[Federal Register Volume 82, Number 1 (Tuesday, January 3, 2017)]
[Rules and Regulations]
[Pages 180-651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30746]



[[Page 179]]

Vol. 82

Tuesday,

No. 1

January 3, 2017

Part II

Book 2 of 2 Books

Pages 179-710





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 510 and 512



Medicare Program; Advancing Care Coordination Through Episode Payment 
Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; and 
Changes to the Comprehensive Care for Joint Replacement Model (CJR); 
Final Rule

  Federal Register / Vol. 82 , No. 1 / Tuesday, January 3, 2017 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 510 and 512

[CMS-5519-F]
RIN 0938-AS90


Medicare Program; Advancing Care Coordination Through Episode 
Payment Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; 
and Changes to the Comprehensive Care for Joint Replacement Model (CJR)

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

ACTION: Final rule.

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SUMMARY: This final rule implements three new Medicare Parts A and B 
episode payment models, a Cardiac Rehabilitation (CR) Incentive Payment 
model and modifications to the existing Comprehensive Care for Joint 
Replacement model under section 1115A of the Social Security Act. Acute 
care hospitals in certain selected geographic areas will participate in 
retrospective episode payment models targeting care for Medicare fee-
for-service beneficiaries receiving services during acute myocardial 
infarction, coronary artery bypass graft, and surgical hip/femur 
fracture treatment episodes. All related care within 90 days of 
hospital discharge will be included in the episode of care. We believe 
these models will further our goals of improving the efficiency and 
quality of care for Medicare beneficiaries receiving care for these 
common clinical conditions and procedures.

DATES: Effective dates: This rule is effective February 18, 2017, 
except for the following amendatory instructions: number 3 amending 42 
CFR 510.2; number 4 adding 42 CFR 510.110; number 6 amending 42 CFR 
510.120; number 14 amending 42 CFR 510.405; number 15 42 CFR 510.410; 
number 16 revising 42 CFR 510.500; number 17 revising 42 CFR 510.505; 
number 18 adding 42 CFR 510.506; and number 19 amending 42 CFR 510.515, 
which are effective July 1, 2017.
    Applicability date: The regulations at 42 CFR part 512 are 
applicable July 1, 2017.

FOR FURTHER INFORMATION CONTACT: For questions related to the EPMs: 
[email protected].
    For questions related to the CJR model: [email protected].

SUPPLEMENTARY INFORMATION: 

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 final rule, we are listing the 
acronyms, abbreviations and short forms used and their corresponding 
terms in alphabetical order.

ACE Acute-care episode
ACO Accountable Care Organization
ALOS Average length of stay
AMA American Medical Association
AMI Acute Myocardial Infarction
APM Alternative Payment Model
APRN Advanced Practice Registered Nurse
ASC QRP Ambulatory Surgical Center Quality Reporting Program
ASC Ambulatory Surgical Center
ASPE Assistant Secretary for Planning and Evaluation
BAA Business Associate Agreement
BPCI Bundled Payments for Care Improvement
CABG Coronary Artery Bypass Graft
CAD Coronary artery disease
CAH Critical access hospital
CBSA Core-Based Statistical Area
CC Complication or comorbidity
CCDA Consolidated clinical document architecture
CCDE Core clinical data elements
CCN CMS Certification Number
CEC Comprehensive ESRD Care Initiative
CEHRT Certified Electronic Health Record Technology
CEP Clinical Episode Payment
CFR Code of Federal Regulations
CHIP Children's Health Insurance Program
CJR Comprehensive Care for Joint Replacement
CMHC Community Mental Health Center
CMI Case Mix Index
CMP Civil monetary penalty
CQMC Core Quality Measure Collaborative
CMS Centers for Medicare & Medicaid Services
CoP Condition of Participation
CORF Comprehensive Outpatient Rehabilitation Facility
CPC Comprehensive Primary Care Initiative
CPT Current Procedural Terminology
CR Cardiac rehabilitation
CRNA Certified Registered Nurse Anesthetists
CSA Combined Statistical Area
CVICU Cardiovascular intensive care units
CY Calendar year
DES Drug-eluting stents
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DR Downside Risk
DSH Disproportionate Share Hospital
DUA Data Use Agreement
ED Emergency Department
ECMO Extracorporeal membrane circulation
ECQM Electronic Clinical Quality Measures
EFT Electronic funds transfer
EGM Episode Grouper for Medicare
EHR Electronic health record
E/M Evaluation and management
EPM Episode payment model
ESCO ESRD Seamless Care Organization
ESRD End-Stage Renal Disease
FFS Fee-for-service
FFR Fractional Flow Reserve
GAAP Generally-Accepted Accounting Principles
GEM General Equivalence Mapping
GPCI Geographic Practice Cost Index
HAC Hospital-Acquired Condition
HACRP Hospital-Acquired Condition Reduction Program
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCC Hierarchical Condition Category
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
HHPPS Home Health Prospective Payment System
HHRG Home Health Resource Group
HHS U.S. Department of Health and Human Services
HH QRP Home Health Quality Reporting Program
HICN Health Insurance Claim Number
HIPAA Health Insurance Portability and Accountability Act
HIQR Hospital Inpatient Quality Reporting
HIV Human Immunodeficiency Virus
Health IT Health Information Technology
HLM Hierarchical Logistic Regression model
HLMR HCAHPS Linear Mean Roll Up
HOOS Hip Dysfunction and Osteoarthritis Outcome Score
HOPD Hospital outpatient department
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
ICHOM International Consortium for Health Outcomes Measurement
IRFQR Inpatient Rehabilitation Facilities Quality Reporting
ICD Implantable Cardioverter Defibrillator
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
ICR Intensive Cardiac Rehabilitation
I-I Inpatient to inpatient transfer
IME Indirect medical education
IP Inpatient
IPF Inpatient psychiatric facility
IPF QRP Inpatient Psychiatric Facility Quality Reporting Program
IPPS Inpatient Prospective Payment System
IRF Inpatient rehabilitation facility
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IVR Active Interactive Voice Recognition
KOOS Knee Injury and Osteoarthritis Outcome Score

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LAN Healthcare Payment Learning and Action Network
LBBB Left bundled branch block
LEJR Lower-extremity joint replacement
LEP limited English proficiency
LIP Low-income percentage
LOS Length-of-stay
LTCH QRP Long-Term Care Hospital Quality Reporting Program
LTCH Long-term care hospital
LUPA Low-utilization payment adjustment
MA Medicare Advantage
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015
MAP Measure Application Partnership
MAPCP Multi-Payer Advanced Primary Care Practice
MAT Measure Authoring Tool
MCC Major complications or comorbidities
MCCM Medicare Care Choices Model
MDC Major diagnostic category
MDH Medicare-Dependent Hospital
MDM Master Database Management
MedPAC Medicare Payment Advisory Commission
MIPS Merit-based Incentive Payment System
MP Malpractice
MSA Metropolitan Statistical Area
MS-DRG Medical Severity Diagnosis-Related Group
MSPB Medicare Spending Per Beneficiary
NHDS National Hospital Discharge Survey
NCDR National Cardiovascular Data Registry
NDR No Downside Risk
NPI National Provider Identifier
NPPGP Non-Physician Practitioner Group Practice
NPRA Net Payment Reconciliation Amount
NQF National Quality Forum
NSTEMI Non ST-elevation myocardial infarction
OCM Oncology Care Model
OIG Department of Health and Human Services' Office of the Inspector 
General
O-I Outpatient-to-inpatient transfer
OPPS Outpatient Prospective Payment System
OPT Outpatient Physical Therapist
OQR Outpatient Quality Reporting
PACE Program of All-Inclusive Care for the Elderly
PBPM Per-beneficiary per-month
PCI Percutaneous Coronary Intervention
PCMH Primary Care Medical Homes
PE Practice Expense
PEP Partial Episode Payment
PFS Physician Fee Schedule
PGP Physician group practice
PHA Partial hip arthroplasty
PQRS Physician Quality Reporting System
PPS Prospective Payment System
PRO Patient-Reported Outcome
PROMIS Patient-Reported Outcomes Measurement Information Systems
PROM Patient-Reported Outcome Performance Measure
PTAC Focused Payment Model Technical Advisory Committee
PTCA Percutaneous transluminal coronary angioplasty
PY Performance year
QCDR Qualified clinical data registries
QE Qualified Entity
QIO Quality Improvement Organization
QP Qualifying APM Participant
QPP Quality Payment Program
QRDA Quality Reporting Document Architecture
QRUR Quality and Resource Use Reports
RAC Recovery Audit Contractor
RRC Rural Referral Center
RSCR Risk-Standardized Complication Rate
RSRR Risk-Standardized Readmission Rate
RSMR Risk-Standardized Mortality Rate
RVU Relative Value Unit
SCH Sole Community Hospital
SDS Socio-demographic Status
SFT Secure File Transfer
SHFFT Surgical hip/femur fracture treatment
SHIP State Health Insurance Assistance Programs
SILS2 Single Item Health Literacy Screening
SLA Service level agreement
SNF Skilled nursing facility
SNF-QRP QRP Skilled Nursing Facility Quality Reporting Program
SSDMF Social Security Death Master file
STEMI ST-elevation myocardial infarction
STS Society of Thoracic Surgeons
ST-T ST-segment-T wave
TEP Technical Expert Panel
TGP Therapy Group Practice
THA Total hip arthroplasty
TIN Taxpayer identification number
TJA Total joint arthroplasty
TKA Total knee arthroplasty
TP Target price
UHDDS Uniform Hospital Discharge Data Set
VAD Ventricular Assist Device
VBP Value Based Purchasing
VR-12 Veterans Rand 12 Item Health Survey

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    1. Model Overview--EPM 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. Beneficiary Protections
    8. Financial Arrangements
    9. Data Sharing
    10. Program Waivers
    C. Summary of Economic Effects
II. Background
III. Episode Payment Models
    A. Selection of Episodes, Advanced Alternative Payment Model 
Considerations, and Future Directions
    1. Selection of Episodes for Episode Payment Models in This 
Rulemaking
    a. Overview
    b. SHFFT Model
    c. AMI and CABG Models
    2. Advanced Alternative Payment Model Considerations
    a. Overview for the EPMs
    b. EPM Participant Tracks
    c. Clinician Financial Arrangements Lists Under the EPMs
    d. Documentation Requirements
    3. Future Directions for Episode Payment Models
    a. Refinements to the BPCI Initiative Models
    b. Potential Future Condition-Specific Episode Payment Models
    c. Potential Future Event-Based Episode Payment Models for 
Procedures and Medical Conditions
    d. Health Information Technology Readiness for Potential Future 
Episode Payment Models
    B. Definition of the Episode Initiator and Selected Geographic 
Areas
    1. Background
    2. Definition of Episode Initiator
    3. Financial Responsibility for Episode of Care
    4. Geographic Unit of Selection and Exclusion of Selected 
Hospitals
    5. Overview and Options for Geographic Area Selection for AMI 
and CABG Episodes
    a. Exclusion of Certain MSAs
    b. Selection Approach
    (1) Factors Considered but Not Used
    (2) Sample Size Calculations and the Number of Selected MSAs
    (3) Method of Selecting MSAs
    C. Episode Definition for EPMs
    1. Background
    2. Overview of Three New Episode Payment Models
    3. Clinical Dimensions of AMI, CABG, and SHFFT Model Episodes
    a. Definition of the Clinical Conditions Included in AMI, CABG, 
and SHFFT Model Episodes
    (1) AMI (Medical Management and PCI) Model
    (2) CABG Model
    (3) SHFFT (Excludes Lower Extremity Joint Replacement) Model
    b. Definition of the Related Services Included in EPM Episodes
    4. EPM Episodes
    a. Beneficiary Care Inclusion Criteria and Beginning of EPM 
Episodes
    (1) General Beneficiary Care Inclusion Criteria
    (2) Beginning AMI Episodes
    (3) Beginning CABG Episodes
    (4) Beginning SHFFT Episodes
    (5) Special Policies for Hospital Transfers of Beneficiaries 
With AMI
    b. Middle of EPM Episodes
    c. End of EPM Episodes
    (1) AMI and CABG Models
    (2) SHFFT Model
    D. Methodology for Setting EPM Episode Prices and Paying EPM 
Participants in the AMI, CABG, and SHFFT Models
    1. Background
    a. Overview
    b. Key Terms for EPM Episode Pricing and Payment
    2. Performance Years, Retrospective Episode Payments, and Two-
Sided Risk EPMs
    a. Performance Period
    b. Retrospective Payment Methodology
    c. Two-Sided Risk EPMs
    3. Adjustments to Actual EPM Episode Payments and to Historical 
Episode Payments Used To Set Episode Prices

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    a. Overview
    b. Special Payment Provisions
    c. Services That Straddle Episodes
    d. High-Payment EPM Episodes
    e. Treatment of Reconciliation Payments and Medicare Repayments 
When Calculating Historical EPM-Episode Payments To Update EPM-
Episode Benchmark and Quality-Adjusted Target Prices
    4. EPM-Episode Price-Setting Methodologies
    a. Overview
    (1) AMI Model DRGs
    (2) CABG Model DRGs
    (3) SHFFT Model DRGs
    b. EPM-Episode Benchmark and Quality-Adjusted Target Price 
Features
    (1) Risk-Stratifying EPM-Episode Benchmark Prices Based on MS-
DRG and Diagnosis
    (2) Adjustments To Account for EPM-Episode Price Variation
    (a) Adjustments for Certain AMI Model Episodes With Chained 
Anchor Hospitalizations
    (b) Adjustments for CABG Model Episodes
    (c) Adjustments for Certain AMI Model Episodes With CABG 
Readmissions
    (d) Potential Future Approaches To Setting Target Prices for AMI 
and Hip Fracture Episodes
    (e) Summary of Pricing Methodologies for AMI, CABG, and SHFFT 
Model Episode Scenarios
    (3) 3 Years of Historical Data
    (4) Trending Historical Data to the Most Recent Year
    (5) Update Historical EPM-Episode Payments for Ongoing Payment 
System Updates
    (6) Blend Hospital-Specific and Regional Historical Data
    (7) Define Regions as U.S. Census Divisions
    (8) Normalize for Provider-Specific Wage Adjustment Variations
    (9) Combining Episodes To Set Stable Benchmark and Quality-
Adjusted Target Prices
    (10) Effective Discount Factor
    c. Approach To Combine Pricing Features for all SHFFT Model 
Episodes and AMI Model Episodes Without CABG Readmissions
    d. Approach To Combine Pricing Features for CABG Model Episodes
    (1) Anchor Hospitalization Portion of CABG Model Episodes
    (2) Approach To Combine Pricing Features for Post-Anchor 
Hospitalization Portion of CABG Model Episodes
    (3) Combine CABG Anchor Hospitalization Benchmark Price and CABG 
Post-Anchor Hospitalization Benchmark Price
    e. Approach To Combine Pricing Features for AMI Model Episodes 
With CABG Readmissions
    5. Process for Reconciliation
    a. Net Payment Reconciliation Amount (NPRA)
    b. Payment Reconciliation
    c. Reconciliation Report
    6. Adjustments for Overlaps With Other Innovation Center Models 
and CMS Programs
    a. Overview
    b. Provider Overlap
    (1) BPCI Participant Hospitals in Geographic Areas Selected for 
EPMs
    (2) BPCI Physician Group Practice (PGP) Episode Initiators in 
Hospitals Participating in EPMs
    c. Beneficiary Overlap
    (1) Beneficiary Overlap With BPCI
    (2) Beneficiary Overlap With the CJR Model and Other EPMs
    (3) Beneficiary Overlap With Shared Savings Models and Programs
    d. Payment Reconciliation of Overlap With Non-ACO CMS Models and 
Programs
    7. Limits or Adjustments to EPM Participants' Financial 
Responsibility
    a. Overview
    b. Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts and Reconciliation Payments
    (1) Limit on Actual EPM-Episode Payment Contribution to 
Repayment Amounts
    (2) Limitation on Reconciliation Payments
    c. Additional Protections for Certain EPM Participants
    (1) Policies for Certain EPM Participants to Further Limit 
Repayment Responsibility
    (2) Considerations for Hospitals Serving a High Percentage of 
Potentially Vulnerable Populations
    d. Application of Stop-Gain and Stop-Loss Limits
    e. EPM Participant Responsibility for Increased Post-Episode 
Payments
    8. Appeals Process
    a. Overview
    b. Notice of Calculation Error (First Level Appeal)
    c. Dispute Resolution Process (Second Level of Appeal)
    d. Exception to the Notice of Calculation Error Process and 
Notice of Termination
    e. Limitations on Review
    E. EPM Quality Measures, Public Display, and Use of Quality 
Measures in the EPM Payment Methodology
    1. Background
    2. Selection of Quality Measures for the EPMs
    a. Overview of Quality Measure Selection
    b. AMI Model Quality Measures
    c. CABG Model Quality Measures
    d. SHFFT Model Quality Measures
    3. Use of Quality Measures in the EPM Payment Methodologies
    a. Overview of EPM Composite Quality Score Methodology
    b. Determining Quality Measure Performance
    c. Determining Quality Measure Improvement
    d. Determining Successful Submission of Voluntary Data for AMI 
and SHFFT Models
    (1) Hybrid AMI Mortality (NQF #2473) Voluntary Data
    (2) Patient-Reported Outcomes and Limited Risk Variable 
Voluntary Data Following Elective Primary THA/TKA
    e. Calculation of the EPM-Specific Composite Quality Score
    (1) AMI Model Composite Quality Score
    (2) CABG Model Composite Quality Score
    (3) SHFFT Model Composite Quality Score
    f. EPM Pay-for-Performance Methodologies To Link Quality and 
Payment
    (1) Overview of Pay-for-Performance Proposals Applicable to the 
EPMs
    (2) AMI and CABG Model Pay-for-Performance Methodology
    (a) AMI Model Pay-for-Performance Methodology
    (b) CABG Model Pay-for-Performance Methodology
    (c) Alignment Between the AMI and CABG Model Methodologies
    (3) SHFFT Model Pay-for-Performance Methodology
    4. Details on Quality Measures for the EPMs
    a. AMI Model-Specific Measures
    (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230) (MORT-30-AMI)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    (2) Excess Days in Acute Care After Hospitalization for Acute 
Myocardial Infarction (AMI Excess Days)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Rate and Performance Period
    (3) Hybrid Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #2473) (Hybrid AMI Mortality)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    (g) Requirements for Successful Submission of AMI Voluntary Data
    b. CABG Model-Specific Measure
    (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF 
#2558) (MORT-30-CABG)
    (a) Background
    (b) Data Source
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    c. SHFFT Model-Specific Measures
    (1) Hospital Level Risk Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total 
Knee Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications)
    (a) Background
    (b) Data Sources

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    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk Adjustment
    (f) Calculating the Risk Standardized Complication Rate and 
Performance Period
    (2) Hospital-Level Performance Measure(s) of Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Outcome
    (f) Risk Adjustment (If Applicable)
    (g) Calculating the Risk Standardized Rate
    (h) Performance Period for Successful Submission of THA/TKA 
Patient-Reported Outcome-Based Voluntary Data
    (i) Requirements for Successful Submission of THA/TKA Patient-
Reported-Outcome-Based Voluntary Data
    d. Measure Used for All EPMs
    (1) Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey (NQF #0166)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Case-Mix Adjustment
    (f) HCAHPS Scoring
    (g) Calculating the Rate and Performance Period
    e. Potential Future Measures
    5. Form, Manner, and Timing of Quality Measure Data Submission
    6. Display of Quality Measures and Availability of Information 
for the Public From the AMI, CABG, and SHFFT Models
    F. Compliance Enforcement and Termination of an Episode Payment 
Model
    1. Overview and Background
    2. Compliance Enforcement for EPMs
    3. Termination of an Episode Payment Model
    G. Monitoring and Beneficiary Protection
    1. Introduction and Summary
    2. Beneficiary Choice
    3. Beneficiary Notification
    4. Monitoring for Access To Care
    5. Monitoring for Quality of Care
    6. Monitoring for Delayed Care
    H. Access to Records and Record Retention
    I. Financial Arrangements Under EPM
    1. Background
    2. Overview of the EPM Financial Arrangements
    3. EPM Collaborators
    4. Sharing Arrangements Under EPM
    a. General
    b. Requirements
    c. Gainsharing Payment, Alignment Payment, and Internal Cost 
Savings Conditions and Restrictions
    d. Documentation Requirements
    5. Distribution Arrangements Under the EPM
    a. General
    b. Requirements
    6. Downstream Distribution Arrangements Under the EPM
    a. General
    b. Requirements
    7. Summary of Proposals for Sharing, Distribution, and 
Downstream Distribution Arrangements Under the EPM
    8. Enforcement Authority
    9. Beneficiary Engagement Incentives Under the EPM
    a. General
    b. Technology Provided to an EPM Beneficiary
    c. Clinical Goals of the EPM
    d. Documentation of Beneficiary Incentives
    10. Compliance With Fraud and Abuse Laws
    J. Waivers of Medicare Program Requirements
    1. Overview
    2. Summary of Waivers Adopted Under the CJR Model
    3. Analysis of Current Model Data
    a. Analysis of Waiver Usage
    b. Analysis of Discharge Destination--Post-Acute Care Usage
    c. Analysis of Hospital Mean Length of Stay Data
    4. Post-Discharge Home Visits
    a. AMI Model
    b. CABG Model
    c. SHFFT Model
    5. Billing and Payment for Telehealth Services
    6. SNF 3-Day Rule
    a. Waiver of SNF 3-Day Rule
    b. Additional Beneficiary Protections Under the SNF 3-Day Stay 
Rule Waiver
    7. Waivers of Medicare Program Rules To Allow Reconciliation 
Payment or Repayment Actions Resulting From the Net Payment 
Reconciliation Amount
    8. New Waiver for Providers and Suppliers of Cardiac 
Rehabilitation and Intensive Cardiac Rehabilitation Services 
Furnished to EPM Beneficiaries During an AMI or CABG Episode
    K. 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
    7. Data Considerations With Respect to EPM and CJR Collaborators
    L. 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. Comprehensive Care for Joint Replacement Model
    A. Participant Hospitals in the CJR Model
    B. Inclusion of Reconciliation and Repayment Amounts When 
Updating Data for Quality-Adjusted Target Prices
    C. Quality-Adjusted Target Price
    D. Reconciliation
    1. Hospital Responsibility for Increased Post-Episode Payments
    2. ACO Overlap and Subsequent Reconciliation Calculation
    3. Stop-Loss and Stop-Gain Limits
    4. Modifications to Reconciliation Process
    E. Use of Quality Measures and the Composite Quality Score
    1. Hospitals Included in Quality Performance Distribution
    2. Quality Improvement Points
    3. Relationship of Composite Quality Score to Quality Categories
    4. Maximum Composite Quality Score
    5. Acknowledgement of Voluntary Data Submission
    6. Calculation of the HCAHPS Linear Mean Roll-Up (HLMR) Score
    F. Accounting for Overlap With CMS ACO Models and the Medicare 
Shared Savings Program
    G. Appeals Process
    H. Beneficiary Notification
    I. Compliance Enforcement
    1. Failure To Comply
    J. Financial Arrangements Under the CJR Model
    1. Definitions Related to Financial Arrangements
    a. Addition to the Definition of CJR Collaborators
    b. Deleting the Term Collaborator Agreements
    c. Addition of CJR Activities
    2. Sharing Arrangements
    a. General
    b. Requirements
    c. Gainsharing Payment, Alignment Payment, and Internal Cost 
Savings Conditions and Restrictions
    d. Documentation
    3. Distribution Arrangements
    a. General
    b. Requirements
    4. Downstream Distribution Arrangements Under the CJR Model
    a. General
    b. Requirements
    5. Summary of Proposals for Sharing, Distribution, and 
Downstream Distribution Arrangements Under the CJR Model
    K. Beneficiary Incentives Under the CJR Model
    L. Access to Records and Record Retention
    M. Waivers of Medicare Program Rules To Allow Reconciliation 
Payment or Repayment Actions Resulting From the Net Payment 
Reconciliation Amount
    N. SNF 3-Day Waiver Beneficiary Protections
    O. Advanced Alternative Payment Model Considerations
    1. Overview for CJR
    2. CJR Participant Hospital Track
    3. Clinician Financial Arrangements Lists Under the CJR Model
    4. Documentation Requirements
VI. Cardiac Rehabilitation Incentive Payment Model
    A. Background
    B. Overview of the CR Incentive Payment Model
    1. Rationale for the CR Incentive Payment Model
    2. General Design of the CR Incentive Payment Model
    C. CR Incentive Payment Model Participants

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    D. CR/ICR Services That Count Towards CR Incentive Payments
    E. Determination of CR Incentive Payments
    1. Determination of CR Amounts That Sum To Determine a CR 
Incentive Payment
    2. Relation of CR Incentive Payments to EPM Pricing and Payment 
Policies and Sharing Arrangements for EPM-CR Participants
    3. CR Incentive Payment Report
    4. Timing for Making CR Incentive Payments
    F. Provisions for FFS-CR Participants
    1. Access to Records and Retention for FFS-CR Participants
    2. Appeals Process for FFS-CR Participants
    a. Overview
    b. Notice of Calculation Error (First Level Appeal)
    c. Dispute Resolution Process (Second Level of Appeal)
    d. Exception to the Notice of Calculation Error Process and 
Notice of Termination
    e. Limitations on Review
    3. Data Sharing for FFS-CR Participants
    a. Overview
    b. Data Sharing With CR Participants
    4. Compliance Enforcement for FFS-CR Participants and 
Termination of the CR Incentive Payment Model
    5. Enforcement Authority for FFS-CR Participants
    6. Beneficiary Engagement Incentives for FFS-CR Participants
    7. Waiver of Physician Definition for FFS-CR Participants 
Furnishing CR and ICR Services
    a. Overview of Program Rule Waivers Under an EPM
    b. General Physician Requirements for Furnishing CR/ICR Services
    c. Waiver of Physician Definition For EPM-CR Participants 
Furnishing CR and ICR Services
    d. Waiver of Physician Definition For FFS-CR Participants 
Furnishing CR and ICR Services
    G. Considerations Regarding Financial Arrangements Under the CR 
Incentive Payment Model
VII. Collection of Information Requirements
VIII. Regulatory Impact Analysis
    A. Statement of Need
    1. Need for EPM Final Rule
    2. Need for CJR Modifications
    3. Need for CR Incentive Payment Model
    4. Aggregate Impact of EPMs, CJR, and CR Incentive Payment Model
    B. Overall Impact
    C. Anticipated Effects
    1. Overall Magnitude of the Model and Its Effects on the Market
    a. EPMs
    b. CJR
    c. CR Incentive Payment Model
    d. Aggregate Effects on the Market
    2. Effects on the Medicare Program
    a. EPMs
    (1) Assumptions and Uncertainties
    (2) Analyses
    (3) Uncertainties
    b. CJR
    (1) Assumptions and Uncertainties
    (2) Analyses
    c. CR Incentive Payment Model
    (1) Assumptions and Uncertainties
    (2) Analysis
    d. Further Consideration
    3. Effects on Beneficiaries
    4. Effects on Small Rural Hospitals
    5. Effects on Small Entities
    6. Effects on Collection of Information
    7. Unfunded Mandates
    D. Alternatives Considered
    E. Accounting Statement and Table
    F. Conclusion
    Regulations Text

I. Executive Summary

A. Purpose

    The purpose of this final rule--Advancing Care Coordination through 
Episode Payment Models is to implement the creation and testing of 
three new episode payment models (EPMs) and a Cardiac Rehabilitation 
(CR) incentive payment model under the authority of the Center for 
Medicare and Medicaid Innovation (``the Innovation Center''), as well 
as to implement several modifications to the Comprehensive Care for 
Joint Replacement model. Section 1115A of the Social Security Act 
(``the Act'') authorizes the Innovation Center to test innovative 
payment and service-delivery models to reduce Medicare, Medicaid, and 
Children's Health Insurance Program (CHIP) expenditures while 
preserving or enhancing the quality of care furnished to such programs' 
beneficiaries. Under the fee-for-service (FFS) program, 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. The goal for the EPMs is to 
improve the quality of care provided to beneficiaries in an applicable 
episode while reducing episode spending through financial 
accountability.\1\ The EPMs include models for episodes of care 
surrounding an acute myocardial infarction (AMI), coronary artery 
bypass graft (CABG), and surgical hip/femur fracture treatment 
excluding lower extremity joint replacement (SHFFT). Under this final 
rule, the Centers for Medicare & Medicaid Services (CMS) will test 
whether an EPM for AMI, CABG, and SHFFT episodes of care will reduce 
Medicare expenditures while preserving or enhancing the quality of care 
for Medicare beneficiaries. We anticipate that the finalized models 
will benefit Medicare beneficiaries by improving the coordination and 
transition of care, improving the coordination of items and services 
paid for through FFS Medicare, 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. We proposed on 
August 2, 2016 to test the proposed EPMs for 5 performance years, 
beginning July 1, 2017, and ending December 31, 2021 (81 FR 50799) and 
we are finalizing those dates as proposed in this final rule.
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    \1\ In this final rule, we use the terms ``AMI episode,'' ``CABG 
episode,'' and ``SHFFT episode'' to refer to episodes of care as 
described in section III.C. of this final rule.
---------------------------------------------------------------------------

    Within this final rule, we discuss three distinct EPMs focused on 
episodes of care for AMI, CABG, and SHFFT episodes. We chose these 
episodes for the models because, as discussed in depth in section 
III.A. of this final rule and as stated in the proposed rule, we 
believe hospitals would have a significant opportunity to redesign care 
and to improve the quality of care furnished during the applicable 
episode. The EPMs will enable hospitals to consider the most 
appropriate strategies for care redesign, including: (1) Increasing 
post-hospitalization follow-up and medical management for patients; (2) 
coordinating across the inpatient and post-acute care spectrum; (3) 
conducting appropriate discharge planning; (4) improving adherence to 
treatment or drug regimens; (5) reducing readmissions and complications 
during the post-discharge period; (6) managing chronic diseases and 
conditions that may be related to the EPMs' episodes; (7) choosing the 
most appropriate post-acute care setting; and (8) coordinating between 
providers and suppliers such as hospitals, physicians, and post-acute 
care providers. The EPMs would offer hospitals the opportunity to 
examine and better understand their own care processes and patterns 
with regard to patients in AMI, CABG, and SHFFT episodes, as well as 
the processes of post-acute care providers and physicians.
    We previously have used our statutory authority under section 1115A 
of the Act to test other episode payment models such as the Bundled 
Payments for Care Improvement (BPCI) initiative and Comprehensive Care 
for Joint Replacement (CJR) model. Bundled payments for multiple 
services in an episode of care hold participating organizations 
financially accountable for that episode of care. Such models also 
allow participants to receive payments based in part on the reduction 
in Medicare expenditures that arise

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from such participants' care redesign efforts. This payment can be used 
for investments in care redesign strategies and infrastructure, as well 
as to incentivize collaboration with other providers and suppliers 
furnishing services to beneficiaries included in the models.
    We believe the EPMs will further the Innovation Center's mission 
and the Administration's goal of increasingly paying for value and 
outcomes, rather than for volume alone,\2\ by promoting the alignment 
of financial and other incentives for all health care providers caring 
for beneficiaries during SHFFT, CABG, or AMI episodes. The acute care 
hospital where an eligible beneficiary has a hospitalization for one of 
the procedures or clinical conditions included in these EPMs will be 
held accountable for spending during the episode of care. EPM 
participants could earn reconciliation payments by appropriately 
reducing expenditures and meeting certain quality metrics. EPM 
participants will also gain access to data and educational resources to 
better understand care patterns during the inpatient hospitalization 
and post-acute periods, as well as associated spending. Payment 
approaches that reward providers for assuming financial and performance 
accountability for a particular episode of care create incentives for 
the implementation and coordination of care redesign between 
participants and other providers and suppliers such as physicians and 
post-acute care providers.
    The AMI, CABG, and SHFFT models will require the participation of 
hospitals in multiple geographic areas that might not otherwise 
participate in testing episode payment for the episodes of care. CMS is 
testing other episode payment models with the BPCI initiative and the 
CJR model. The BPCI initiative is voluntary; providers applied to 
participate and chose from 48 clinical episodes. BPCI participants 
entered the at-risk phase between 2013 and 2015 and have the option to 
continue participating in the initiative through FY 2018. In the CJR 
model, acute care hospitals in selected geographic areas are required 
to participate in the CJR model for all eligible lower-extremity joint 
replacement (LEJR) episodes that initiate at a CJR participant 
hospital. The CJR model began its first of 5 performance years on April 
1, 2016. Realizing the full potential of new EPMs will require the 
engagement of an even broader set of providers than have participated 
to date in our episode payment models such as the BPCI initiative and 
the CJR model. As such, we are interested in testing and evaluating the 
impact of episode payment for the three EPMs in a variety of 
circumstances, including those hospitals that may not otherwise 
participate in such a test.
    While we note that testing of the CJR model that began in April 
2016 will allow CMS to gain experience with requiring hospitals to 
participate in an episode payment model, the clinical circumstances of 
the episodes we proposed (AMI, CABG, and SHFFT) differ in important 
ways from the LEJR episodes included in the CJR model. LEJR procedures 
are common among the Medicare population, and the majority of such 
procedures are elective. In contrast, under the three EPMs, CMS will 
test episode payment for certain cardiac conditions and procedures, as 
well as SHFFT. We expect the patient population included in these 
episodes will be substantially different from the patient population in 
CJR episodes, due to the clinical nature of the cardiac and SHFFT 
episodes. Beneficiaries in these episodes commonly have chronic 
conditions that contribute to the initiation of the episodes, and need 
both planned and unplanned care throughout the EPM episode following 
discharge from the hospitalization that begins the episode. Both AMI 
and CABG model episodes primarily include beneficiaries with 
cardiovascular disease, a chronic condition which likely contributed to 
the acute events or procedures that initiate the episodes. About half 
the average AMI model historical episode spending was for the 
hospitalization, with the majority of spending following discharge from 
the hospitalization due to hospital readmissions, while there was 
relatively less spending on SNF services, Part B professional services, 
and hospital outpatient services. In CABG model historical episodes, 
about three-quarters of episode spending was for the hospitalization, 
with the remaining episode spending relatively evenly divided between 
Part B professional services and hospital readmissions, and a lesser 
percentage on SNF services. Similar to AMI episodes, post-acute care 
provider use was relatively uncommon in CABG model historical episodes, 
while hospital readmissions during CABG model historical episodes were 
relatively common. SHFFT model historical episodes also were 
accompanied by substantial spending for hospital readmissions, and 
post-acute care provider use in these episodes also was high.\2\ The 
number of affected beneficiaries and potential impact of the models on 
quality and Medicare spending present an important opportunity to 
further the Administration's goal of shifting health care payments to 
support the quality of care over the quantity of services by promoting 
better coordination among health care providers and suppliers and 
greater efficiency in the care of beneficiaries in these models, while 
reducing Medicare expenditures.\3\ Pay-for-performance episode payment 
models such as the three EPMs in this rule financially incentivize 
improved quality of care and reduced cost by aligning the financial 
incentives of all providers and suppliers caring for model 
beneficiaries with these goals. This alignment leads to a heightened 
focus on care coordination and management throughout the episode that 
prioritizes the provision of those items and services which improve 
beneficiary outcomes and experience at the lowest cost. A more detailed 
discussion of the evidence supporting the episode selection for these 
models can be found in section III.A.1. of this final rule.
---------------------------------------------------------------------------

    \2\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated by 
all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that end in CY 2014.
    \3\ 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-msarter-spending-healthier-people.html (January 26, 2015).
---------------------------------------------------------------------------

    These models will also allow CMS to gain additional experience with 
episode-payment based approaches for hospitals with variance in (1) 
historic care and utilization patterns; (2) patient populations and 
care patterns; (3) roles within their local markets; (4) volumes of 
services; (5) levels of access to financial, community, or other 
resources; and (6) levels of population and health-care-provider 
density, including local variations in the availability and use of 
different categories of post-acute care providers. We believe that 
participation in the EPMs by a large number of hospitals with diverse 
characteristics will result in a robust data set for evaluating this 
payment approach and will stimulate the rapid development of new 
evidence-based knowledge. Testing the EPMs in this manner will also 
allow us to learn more about patterns of inefficient utilization of 
health care services and how to incentivize quality improvement for 
beneficiaries receiving services in AMI, CABG, and SHFFT episodes. This 
knowledge could potentially inform future Medicare payment policies.
    We proposed the CR incentive payment model to test the effects on

[[Page 186]]

quality of care and Medicare expenditures of providing financial 
incentives to hospitals for beneficiaries hospitalized for treatment of 
AMI or CABG to encourage care coordination and greater utilization of 
medically necessary CR and intensive cardiac rehabilitation (ICR) 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
Despite the evidence from multiple studies that CR services improve 
health outcomes, the literature also indicates that these services are 
underutilized, estimating that only about 35 percent of AMI patients 
older than 50 receive this indicated treatment.4 5 6 Recent 
analysis confirms a similar pattern of underutilization for Medicare 
beneficiaries who are eligible for and could benefit from CR.
---------------------------------------------------------------------------

    \5\ Anderson L. et al. Exercise-based cardiac rehabilitation for 
coronary heart disease. Cochrane Database Syst Rev. 2016 Jan 
5;1:CD001800.
    \6\ Receipt of outpatient cardiac rehabilitation among heart 
attack survivors--United States, 2005. MMWR Morbidity and mortality 
weekly report. 2008 Feb 1:57(4):89-94.
---------------------------------------------------------------------------

    Considering the evidence demonstrating that CR/ICR services improve 
long-term patient outcomes, the room for improvement in CR/ICR service 
utilization for beneficiaries eligible for this benefit, and the need 
for ongoing, chronic treatment for underlying coronary artery disease 
(CAD) among beneficiaries that have had an AMI or a CABG, we believe 
that there is a need for improved long-term care management and care 
coordination for beneficiaries that have had an AMI or a CABG and that 
incentivizing the use of CR/ICR services is an important component of 
meeting this need. We want to reduce barriers to high-value care by 
testing a financial incentive for hospitals that encourages the 
management of beneficiaries that have had an AMI or a CABG in ways that 
may contribute to long-term improvements in quality and reductions in 
Medicare spending.
    We sought public comment on the proposals contained in the proposed 
rule (81 FR 50794) published on August 2, 2016, and also on any 
alternatives considered. Public comment and our responses to those 
comments follow under the applicable sections. The applicable sections 
contain our proposed policy changes, commenters' reactions, and our 
responses.
    We received approximately 175 timely pieces of correspondence 
containing multiple comments on the EPM proposed rule. We note that 
some of these public comments were outside of the scope of the proposed 
rule. These out-of-scope public comments are mentioned in this section 
but are not addressed with the policy responses in this final rule. The 
following is a summary of the comments received on the proposed model 
as a whole, including the authority for the model and general comments 
on CMS' implementation of the EPM model at this time and our responses.
    Comment: Some commenters expressed support for the proposed EPMs 
and for requiring participation from specific hospitals in the selected 
geographic regions. Other commenters requested whether CMS has the 
authority under section 1115A of the Social Security Act (the Act) to 
implement the EPMs as proposed, while others stated specifically that 
they believe CMS cannot compel provider participation and further 
stated that they did not believe Congress intended to delegate its 
authority to make permanent changes to the Medicare program to the 
Secretary through the Innovation Center.
    Many commenters raised concerns that interpreting section 1115A to 
mean that requiring participation in models is permissible under 
statute holds significant implications for the patients and providers 
included in the proposed EPMs, as required models could negatively 
impact the Medicare Shared Savings Program (Shared Savings Program) 
and/or Accountable Care Organizations (ACOs).
    Response: While we appreciate the support expressed by some 
commenters, we disagree with the contention that the Innovation Center 
lacks the authority to test models under section 1115A of the Act in 
which participation is required. Section 1115A of the Act authorizes 
the Secretary 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 (CHIP) beneficiaries, and section 1115A of the Act 
does not specify that participation in models must be voluntary. As 
discussed in section IV. of this final rule, one of the reasons that we 
have determined it is necessary to test the EPM models by requiring the 
participation of certain hospitals is to obtain more generalizable 
evaluation results.
    Moreover, the Secretary has authority to establish regulations to 
carry out the administration of Medicare. Specifically, the Secretary 
has authority under both sections 1102 and 1871 of the Act to implement 
regulations as necessary to administer Medicare, including testing 
these Medicare payment and service delivery models. We note that the 
EPMs will test different methods for delivering and paying for services 
covered under the Medicare program, which the Secretary has clear legal 
authority to regulate.
    To be clear, we did not propose, and are not finalizing, permanent 
changes to Medicare, but rather are testing payment and service 
delivery models under section 1115A(b) of the Act. While the EPMs 
require the participation of certain participant hospitals, the EPMs 
are not permanent changes to the Medicare program. We acknowledge the 
importance of examining the impact of the EPMs as this test will 
implement models at the geographic regional level. The EPMs are thus 
intended to enable CMS to test and evaluate the effects of episode 
payment approaches on a broader range of Medicare providers and 
suppliers than would choose to participate in an alternative payment 
model. More specifically, the evaluation is to conduct a multifaceted 
and multi-pronged examination of issues of quality, access, and 
consequences. Randomized evaluation designs of this kind helps to 
reduce the systematic differences among hospitals that are and are not 
participating in the EPMs, which helps to ensure that, on average, 
differences in outcomes between participating and non-participating 
hospitals reflect the impact of the model. Testing these models in this 
manner also allows us to learn more about patterns of inefficient 
utilization of health care services and how to incentivize the 
improvement of quality for AMI, CABG, and SHFFT procedure/diagnosis 
episodes. This learning can potentially inform future Medicare payment 
policy.
    We do not believe the EPMs will harm the continuation of a 
permanent Medicare program such as the Shared Savings Program, We 
continue to believe that while we test the EPMs, ACOs will still work 
towards the goals of the Shared Savings Program. These goals have been 
previously described (76 FR 67801) and include ensuring the 
coordination of care for beneficiaries, regardless of the time or place 
of that care, being innovative in service delivery by drawing upon the 
best, most advanced models of care, and using modern technologies, 
including telehealth and electronic health records, and other tools to 
continually reinvent care in the modern age.
    We refer to our discussion about ACO overlap with the proposed EPMs 
that was included in the proposed rule (81 FR 50870) and acknowledge 
the concerns expressed by some ACOs that the current CJR and BPCI ACO 
overlap

[[Page 187]]

policies deprive them of a key source of savings. Because ACOs in 
certain types of two-sided risk arrangements have stronger incentives 
than those in one-sided risk arrangements to reduce total cost of care, 
especially given the possibility of paying CMS shared losses, we 
believe that ACOs in such two-sided risk arrangements may be best 
positioned to assume the risk associated with EPM episodes, while ACOs 
in one-sided risk arrangements may be less well-positioned to do so. 
Furthermore, it is more operationally feasible to identify and exclude 
beneficiaries who are prospectively aligned to ACOs.
    Comment: One commenter believed that the EPMs did not satisfy the 
requirement that the model address ``a defined population for which 
there are deficits in care leading to poor clinical outcomes or 
potentially avoidable costs'' as is required by section 1115A(b)(2)(A) 
of the Act.
    Response: Models tested under section 1115A of the Act must address 
a defined population for which there are either deficits in care 
leading to poor clinical outcomes or potentially avoidable 
expenditures. As discussed in section III.C. of the proposed rule (81 
FR 50829-50843) and section III.C. of this final rule, these models 
satisfy the requirements of section 1115A(b) of the Act, as the EPMs 
address defined populations (FFS Medicare beneficiaries experiencing 
acute myocardial infarctions, coronary artery bypass grafting 
procedures and/or surgical hip/femur fracture treatment) for which 
there are potentially avoidable expenditure because there are no strong 
incentives for coordinated care, which can lead to suboptimal care. As 
discussed in section IV. of this final rule, one of the reasons that we 
have determined it is necessary to require the participation of 
hospitals in multiple geographic areas that might not otherwise 
participate in testing episode payment for the episodes of care is to 
provide more generalizable evaluation results of the impacts of these 
models.
    Comment: A few commenters asserted that the SHFFT model is 
equivalent to an expansion of the CJR model under section 1115A(c) of 
the Act. The same commenters stated that the SHFFT EPM model test 
should not be finalized in this rule as the CJR model has not yet 
satisfied the requirements of section 1115A(c) of the Act. One 
commenter stated that before implementing the SHFFT EPM, CMS must first 
complete the evaluation of the CJR model required under section 
1115A(b)(4) of the Act; make the determinations required under section 
1115A(c)(1) and (3) of the Act; and receive the certification from the 
Chief Actuary required under section 1115A(c)(2) of the Act.
    Response: Regarding the commenters' assertion that the proposed 
SHFFT model expands the CJR model prior to the CJR evaluation, we note 
that this is not the case. We agree that section 1115A of the Act 
establishes the necessary criteria for the Secretary to expand payment 
and service delivery models. However, the SHFFT model we are finalizing 
in this rule is not an expansion of the CJR model under section 
1115A(c) of the Act. Rather, the SHFFT EPM model is a new model test 
under section 1115A(b) of the Act. The CJR model is still at the 
initial model test stage, and we will not make any determinations about 
continuing the CJR model test through expansion under section 1115A(c) 
of the Act until there is sufficient information from evaluation(s) to 
assess its potential for expansion. While the SHFFT EPM model test 
complements the CJR model test, it is a separate and distinct model 
test. Specifically, the SHFFT model differs from the CJR model in that 
the CJR model is largely for planned admissions for hip and knee 
replacements and the episode of care begins with an admission to a 
participant hospital of a beneficiary who is ultimately discharged 
under MS-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). In contrast, the SHFFT model tests a 
hospital payment for hip fixation and the episode of care eventually 
results from a discharge paid under MS-DRG 480 (Hip and femur 
procedures except major joint with major complication or comorbidity--
CC), MS-DRG 481 (Hip and femur procedures except major joint with 
complication or comorbidity--MCC), or MS-DRG 482 (Hip and femur 
procedures except major joint without CC or MCC). Therefore, the 
interventions under each model test would not overlap. Further, the 
SHFFT model test would give hospitals already participating in the CJR 
model different experience in managing care for hip and femur fracture 
cases that typically present emergently, rather than the planned, 
elective surgery that is most common for lower extremity joint 
replacement. Despite this geographic overlap, beneficiaries who 
initiate an episode in either the SHFFT or CJR model remain in that 
initial model and are precluded from initiating a simultaneous episode 
in the CJR or SHFFT models respectively. As a result, the evaluations 
of the CJR model and the SHFFT model will assess the effect of discrete 
episodes.
    Comment: Some commenters expressed support for the intended goals 
of the EPMs, and stated they want to contribute to moving our health 
care system to a value-based system. However, many commenters disagreed 
with the process used by CMS to achieve this goal. Specifically, 
commenters stated that CMS moved too fast and too soon in implementing 
these models. Furthermore, commenters believe that the breadth and 
speed of the CMS models expanded exponentially. Commenters stated that 
in situations when multiple initiatives are being implemented 
simultaneously, for example Meaningful Use, new conditions of 
participation for emergency preparedness, multiple clinical and payment 
changes to the existing fee-for-service payment systems, performance 
requirements of payment reforms such as the MACRA, and state regulatory 
changes to health care, commenters stated that hospitals may have 
little time or resources available for thoughtful care redesigns to be 
applied to the proposed model. A few commenters noted that the 
insurance marketplace in general remains volatile, adding further 
complication to the health care landscape, while others believe 
generally that CMS is putting the existing initiatives' success at risk 
as a result of the proposed pace of implementation of new programs and 
models.
    Commenters raised concerns that they were unable to submit informed 
comments on the proposed rule because they did not have sufficient data 
on the CJR model, making it difficult to assess even early experience 
with the process of implementation of models that require 
participation. Other commenters submitted statements of experience 
related to implementation of the CJR model, specifically that 
implementation was administratively challenging due to the need to 
first develop a process of care redesign and then implement operational 
changes related to efficiency as well as specific provisions of the 
model, including but not limited to collaboration agreements, 
provisions for beneficiary notifications, and data analysis. As a 
result of this experience, commenters requested that CMS delay the 
implementation time line of the EPMs. The alternative time lines 
proposed by commenters varied. A few commenters stated that it would be 
unreasonable to implement a new episode payment model before

[[Page 188]]

evaluation of the outcomes and processes of existing bundled payment 
models. Other commenters suggested that CMS generally delay 
implementation until the agency can address concerns related to risk 
adjustment, minimum volume thresholds, comprehensiveness of payment, 
and episode definitions. Commenters believed that launching the 
proposed models simultaneously will require an incredible 
administrative effort, which may hinder the ability to effectively 
direct clinical resources towards best practices for success. To this 
end, commenters also suggested alternative proposals, including but not 
limited to reconsideration of implementing cardiac EPMs; delay, pilot, 
or narrow the scope of the proposed SHFFT model; delay the start date 
of the proposed EPMs until no earlier than January 1, 2018; provide 
hospitals with at least 12 months of preparation time from the date the 
final rule is finalized. Other commenters believed hospitals should not 
be subject to downside risk for at least 12 months from the 
implementation date of the final rule, and other commenters suggested 
that CMS delay the onset of downside risk beyond the first quarter of 
performance year 2. Commenters suggested CMS delay implementation to 
allow both CMS and EPM participants to prepare to be successful during 
testing of the model. Specifically, commenters stated that CMS should 
use the delay to establish a dialogue with hospitals to improve the 
existing bundled payment experience, perform outcomes studies on 
existing models and programs, analyze the existing CJR model to 
determine the model's impact to beneficiaries' outcomes and longer term 
well-being, and create infrastructure to more easily attribute patients 
to the EPMs. Commenters also stated that such a delay would allow time 
for EPM participants to better understand the clinical and financial 
risk of their patient populations, to establish collaborator 
relationships and to create the internal organization structure to 
manage payment bundles. A few commenters specifically suggested changes 
in payment once the risk-bearing phase begins, to allow a prospective 
payment to the EPM participants upon determination of an eligible 
diagnosis, as this change could permit all collaborating providers to 
share in both the upside and downside financial risk, and not be 
constrained by what Medicare pays for services during the episode. 
Overall, most commenters requested that CMS generally apply a more 
strategic process to achieve the intended goals by building on the 
experience to date to set the health care system on a pathway to 
success rather than rolling out new models before anything concrete is 
gleaned from existing models.
    Response: We appreciate the comments we received in support of our 
proposed performance period and start date. We also appreciate comments 
expressing concerns around the timing of this model. Although we 
believe that it is important to initiate these EPMs now since they are 
different than CJR and BPCI and will provide essential information 
about the potential for episode payment to improve care and lower 
spending, we are sensitive to commenters' concerns that our proposed 
date to implement downside risk may not provide sufficient time for 
participants to implement the kinds of changes needed to successfully 
participate in the model, particularly given the availability of 
baseline data. Accordingly, this final rule will increase available 
preparation time by not implementing downside risk for all participants 
in the EPMs until October 1, 2018. Downside risk for EPM episodes will 
be applied to episodes ending on or after January 1, 2019. As discussed 
in detail in section III.D. of this final rule, participants who are 
interested in taking on downside risk earlier can choose to begin 
downside risk for episodes ending on or after January 1, 2018. 
Additionally, specific amendments to the regulations regarding the CJR 
model access to records and records retention policy, compliance 
enforcement policy, and waiver of the SNF 3 day rule will take effect 
July 1, 2017. We refer readers to sections V.H., V.I., and V.L. of the 
final rule for discussions of our final decisions. We believe that 
these changes will both facilitate participants' abilities to be 
successful under these models and allow for a more gradual transition 
to full financial responsibility under the models. CMS will also 
continue to work internally to determine the extent to which the 
suggestions submitted by commenters, including performing education and 
outreach activities or outcomes studies on existing models, will impact 
the implementation of the EPMs. The EPMs will only include a limited 
number of episode types, and as such we believe it is reasonable for 
hospitals to begin to analyze data and identify care patterns and 
opportunities for care redesign for these episodes prior to assuming 
financial responsibility for spending for episode beginning after 
October 1, 2018. We also note that due to the gradual implementation of 
financial responsibility that was proposed and that will still be 
incorporated in the models even given the start of the phased-in 
downside risk that we are finalizing in this rule, we expect that 
hospitals will spend the first performance year of the model analyzing 
data, identifying care pathways, forming clinical and financial 
relationships with other providers and suppliers, and assessing 
opportunities for savings under the model, utilizing in part the claims 
data we provide to them. As a result of these changes, we do not 
believe that further changes are needed to the start date of 
implementation. We also do not agree with commenters that 
implementation of the model is premature or that it should not be 
implemented until results for CJR or other episode-based payment models 
are available. While we anticipate that these models will offer 
valuable information that should assist CMS in developing future 
episode payment models, the EPMs will offer additional insights that 
are not available under the CJR model; in particular, insights with 
respect to episode payment models on a distinct set of episodes for 
participants that would not otherwise participate under a model such as 
BPCI.
    Likewise, we do not agree that the models should be implemented 
after certain other actions have occurred or because of the multiple 
competing mandates faced by hospitals and other providers. Since the 
Medicare program's inception, providers have and will continue to 
contend with constantly evolving statutory and administrative 
requirements that often require them to make concurrent changes in 
their practices and procedures. We do not believe the EPMs are 
dissimilar to those requirements.
    Also as discussed earlier in this section, some commenters pointed 
to the potential for unintended consequences that could result from our 
proposed start date, including impediments to beneficiary access and 
reduced quality of care. As discussed in section III.E. of this final 
rule, we are including quality measures for purposes of evaluating 
hospitals' performance both individually and in aggregate across the 
models. Also, as discussed in section III.F. of this final rule, we are 
making final policies and actions to monitor both care access and 
quality. We believe these features will help ensure that beneficiary 
access to high quality care is not compromised under the EPMs.
    Comment: Commenters raised specific concerns that the proposed 
EPMs' emphasis on cost-savings could incentivize hospitals to use the 
least

[[Page 189]]

costly post-acute alternative rather than the option that is most 
appropriate for the beneficiary. Furthermore, commenters stated that 
under an episode payment structure, EPM participants that admit 
healthier patients would have better financial results. Some commenters 
believe this design will consequently impact Medicare beneficiaries and 
the Medicare Trust Fund by increasing the frequency of Medicare 
payments from participants initiating a higher volume of episodes in a 
healthier population of beneficiaries. Other commenters believed that 
the proposed regulation would have serious negative impacts on Medicare 
beneficiaries by encouraging unnecessary surgeries and on health care 
stakeholders by discouraging innovation. One commenter encouraged us to 
create a patient advisory panel so that beneficiary viewpoints could be 
incorporated into model planning for the EPMs and any other Innovation 
Center bundled payment models.
    Response: We appreciate the commenters' concerns regarding the 
quality of care for Medicare beneficiaries. Improving the quality of 
care is a central goal of the Innovation Center's work to test new 
payment and service delivery models. We disagree with commenters that 
the models will negatively impact the quality of care for beneficiaries 
in these models and we refer readers to the monitoring and beneficiary 
protections discussion in section III.G. of this final rule which we 
believe will address the commenters' concerns about care stinting. We 
emphasize that care stinting or denying the provision of medically 
necessary care is not permitted under the EPMs. Medicare beneficiaries 
in the EPMs will retain the right to obtain health services from any 
individual or organization qualified to participate in the Medicare 
program, and EPM participants are required to supply beneficiaries with 
written information regarding the design and implications of these 
models as well as the beneficiaries' rights under Medicare, including 
their right to use their providers of choice. We disagree with 
commenters that the EPMs will stifle innovation for care furnished 
during an EPM episode. We proposed, and are finalizing in this final 
rule, a payment methodology that will account for changes in care 
patterns and utilization trends for EPM episodes as described in 
section III.D. of this final rule and will have a monitoring contractor 
actively reviewing claims and monitoring behavior of participant 
providers to ensure beneficiary choice and care are not compromised by 
the EPMs. The Federal Government has long recognized the important role 
of the public in developing effective policies. Advisory committees are 
a way of ensuring public and expert involvement and advice in federal 
decision-making. In compliance with the Federal Advisory Committee Act 
(FACA) the number of advisory committees is carefully managed and 
committee memberships reflect a balance of viewpoints, education, and 
experience. Although the establishment of a Patient Advisory Committee 
for all Innovation Center models is beyond the scope of this rule, we 
believe that stakeholder engagement is essential to the success of 
these models and our learning and monitoring contractors as well as our 
evaluation contractor will be soliciting beneficiary feedback on their 
experiences with the EPMs.
    Comment: While some commenters appreciated the approach of CMS to 
implement episode-based payment models for a select group of clinical 
scenarios, others suggested that participation be voluntary, in order 
to allow hospitals and providers implementing other payment reforms 
like the MACRA a more gradual adoption process of EPMs. An additional 
voluntary component to the proposed EPMs, commenters stated, would also 
permit additional participants who are interested in the models but not 
located in the MSAs in which the models will be tested to volunteer for 
participation. Still, other commenters stated that single-episode 
initiatives fail to encourage systemic change within organizations, and 
may hinder competition if implemented. Commenters stated that as a 
result of mandated participation, many surgeons who and facilities 
which lack familiarity, experience, or proper infrastructure to support 
care redesign efforts will hamper provider participation, bias model 
performance evaluation, and negatively affect patient care. One 
commenter suggested that the nature of the models will provide 
information about how many organizations, and which organizations, 
fail. Other commenters commended CMS for the episode payment models. 
The commenters believed that this overall strategy will motivate 
hospitals to work more closely with other members of the patient's care 
team, which could reduce avoidable complications after surgery and 
decrease the risk of additional hospitalizations.
    Response: We thank the commenters for their feedback, but disagree 
with the suggestion to finalize the proposed EPMs as a voluntary 
initiative. The EPMs will give CMS the ability to test how an episode 
payment model might function among participants that would otherwise 
not participate in such a model. As such, we expect the results from 
these models will produce data that are more broadly representative 
than what might be achieved under a voluntary model. Also, these models 
test a regional target pricing approach to consider a participant 
hospital's performance relative to its regional peers. As part of this 
test, we will learn whether our alternative pricing approach in these 
models will better incentivize participants who are already delivering 
high quality and efficient care while still incentivizing historically 
less efficient providers to improve. We would not be able to test such 
a regional pricing approach under a purely voluntary model, nor could 
the appropriate evaluation approach be implemented if participants 
could volunteer, because it is likely that only the already high 
quality and efficient providers would sign up.
    Comment: Many commenters supported our use of notice and comment 
rulemaking for the EPMs and encouraged us to continue to use the notice 
and comment rulemaking process to facilitate a robust public dialogue 
on important issues related to the EPMs and the CR incentive payment 
model. These commenters generally agreed with the proposed EPM 
episodes. A few commenters were concerned that we would avoid notice 
and comment rulemaking requirements.
    Response: We appreciate the commenters' support for the use of 
notice and comment rule-making for the EPM models. The EPMs are 
intended to enable CMS to better understand the effects of payment 
models on a broader range of Medicare providers than what is currently 
being tested under the BPCI initiative. To this end, testing the EPMs 
in the proposed manner will also allow us to learn more about patterns 
of inefficient utilization of health care services and how to 
incentivize improvement in quality for common AMI episodes.
    We respectfully disagree that we are avoiding notice and comment 
rulemaking. We note that the proposed rule (81 FR 50794), promulgated 
in accordance with the requirements of 5 U.S.C. 553, went into great 
detail about the provisions of the proposed EPMs, enabling the public 
to fully understand and comment on how the proposed models were 
designed and could apply to those affected providers and beneficiaries. 
In this final rule, which is also being promulgated in accordance with 
the requirements of 5 U.S.C. 553,

[[Page 190]]

we respond to the public comments received on our proposals, and after 
considering them, we are finalizing our proposals with some 
modifications.
    Comment: Commenters questioned the extent to which EPM participants 
would have the knowledge, skills, and experience to successfully drive 
improvements in care delivery and health outcomes. Many commenters 
asserted they do not have enough experience to even know where the 
efficiencies in care delivery are available to take advantage of them, 
which limits the ability of the EPMs' potential success. Another 
commenter recommended CMS inform the participants that will be in these 
episode payment models as early as possible. To this end, many 
commenters recommended that CMS implement a broad-based education 
campaign regarding the new EPMs that uses all of CMS' communication 
channels to reach hospitals, post-acute care providers, physicians, and 
community-based providers of long term services and supports.
    There were many unique suggestions by commenters to appropriately 
communicate the proposed EPMs to affected stakeholders. A few 
commenters were generally uncertain where CMS could articulate its 
vision for innovative payment models. A few other commenters believed 
CMS should explain in detail the applicable EPMs, provide contact 
information and a publicly accessible list of all the providers that 
are part of the model in each region. Other commenters requested more 
opportunity to analyze the lessons learned from Health Care Payment 
Learning and Action Network (HCP-LAN), Clinical Episode Payment (CEP) 
work group, and BPCI so they can be broadly applied to care redesigns 
as part of the proposed EPMs. To support learning efforts, some 
commenters recommended CMS to include in final regulations a 
requirement that participating hospitals must develop, have approved by 
CMS, and implement a comprehensive, effective clinical care model and 
leadership structure for coordinating care and managing implementation 
of the EPMs. A few suggested that CMS assign a Medicare Project Officer 
to assist CJR and EPM participants. One commenter suggested that CMS 
provide advanced education and clinical-financial tools attainable 
through a blend of registries, databases and CMS claims data. Other 
commenters supported the intention of CMS to establish a learning and 
diffusion program.
    Response: We agree with commenters regarding the need to 
continually improve stakeholder outreach for models to succeed and we 
intend to do as much as we can to work to design and deploy a helpful 
learning and diffusion program. CMS is committed to continuing to 
facilitate performance improvement by identifying areas of excellence 
for the purposes of extrapolating best practices. CMS encourages 
collaboration amongst organizations and can provide guidance on the 
development and implementation of specific learning systems. We 
currently deploy the expertise and experience of The Innovation 
Center's Learning and Diffusion Group to facilitate learning within 
models by disseminating the lessons learned across models so that 
participants can benefit from the experiences of other models, and are 
always looking for better ways to educate and assist participants in 
knowledge sharing. For example, BPCI includes a shared learning network 
that brings experienced stakeholders together for knowledge sharing, 
collaboration, and peer-to-peer learning. We continue to believe that 
these efforts contribute to reducing the administrative burden on the 
health care delivery system and will be responsive to commenters' 
concerns.
    Comment: One commenter stated that they believe CMS should engage 
in models which enhance sharing of best practices rather than financial 
incentives.
    Response: We appreciate the commenter's submission and agree with 
the sentiment that providers of care in the EPMs should ensure quality 
of care is maintained or improved. The design of the episode-based 
payments directly corresponds with CMS' stated goal of decreasing costs 
while maintaining or improving quality. Within this framework, we 
anticipate best practices naturally evolving as participants explore 
care redesign to achieve efficiencies in the episode.
    Comment: Many commenters applauded many of the design features in 
the new proposed models--suggesting that the proposed rule outlined the 
framework for models that could become very successful at reducing 
Medicare spending and improving patient care. One commenter suggested 
that CMS develop accreditation standards for participation and only 
select accredited EPM participants. Another commenter suggested 
considering Quality Improvement Organizations (QIOs) as participants, 
or that QIOs be more centrally involved in such models to continue to 
recognize the importance of care transitions.
    Response: We thank commenters for their support of the proposed 
design features in the new proposed models. The QIO Care Transitions 
Project \7\ previously tested the extent to which QIOs lead 
improvements in care transitions. Research found reduced rates of 30-
day re-hospitalization and all-cause hospitalization per 1,000, however 
the reduced rate of all-cause 30-day re-hospitalization as a percentage 
of hospital discharges was not statistically significant. We will 
continue to work internally to evaluate the extent to which QIOs 
complement the operations of the EPMs. We disagree with the suggestion 
to develop accreditation standards, as such actions are distinct from 
testing of EPMs, and the proposal to define EPM episode initiators as 
only those accredited EPM participants. The definition of the episode 
initiator is discussed further in section III.B of this final rule.
---------------------------------------------------------------------------

    \7\ Brock J, et al., Association between quality improvement for 
care transitions in communities and rehospitalizations among 
Medicare beneficiaries. JAMA. 2013 Jan 23;309(4):381-91.
---------------------------------------------------------------------------

    As discussed in more detail in section V. of this final rule, we 
proposed numerous modifications to the CJR model, which began on April 
1, 2016. Section V. of this final rule contains our proposed policy 
changes, commenters' reactions, and our responses. We discuss here 
comments we received on the CJR model as a whole, including several 
comments pertaining to model policies for which we did not propose any 
changes, as well as our responses.
    Comment: In general, commenters expressed support for the CJR 
model. One commenter suggested that CMS extend the model on a voluntary 
basis after the conclusion of the model's 5 performance years, to allow 
for successful participants to continue under CJR. The commenter also 
suggested that in such a scenario, CMS allow for convening 
organizations to participate (as is the case currently under the BPCI 
initiative) and modify the model design to include features such as 
financial risk for the post-acute care period only. The commenter noted 
that such flexibility would encourage participation in alternative 
payment models.
    Another commenter expressed support for the CJR model but noted the 
significant time and effort required for hospitals to implement the 
model. Commenters also requested several policy changes out of scope 
for this rulemaking, including: Additional relaxation of regulatory 
barriers to integration between hospitals and other stakeholders, 
removal of fractures in

[[Page 191]]

their entirety from this episode payment model, additional waivers of 
Medicare program rules, additional quality measures, policies that 
would encourage use of specific medical devices associated with lower 
revision rates, and modifications to the pricing methodology that would 
include comprehensive risk adjustment. Finally, one commenter requested 
that data be provided on a more frequent basis.
    Response: We thank the commenters for their support of the CJR 
model. With regard to the CJR model policies for which we did not 
propose any changes, we will continue to consider the issues commenters 
brought forward and if warranted, would address any changes through 
future rulemaking as necessary. In addition, we note that while 
currently we provide CJR hospitals with episode data on a quarterly 
basis, we may begin to consider providing such data on a monthly basis 
when practicable.
    Comment: A few commenters supported CMS' pursuit of opportunities 
to spread value-based payment to more providers through additional 
episode payment models beyond lower extremity joint replacement.
    Response: We acknowledge and appreciate the commenters' remarks.
    Comment: A few commenters addressed issues on the following 
subject-matter areas: Alternative administration of medications, non-
medically directed anesthesia delivery, remote patient monitoring, data 
collection for global surgical services, and the long term care 
hospital certification program.
    Response: These comments pertain to issues for which we did not 
include any proposals in the proposed rule. Therefore, we believe these 
comments are outside the scope of the proposed rule, and we are not 
addressing them in this final rule. After carefully considering all of 
the comments we received on the proposed model, including those 
discussed previously and within the following pages, for the reasons 
described elsewhere in this rule, we have concluded that we can 
successfully test the Episode Payment Models with several modifications 
and timing changes. The final model design we are implementing includes 
additional lead time for participants prior to the onset of downside 
risk to ensure that the models have time to incorporate risk adjustment 
into pricing, a commitment to conduct public listening sessions on risk 
adjustment during the 2017 calendar year and rulemaking during the 2018 
calendar year on risk adjustment methods, an exemption for the Medicare 
Shared Savings Program Track 3 ACOs from participation in the EPMs and 
adjustments to the AMI transfer policy and the CABG quality measures. 
All of these changes are discussed in detail in this final rule.

B. Summary of the Major Provisions

1. Model Overview--EPM Episodes of Care
    The EPMs, as described further in section III.B.2. of this final 
rule, are an AMI, CABG, or SHFFT model episode that will begin with an 
inpatient admission to an anchor hospital assigned to one of the 
following MS-DRGs upon beneficiary discharge. Acute care hospital 
services furnished to beneficiaries in AMI, CABG, and SHFFT episodes 
currently are paid under the Inpatient Prospective Payment System 
(IPPS) through several Medicare Severity-Diagnosis Related Groups (MS-
DRGs): For AMI episodes, AMI MS-DRGs (280-282) and those Percutaneous 
Coronary Intervention (PCI) MS-DRGs (246-251) representing IPPS 
admissions for AMI that are treated with PCIs; CABG MS-DRGs (231-236); 
and SHFFT MS-DRGs (480-482). Episodes will end 90 days after the date 
of discharge from the anchor hospital, as defined under Sec.  512.2. 
Defining EPMs' episodes of care in such a manner offers operational 
simplicity for both providers and CMS. The EPMs' episodes will include 
the inpatient stays 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
    Consistent with the CJR model, we proposed that acute care 
hospitals would be the episode initiators and bear financial risk under 
the proposed AMI, CABG and SHFFT models. 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 an 
episode, and hospital staff members already are involved in hospital-
discharge planning and post-acute care recommendations for recovery, 
key dimensions of high-quality and efficient care. We proposed to 
require all hospitals to participate that are paid under the IPPS, have 
a CMS Certification Number (CCN), and have an address located in 
selected geographic areas to participate in the EPMs, with limited 
exceptions. An eligible beneficiary who receives care at such a 
hospital will automatically be included in the applicable EPM. We 
proposed to select geographic areas through a random sampling 
methodology.
    For the CR incentive payment model, we proposed to provide a CR 
incentive payment specifically to selected hospitals with financial 
responsibility for AMI or CABG model episodes (hereinafter EPM-CR 
participants) because they are already engaged in managing the AMI or 
CABG model beneficiary's overall care for a period of time following 
hospital discharge. Similarly, we believe there are opportunities to 
test the same financial incentives for hospitals where the 
beneficiary's overall care is paid under the Medicare FFS program. 
Thus, we also proposed to provide a CR incentive payment specifically 
to selected hospitals that are not AMI or CABG model participants 
(hereinafter FFS-CR participants).
    Our geographic-area selection process is detailed further in 
section III.B.4. of this final rule.
3. Payment
    We will test the AMI, CABG, and SHFFT EPMs for 5 performance years. 
The first performance year would begin July 1, 2017. During these 
performance years we will continue paying hospitals and other providers 
and suppliers according to the appropriate Medicare FFS payment 
systems. However, after the completion of a performance year, the 
Medicare claims payments for services furnished to an eligible 
beneficiary during an episode, based on claims data, will be combined 
to calculate an actual episode payment. The actual episode payment will 
then be reconciled against an established EPM quality adjusted target 
price. The amount of this calculation, if positive, will be paid to the 
EPM participant as a ``reconciliation payment'' provided they had 
achieved a quality category of ``acceptable'' or higher. If the amount 
of this calculation is negative, we will require a ``Medicare 
repayment'' from the participant hospital beginning with episodes 
ending in performance year 3 of the EPMs. We had proposed to phase in 
the requirement that participants whose actual episode payments exceed 
the quality adjusted target price pay the difference back to Medicare 
beginning in the second quarter of performance year 2, and under this 
proposal, CMS would not require a Medicare repayment from hospitals for 
actual episode payments that exceed their target price in performance 
year 1 and the first quarter of performance year 2. Our final rule 
implements the requirement for Medicare repayments during performance 
year 3 and includes

[[Page 192]]

an applicable discount factor that would be used for calculating 
repayment amounts for performance years 3 and 4. Also, participants may 
elect to assume downside risk for performance year 2, which would also 
include an applicable discount factor for calculating repayment 
amounts.
    In contrast to the CJR model, due to the clinical characteristics 
and common patterns of care in AMI episodes, we proposed payment 
adjustments in the cases of certain transfers and readmissions of 
beneficiaries to inpatient hospitals for these episodes. These payment 
adjustments are discussed in detail in sections III.D.4.b.(1). through 
III.D.4.b.(2).(a). of the proposed and this final rule. We did not 
finalize one of these proposals--a payment adjustment for AMI episodes 
involving an inpatient-to-inpatient transfer or what we referred to as 
a chained anchor hospitalization. We also proposed payment adjustments 
for CABG model episodes, which we are finalizing in this rule. We 
proposed and are making final with modification limits on how much a 
hospital can gain or lose based on its actual episode payments relative 
to quality adjusted target prices, including policies to further limit 
the risk of high payment cases for special categories of participants 
as described in sections III.D.7.a. through III.D.7.d. of this final 
rule. In response to comments, we are finalizing a policy to extend 
separate financial loss protections to participants with a low volume 
of episodes under a model, which we refer to as EPM volume protection 
hospitals.
    In addition to the EPMs, we proposed to test a CR incentive payment 
model (81 FR 50800) to encourage the utilization of CR/ICR services for 
beneficiaries hospitalized for treatment of AMI or CABG. To determine 
the CR incentive payment, we proposed to count the number of CR/ICR 
services for the relevant time periods under the Outpatient Prospective 
Payment System (OPPS) and PFS on the basis of the presence of paid 
claims of the HCPCS codes that report CR/ICR services and the units of 
service billed. The initial level of the per service CR incentive 
amount would be $25 per CR/ICR service for each of the first 11 CR/ICR 
services paid for by Medicare during an AMI or CABG model episode or 
AMI or CABG care period. After 11 CR/ICR services are paid for by 
Medicare for a beneficiary, the level of the per service CR incentive 
amount will increase to $175 per CR/ICR service for each additional CR/
ICR service paid for by Medicare during the AMI or CABG model episode 
or AMI care period or CABG care period. A more detailed discussion of 
the CR incentive payment is located in section VI.E.1 of this final 
rule. The CR performance years would be the same as the performance 
years for the EPMs in section III.D.2.a. of this final rule. Further 
details about the payment structure and design of the CR incentive 
payment model can be found in section VI. of this final rule.
4. Similar, Previous, and Concurrent Models
    The EPMs are informed by other models and demonstrations currently 
and previously conducted by CMS, and will explore additional ways to 
use episode payment to enhance coordination of care and improve the 
quality of care.
    We recently announced practices that will participate in the 
Oncology Care Model (OCM), an episode payment model for physician 
practices administering chemotherapy. Under OCM, practices will enter 
into payment arrangements that include both financial and performance 
accountability for episodes of care surrounding chemotherapy 
administration to cancer patients. We will coordinate with other payers 
to align with OCM in order to facilitate enhanced services and care at 
participating practices.\8\
---------------------------------------------------------------------------

    \8\ More information on the OCM can be found on the Innovation 
Center's Web site at http://innovation.cms.gov/initiatives/Oncology-Care/.
---------------------------------------------------------------------------

    The Innovation Center previously tested innovative episode payment 
approaches in the Medicare Acute Care Episode (ACE) demonstration,\9\ 
and, as described in this final rule, currently is testing additional 
approaches under the BPCI initiative and the CJR model. The ACE 
demonstration tested an alternative payment approach for cardiac and 
orthopedic inpatient surgical services and procedures. All Medicare 
Part A and Part B services pertaining to the inpatient stay were 
included in the ACE demonstration episodes of care. Evaluations of the 
ACE demonstration found that while there was not strong quantitative 
evidence indicating improvements in quality, there was qualitative 
evidence that hospitals worked to improve processes and outcomes as a 
result of their participation in the demonstration.
---------------------------------------------------------------------------

    \9\ Information on the ACE Demonstration can be found on the 
Innovation Center's Web site at http://innovation.cms.gov/initiatives/ACE/.
---------------------------------------------------------------------------

    Currently, we are testing the BPCI initiative, which is composed of 
related payment models that link payments for multiple services that a 
Medicare beneficiary receives 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. Participating organizations chose from 48 clinical 
episodes, including hip and femur procedures except major joint, acute 
myocardial infarction, percutaneous coronary intervention, and coronary 
artery bypass graft surgery. BPCI Model 2 is an episode payment model 
in which a qualifying acute care hospitalization initiates a 30-, 60-, 
or 90-day episode of care. The episode 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.\10\ Our experience testing BPCI Model 2 informed the design 
of the three proposed EPMs. Although some interim evaluation results 
from the BPCI models are available, final evaluation results for the 
models within the BPCI initiative are not yet available. However, we 
believe that CMS' experiences with BPCI support the design of the 
proposed EPMs. Stakeholders both directly and indirectly involved in 
testing BPCI models have conveyed that they perceive the initiative to 
be an effective mechanism for advancing better, more accountable care 
and aligning providers along the care continuum. This message has been 
reinforced through CMS site visits to participating entities, the 
Bundled Payments summit in Washington, in-person meetings with Awardees 
at CMS, and Awardee-led Affinity Group discussions. The BPCI initiative 
incorporates 48 clinical episodes, including cardiac and orthopedic 
episodes similar to the AMI, CABG, and SHFFT models. These clinical 
episodes are being tested by over 1,200 Medicare providers, including 
acute care hospitals, physician group practices, skilled nursing 
facilities, and home health agencies. Cardiac and orthopedic clinical 
episodes are among the most popular episodes in BPCI, indicating that 
BPCI awardees participating in BPCI believe they can reduce cost and

[[Page 193]]

improve quality for beneficiaries in these episodes of care.
---------------------------------------------------------------------------

    \10\ 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/.
---------------------------------------------------------------------------

    Our design and implementation of the CJR model, which is an episode 
payment model for LEJR episodes, also informed the design of the AMI, 
CABG, and SHFFT EPMs. After releasing a proposed rule in July 2015 and 
receiving nearly 400 comments from the public, in November 2015 we 
released final regulations implementing the CJR model. Approximately 
800 acute care hospitals (approximately 23 percent of all IPPS 
hospitals) now participate in the CJR model. The first CJR performance 
year began on April 1, 2016. The CJR model will continue for 5 
performance years, ending on December 31, 2020. The AMI, CABG, and 
SHFFT models build upon our experience designing and implementing the 
CJR model, including feedback from providers and other public 
stakeholders during the CJR model's rulemaking and implementation 
processes.
    Further information on why specific elements of the models and 
initiatives were incorporated into the EPMs' designs is discussed later 
in this final rule.
5. Overlap With Ongoing CMS Efforts
    We proposed to exclude from participation in the AMI, CABG, and 
SHFFT models certain acute care hospitals participating in BPCI Models 
2 and 4 for the hip and femur procedures except major joint or for all 
three of the BPCI cardiac episodes (AMI, PCI, and CABG). We proposed to 
exclude from EPMs beneficiaries prospectively aligned to Innovation 
Center ACO models which had downside financial risk such as the Next 
Generation ACO and the Comprehensive ESRD Care models. We also sought 
comment regarding whether this exclusion should be extended to include 
beneficiaries assigned to Track 3 Shared Savings Program ACOs as these 
ACOs also have prospective assignment and downside financial risk. As 
discussed in the proposed rule, other CMS programs, such as the Shared 
Savings Program (Tracks 1 and 2) and other accountable care 
organization (ACO) or total cost of care initiatives will remain 
eligible for EPM episode initiation. We proposed to account for 
overlap, that is, where EPM beneficiaries also are included in other 
models and programs to ensure the financial policies of the models are 
maintained and results and spending reductions are attributed to one 
model or program. Specifically, as with CJR, we have proposed to give 
precedence to existing BPCI models when a beneficiary is admitted to an 
acute care hospital for what would otherwise be a covered EPM episode 
but that acute care hospital or the treating physician is participating 
in BPCI and the admission would meet the criteria to be covered under 
BPCI. In addition, as with CJR, an EPM episode will be cancelled if a 
beneficiary whose hospitalization initiates an EPM episode receives 
treatment during the post discharge period that would also result in 
the episode being covered under BPCI. Based on the comments received, 
we are finalizing these proposals with the modification that we will 
exclude from EPMs not only those beneficiaries prospectively assigned 
to the Next Generation ACO and the Comprehensive ESRD Care models which 
also share in downside risk with CMS, but also those beneficiaries 
prospectively assigned to Track 3 Shared Savings Program ACOs. More 
detail on our policies for accounting for provider- and beneficiary-
level overlap is discussed in section III.D.6. of this final rule.
    The amendments made by the Medicare Access and CHIP Reauthorization 
Act of 2015 (MACRA) (Pub. L. 114-10, April 16, 2015) created two paths 
for eligible clinicians to link quality to payments: The Merit-Based 
Incentive Payment System (MIPS) and Advanced Alternative Payment Models 
(APMs). These two paths create a flexible payment system called the 
Quality Payment Program as finalized by CMS in the Quality Payment 
Program final rule with comment period (81 FR 77008 through 77831). The 
MIPS streamlines and improves on three current programs--the Physician 
Quality Reporting System (PQRS), the Physician Value-based Payment 
Modifier (VM), and the Medicare Electronic Health Record (EHR) 
Incentive Program--and continues the focus on quality and value in one 
cohesive program. Through sufficient participation in Advanced APMs, 
eligible clinicians can become Qualifying APM Participants (QPs) for a 
payment year beginning with CY 2019 and potentially receive an APM 
Incentive Payment (or, in later years, a more favorable payment update 
under the PFS) for the year.
    So that the EPMs may be able to meet the criteria to be Advanced 
APMs based on the requirements in the Quality Payment Program final 
rule with comment period, we proposed to require EPM participants to 
use Certified Electronic Health Record Technology (CEHRT) (as defined 
in section 1848(o)(4) of the Act) in Track 1 of each EPM. We proposed 
that EPM participants in these tracks must use certified health 
information technology (IT) functions, in accordance with the 
definition of CEHRT under our regulation at 42 CFR 414.1305, to 
document and communicate clinical care with patients and other health 
care professionals as described in the Quality Payment Program final 
rule with comment period. We also made similar proposals with respect 
to CJR.
    We proposed to implement two different tracks within the EPMs 
whereby EPM participants that meet requirements for use of CEHRT and 
financial risk would be in Track 1 (an Advanced APM track) and EPM 
participants that do not meet these requirements would be in Track 2 (a 
non-Advanced APM track). The different tracks would not change how EPM 
participants operate within the EPM itself, beyond the requirements 
associated with selecting to meet CEHRT use requirements. The only 
distinction between the two tracks is that only Track 1 EPMs could be 
considered an Advanced APM for purposes of the Quality Payment Program 
based on the criteria in the Quality Payment Program final rule with 
comment period. We made similar proposals with respect to CJR. We 
considered modifying requirements proposed in this rule as necessary to 
reconcile them with policies adopted in the Quality Payment Program 
final rule. A more detailed discussion of how EPMs and CJR could 
qualify as Advanced APMs, and how eligible clinicians participating in 
the EPMs and CJR will be identified and affected, can be found in 
sections III.A.2 and V.O. of this final rule.
    Comment: One commenter suggested that the most relevant definition 
of CEHRT to the EPM is found at Sec.  495.4.
    Response: The definition at 42 FR 495.4 relates to Medicaid 
eligible professionals, eligible hospitals, and CAHs, as defined for 
the EHR Incentive Programs. The definition at 45 FR 414.1305 relates to 
Medicare eligible clinicians and groups participating as defined for 
the CMS Quality Payment Program. These two definitions are 
substantively the same; however, we refer readers to the definition at 
42 FR 495.4 as this most closely relates to the eligibility status of 
EPM participants. We have updated and finalized this technical 
correction.
6. Quality Measures and Reporting Requirements
    Similar to the quality measures selected for the CJR model, we 
proposed to use established measures used in other CMS quality-
reporting programs for the proposed EPMs' episodes. We proposed to use 
these measures to test

[[Page 194]]

EPMs' success in achieving its goals under section 1115A of the Act and 
to monitor for beneficiary safety. For the SHFFT model, we proposed 
applying the same quality measures selected for the CJR model.
    The quality measures for SHFFT episodes are as follows:
     THA/TKA Complications: Hospital-Level Risk-Standardized 
Complication Rate (RSCR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (National 
Quality Forum [NQF] #1550).
     Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAPHS) Survey (NQF #0166).
     Successful Voluntary Reporting of Patient-Reported 
Outcomes.
    The measures for the AMI model are as follows:
     MORT-30-AMI: Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #0230).
     AMI Excess Days: Excess Days in Acute Care after 
Hospitalization for Acute Myocardial Infarction (acute care days 
include emergency department, observation, and inpatient readmission 
days).
     HCAPHS Survey (NQF #0166), linear mean roll-up (HLMR) 
scores like CJR.
    The measures for the CABG model are as follows:
     MORT-30-CABG: Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass 
Graft Surgery (NQF #2558).
     HCAPHS Survey (NQF #0166), HLMR scores like CJR.
    We proposed and requested public feedback on options for including 
successful implementation testing of the Hybrid AMI measure as a 
quality measure for the AMI episode. The Hybrid AMI measure will assess 
a hospital's 30-day risk-standardized acute myocardial infarction 
mortality rate and will incorporate a combination of claims data and 
EHR data submitted by hospitals. Public comment and our responses to 
those comments follow under the applicable sections in section III. of 
this final rule.
    We are finalizing as proposed the following quality measures for 
SHFFT episodes:
     THA/TKA Complications: Hospital-Level Risk-Standardized 
Complication Rate (RSCR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (National 
Quality Forum [NQF] #1550).
     Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAPHS) Survey (NQF #0166).
     Successful Voluntary Reporting of Patient-Reported 
Outcomes.
    We are finalizing as proposed the following measures for the AMI 
model:
     MORT-30-AMI: Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #0230).
     AMI Excess Days: Excess Days in Acute Care after 
Hospitalization for Acute Myocardial Infarction (acute care days 
include emergency department, observation, and inpatient readmission 
days).
     HCAPHS Survey (NQF #0166), linear mean roll-up (HLMR) 
scores like CJR.
    We are finalizing as proposed the following measures for the CABG 
model:
     MORT-30-CABG: Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass 
Graft Surgery (NQF #2558).
     HCAPHS Survey (NQF #0166), HLMR scores like CJR.
    In addition, after consideration of comments received, we are 
finalizing an additional measure for the CABG model. Successful 
voluntary reporting of the Society of Thoracic Surgeons (STS) CABG 
composite score (NQF #0696) is a comprehensive NQF-endorsed composite 
measure and will be weighted at 10 percent of the composite quality 
score for those hospitals that report this voluntary measure.
    Additionally, similar to the CJR model, we proposed to adopt a pay-
for-performance methodology for EPMs that relies upon a composite 
quality score to assign respective EPM participants to four quality 
categories. These quality categories will determine an EPM 
participant's eligibility for a reconciliation payment should such EPM 
participant achieve spending below the quality-adjusted target price, 
as well as the effective discount percentage at reconciliation. Points 
for quality performance and improvement (as applicable) will be awarded 
for each episode measure and then summed to develop a composite quality 
score that will determine the EPM participant's quality category for 
the episode. Quality performance will make up the majority of available 
points in the composite quality score, with improvement points 
available as ``bonus'' points for the measure. This approach resembles 
the CJR model methodology.
7. Beneficiary Protections
    As with the CJR model, Medicare beneficiaries in the EPM models 
will retain the right to obtain health services from any individual or 
organization qualified to participate in the Medicare program. Eligible 
beneficiaries who receive services from EPM participants would not have 
the option to opt out of inclusion in the applicable model. We proposed 
to require EPM participants to supply beneficiaries with written 
information regarding the design and implications of these models as 
well as the beneficiaries' rights under Medicare, including their right 
to use their providers of choice. We will make a robust effort to reach 
out to beneficiaries and their advocates to help them understand the 
models. We also proposed to use our existing authority, if necessary, 
to audit participant hospitals if claims analysis indicates an 
inappropriate change in furnished services. Beneficiary protections are 
discussed in greater depth in section III.G. of this final rule.
8. Financial Arrangements
    We proposed a regulatory structure for financial relationships 
under the EPM to advance the goals of improving the quality and 
efficiency of model episodes, which also included program integrity 
safeguards to protect against abuse under the financial relationships 
permitted for the EPM. Our EPM proposals reflected changes from the 
current CJR model regulations that generally fell into the following 
four categories: (1) Removing duplication of requirements in similar 
provisions; (2) streamlining and reorganizing the provisions for 
clarity and consistency; (3) providing additional flexibility in 
response to feedback from CJR participant hospitals and other 
stakeholders; and (4) expanding the scope of financial arrangements 
under the EPM. In addition to the collaborators permitted under the CJR 
model, we proposed to add hospitals and critical access hospitals 
(CAHs) to the list of providers and suppliers eligible for gainsharing 
as EPM collaborators due to the expected participation of multiple 
hospitals in the episode care for some beneficiaries in AMI and CABG 
episodes. We specifically proposed that ACOs be eligible for 
gainsharing as EPM collaborators due to the interest of ACOs in 
gainsharing during the CJR model rulemaking and the ongoing challenges 
of addressing overlap between episode payment models and ACOs. We made 
additional proposals that would allow ACOs to enter into financial 
arrangements under the EPM with ACO participants and ACO providers/
suppliers and to allow physicians group practices (PGPs) that are ACO 
participants in an ACO that is an EPM collaborator to enter into 
financial

[[Page 195]]

arrangements under the EPM with PGP members.
    As discussed in section III.I. of this final rule, after 
consideration of the public comments received we are finalizing the 
proposed structure for financial arrangements under the EPM, including 
that EPM participants may enter into sharing arrangements with EPM 
collaborators, EPM collaborators may enter into distribution 
arrangements with collaboration agents, and collaboration agents may 
enter into downstream distribution arrangements with downstream 
collaboration agents, subject to the requirements specific to each type 
of arrangement. Our final policies also include modifications to 
specify individually based on their enrollment in Medicare the specific 
providers and suppliers of outpatient therapy services that may be EPM 
collaborators. We also make modifications to clarify that groups of 
nonphysician practitioners and groups of therapists (physical therapy, 
occupational therapy, and speech-language pathology) enrolled in 
Medicare may be EPM collaborators and may enter into distribution 
arrangements or downstream distribution arrangements under the EPM that 
are similar to those we are finalizing for PGPs and their members.
9. Data Sharing
    Based on our experience with various Medicare programs and models, 
including the BPCI initiative, the CJR model, the Shared Savings 
Program, and the Pioneer ACO model, we believe that providing certain 
beneficiary claims data to model participants will be essential to 
their success. We proposed to share data with participants upon request 
throughout the performance period of the models to the extent permitted 
by the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) Privacy Rule and other applicable law. We proposed to share 
upon request both raw claims-level data and claims summary data with 
participants. This approach would allow participants without prior 
experience analyzing claims to use summary data for analysis of care 
and spending patterns, while allowing those participants who prefer raw 
claims-level data the opportunity to analyze claims. We proposed to 
provide participants with up to 3 years of retrospective claims data 
upon request that will be used to develop their quality-adjusted target 
price. In accordance with the HIPAA Privacy Rule, we will limit the 
content of this data to the minimum data necessary for the participant 
to conduct quality assessment and improvement activities and 
effectively coordinate care.
10. Program Waivers
    Section 1115A of the Act authorizes the Secretary to waive Medicare 
program requirements as necessary to implement provisions for testing 
models. Under the CJR model, CMS waived certain program rules regarding 
the direct supervision requirement for certain post-discharge home 
visits, telehealth services, and the skilled nursing facility (SNF) 3-
day rule. CMS finalized these waivers to offer providers and suppliers 
more flexibility so that they may increase coordination of care and 
management of beneficiaries in model episodes. Adopting the CJR waivers 
for the proposed EPMs required further examination to determine if such 
adoption would increase financial vulnerability to the Medicare program 
or would create inappropriate incentives to reduce the quality of 
beneficiary care. As discussed in section III.J. of this final rule, we 
will do the following:
     Adopt waivers of the telehealth originating site and 
geographic site requirement and to allow in-home telehealth visits for 
all three proposed EPMs, as well as the general waiver to allow post-
discharge nursing visits in the home;
     Provide model-specific limits to the number of post-
discharge nursing visits and make model-specific decisions about 
offering the SNF 3-day stay waiver; and
     Adopt a waiver for furnishing cardiac and intensive 
cardiac rehabilitation services to allow a Nurse Practitioner, Clinical 
Nurse Specialist, or Physician Assistant, in addition to a physician, 
to perform specific physician functions.

C. Summary of Economic Effects

    As shown in our impact analysis, we expect the EPMs to result in 
savings to Medicare of $159 million over the 5 performance years of the 
models. We note that a composite quality score will be calculated for 
each hospital in order to determine eligibility for a reconciliation 
payment and whether the hospital qualifies for quality incentive 
payments that will reduce the effective discount percentage experience 
by the hospital at reconciliation for a given performance year. More 
specifically, in performance year 1 of the models, we estimate a 
Medicare cost of approximately $10 million, as hospitals will not be 
subject to downside risk in the first performance year of the models. 
In performance year 2 of the models, we estimate a Medicare cost of 
approximately $25 million, as some hospitals will voluntarily assume 
downside risk in the second performance year of the models and some 
hospitals will receive payments made by CMS. As we introduce downside 
risk beginning in performance year 3 of the models, we estimate 
Medicare savings of approximately $34 million. In performance years 4 
and 5 of the models, we will move from target episode pricing that is 
based on a hospital's experience to target pricing based on regional 
experience, and we estimate Medicare savings of $49 million and $112 
million, respectively.
    As a result, we estimate the net savings to Medicare to be $159 
million over the 5 performance years of the models. We anticipate there 
will be a broader focus on care coordination and quality improvement 
for EPMs among hospitals and other providers and suppliers within the 
Medicare program that will lead to both increased efficiency in the 
provision of care and improved quality of the care provided to 
beneficiaries.
    Additionally, the CR incentive model estimates that the impact on 
the Medicare program may range from up to $29 million of additional 
spending to $32 million of savings between 2017 and 2024, depending on 
the change in utilization of CR/ICR services based on the proposed 
incentive structure.
    Finally, the change in the estimated net financial impact to the 
Medicare program from the CJR model modifications in this final rule is 
$22 million in spending, and the updated assumptions regarding the 
number of hospitals that will report quality data result in an increase 
of $4 million in spending. The total estimated net financial impact to 
the Medicare program from both the modifications in the final rule and 
revised assumptions are $26 million in spending. 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 a model it is determined that termination or 
modification is necessary, such actions will be undertaken through 
rulemaking.

II. Background

    This final rule finalizes the implementation of three new EPMs and 
a CR incentive payment model under the authority of section 1115A of 
the Act. Under the AMI, CABG, and SHFFT EPMs, acute care hospitals in 
certain selected geographic areas will be financially accountable for 
quality

[[Page 196]]

performance and spending for applicable episodes of care. We proposed 
to retrospectively apply through a reconciliation process the episode 
payment methodology; hospitals and other providers and suppliers would 
continue to submit claims and receive payment via the usual Medicare 
FFS payment systems throughout the proposed EPMs' performance years. 
Critical Access Hospitals (CAHs) acting as EPM collaborators would 
continue to receive payment via the usual cost-based reimbursement 
system. Hospitals participating in the proposed EPMs would receive 
target prices, which reflect expected spending for care during an 
episode as well as a discount to reflect savings to Medicare, on a 
prospective basis, prior to the beginning of a performance year. All 
related care covered under Medicare Parts A and B and furnished within 
90 days after the date of hospital discharge from the anchor 
hospitalization which initiated the applicable EPM episode would be 
included in the episode of care. We proposed the CR incentive payment 
model to test the effects on quality of care and Medicare expenditures 
of providing explicit financial incentives to a subset of EPM 
participants and selected hospitals that are not AMI or CABG model 
participants for beneficiaries hospitalized for treatment of AMI or 
CABG to encourage care coordination and greater utilization of 
medically necessary CR/ICR services for 90 days post-hospital discharge 
where the beneficiary's overall care is paid under either an EPM or the 
Medicare FFS program. We believe the models will further our goals of 
improving the efficiency and quality of care for Medicare beneficiaries 
for these medical conditions and procedures.

III. Episode Payment Models

A. Selection of Episodes, Advanced Alternative Payment Model 
Considerations, and Future Directions

1. Selection of Episodes for Episode Payment Models in This Rulemaking
a. Overview
    We have been engaged since 2013 in testing various approaches to 
episode payment for Medicare FFS beneficiaries for 48 clinical episodes 
in the BPCI initiative. As of October 1, 2016, the BPCI initiative has 
1,403 participants in the risk-bearing phase, comprised of 297 Awardees 
and 1,107 Episode Initiators. The breakdown of BPCI participants by 
provider type is as follows: Acute care hospitals (354); skilled 
nursing facilities (642); physician group practices (257); home health 
agencies (81); and inpatient rehabilitation facilities (9).\11\ In BPCI 
Models 2 and 3, there is participation across all 48 clinical episodes, 
and in Model 4 there is participation in 19 clinical episodes.
---------------------------------------------------------------------------

    \11\ https://innovation.cms.gov/initiatives/bundled-payments/.
---------------------------------------------------------------------------

    The 10 clinical episodes with the most participation are: Major 
joint replacement of the lower extremity; simple pneumonia and 
respiratory infections; congestive heart failure; chronic obstructive 
pulmonary disease; bronchitis; asthma; hip and femur procedures except 
major joint; sepsis; urinary tract infection; acute myocardial 
infarction (medical management only); medical non-infectious 
orthopedic; and other respiratory.\12\
---------------------------------------------------------------------------

    \12\ https://innovation.cms.gov/Files/x/bpcianalyticfile.xlsx.
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    In November 2015, CMS released the Final Rule for the Comprehensive 
Care for Joint Replacement (CJR) model (80 FR 73274 through 73554), the 
first test of episode-based payment model for Medicare FFS 
beneficiaries in which providers are required to participate. The CJR 
model, which began on April 1, 2016, focuses on the episode-of-care for 
lower-extremity joint replacement (LEJR) procedures. As discussed in 
the CJR Final Rule (80 FR 73277), LEJR episodes were chosen for the CJR 
model because they represent one of the most common high-expenditure, 
high-utilization procedures furnished to Medicare beneficiaries and 
have significant variation in episode spending. We believe this high 
volume, coupled with substantial variation in utilization and spending 
across individual providers and geographic regions, created a 
significant opportunity to test whether an episode payment model 
focused on a defined set of procedures could improve the quality and 
coordination of care, as well as result in savings to Medicare. 
Notably, both the BPCI initiative and the CJR model are focused on care 
that is related to an inpatient hospitalization, with CJR model and 
BPCI Model 2 episodes beginning with an inpatient hospitalization 
(anchor hospitalization) and extending up to 90 days post-hospital 
discharge.
    In the proposed rule (81 FR 50805), we proposed three new EPMs 
that, like the CJR model, would require provider participation in 
selected geographic areas. Episodes in the new EPMs would begin with 
admissions for hospitalizations in IPPS hospitals, and would extend 90 
days post-hospital discharge. The episodes included in these three 
proposed EPMs would be AMI, CABG, and SHFFT excluding lower extremity 
joint replacement. The proposed AMI model included beneficiaries 
discharged under AMI MS-DRGs (280-282), representing IPPS admissions 
for AMI that are treated with medical management. The proposed AMI 
model also included beneficiaries discharged under PCI MS-DRGs (246-
251) with AMI International Classification of Disease, Tenth Edition, 
Clinical Modification (ICD-10-CM) diagnosis codes for initial AMI 
diagnoses in the principal or secondary diagnosis code positions, 
representing IPPS admissions for AMI that are treated with PCIs. The 
proposed CABG model included beneficiaries discharged under CABG MS-
DRGs (231-236), representing IPPS admissions for this coronary 
revascularization procedure irrespective of AMI diagnosis. The proposed 
SHFFT model included beneficiaries discharged under hip and femur 
procedures except major joint replacement MS-DRGs (480-482), 
representing IPPS admissions for hip-fixation procedures in the setting 
of hip fractures.
    Similar to the selection of LEJR episodes for the CJR model (80 FR 
73277), we selected the AMI, CABG, and SHFFT episodes because they 
represent high-expenditure, high-volume episodes-of-care experienced by 
Medicare beneficiaries. Based on analysis of historical episodes 
beginning in CY 2012-2014, the average annual number of episodes that 
began with IPPS hospitalizations and extended 90 days post-hospital 
discharge, and therefore would have been included in the proposed 
models, is approximately 168,000 for AMI; 48,000 for CABG; and 109,000 
for SHFFT.\13\ The total annual Medicare spending for these historical 
episodes was approximately $4.1 billion, $2.3 billion, and $4.7 
billion, respectively.\14\ Each of the episodes provides different 
opportunities in an EPM to improve the coordination and quality of 
care, as well as efficiency of care during the episode, based on 
varying current patterns of utilization and Medicare spending.
---------------------------------------------------------------------------

    \13\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that began in CY 2012-2014.
    \14\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that began in CY 2012-2014.
---------------------------------------------------------------------------

    However, in contrast to LEJR episodes in the CJR model, which are 
predominantly elective and during which hospital readmissions are rare

[[Page 197]]

and substantial post-acute care provider utilization is common, the 
proposed AMI, CABG, and SHFFT episodes have very different current 
patterns of care. Beneficiaries in these episodes commonly have chronic 
conditions that contribute to the initiation of the episodes and need 
both planned and unplanned care throughout the EPM episode following 
discharge from the initial hospitalization that begins the episode. 
Both AMI and CABG episodes primarily include beneficiaries with 
cardiovascular disease, a chronic condition which likely contributed to 
the acute events or procedures that initiate the episodes. About half 
the average AMI model historical episode spending was for the initial 
hospitalization, with the majority of spending following discharge from 
the initial hospitalization due to hospital readmissions, while there 
was relatively less spending on SNF services, Part B professional 
services, and hospital outpatient services. In CABG model historical 
episodes, about three-quarters of episode spending was for the initial 
hospitalization, with the remaining episode spending relatively evenly 
divided between Part B professional services and hospital readmissions, 
and a lesser percentage on SNF services. Similar to AMI episodes, post-
acute care provider use was relatively uncommon in CABG model 
historical episodes, while hospital readmissions during CABG model 
historical episodes were relatively common. SHFFT model historical 
episodes also were accompanied by substantial spending for hospital 
readmissions, and post-acute care provider use in these episodes also 
was high.\15\ The number of affected beneficiaries and potential impact 
of the models on quality and Medicare spending present an important 
opportunity to further the Administration's goal of shifting health 
care payments to support the quality of care over the quantity of 
services by promoting better coordination among health care providers 
and suppliers and greater efficiency in the care of beneficiaries in 
these models, while reducing Medicare expenditures.\16\ Pay-for-
performance episode payment models, such as the three EPMs proposed in 
the proposed rulemaking, financially incentivize improved quality of 
care and reduced cost by aligning the financial incentives of all 
providers and suppliers caring for model beneficiaries with these 
goals. This alignment leads to a heightened focus on care coordination 
and management throughout the episode that prioritizes the provision of 
those items and services which improve beneficiary outcomes and 
experience at the lowest cost.
---------------------------------------------------------------------------

    \15\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that end in CY 2014.
    \16\ 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 (January 26, 2015).
---------------------------------------------------------------------------

    We selected all of the proposed EPM episodes based on their 
clinical homogeneity, site-of-service, and MS-DRG assignment 
considerations. We anticipated these proposed new EPMs, like the CJR 
model, would benefit Medicare beneficiaries by improving the 
coordination and transition of care among various care settings to 
facilitate beneficiaries' return to their communities as their 
recoveries progress, improving the coordination of items and services 
paid through Medicare FFS, encouraging 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 (80 FR 73276). However, improving value in the EPMs through 
these means requires a cohort of beneficiaries with similar clinical 
features such that coordination and care redesign efforts can be 
targeted. Therefore, we proposed EPM episodes built on common 
pathologic and treatment processes; that is, beneficiaries included in 
both the AMI and CABG models have cardiovascular pathologies that drive 
their clinical courses during the episodes, and SHFFT model 
beneficiaries all share similar diagnoses of hip fracture and treatment 
with hip fixation that drive their clinical courses during their 
respective episodes.
    The following is a summary of the comments received on our overall 
proposal of three new EPMs in which participation would be required and 
our responses.
    Comment: Many commenters commended CMS for its continued commitment 
to testing episode-based payments demonstrated through the proposal to 
implement three new EPMs. MedPAC identified conditions with high post-
acute care use as an appropriate setting to test bundled payments that 
would offer ample opportunities to improve care and lower spending. 
MedPAC also suggested that another consideration for bundled payments 
is whether the condition has a relatively uniform clinical pathway that 
simplifies the rules defining and pricing the bundle. In addition, 
MedPAC emphasized that conditions that lend themselves to patient 
selection should be avoided in bundled payment models, at least in the 
near term, to limit the undesirable provider responses to financial 
incentives that may occur. Other commenters expressed appreciation for 
the opportunity to test innovative care models under the Innovation 
Center authority. They stated that EPMs could hold significant promise 
for furthering the Triple Aim goals of providing high quality care at 
lower cost to produce better outcomes and advance population health.
    However, some commenters expressed concern about the pace of 
changes proposed by CMS through its models and the associated 
expectation and burden that rapid changes in the delivery system and 
related payment structure place on hospitals and providers. Some 
commenters noted that CMS has been swift in releasing rules aimed at 
improving the quality of care delivered, reducing the cost of care, and 
coordinating patient care across multiple settings. The commenters 
pointed out the large volume of significant requirements announced by 
CMS over the last 2 years, including MACRA, the CJR model, and the 
proposed Part B drug payment model, as well as alternative payment 
models and programs, including the Shared Savings Program, Next 
Generation ACOs, BPCI initiative, and OCM, coupled with state level 
initiatives. The commenters believe the breadth and amount of new 
activities make it difficult to understand how the various models and 
program will interact with each other and impact individual delivery 
systems. While directed toward laudable goals, the commenters 
encouraged CMS to be vigilant in its review and analysis of these 
models and programs and to consider the impact and burden on hospitals 
as it continues to release models and programs impacting the hospital 
community. The commenters believe it is in everyone's best interest 
that these models are successful, yet the pace and complexity of 
implementation likely will be a critical factor in the achievement of 
these goals. Therefore, they encouraged CMS to slow the pace of EPM 
implementation to establish ``proof of concept'' through the CJR model 
and BPCI Model 2 results before implementing new EPMs where 
participation is required. Without adequate time to understand the 
appropriate role these payment innovations play in transforming care 
delivery and build upon lessons learned and best practices, the 
commenters

[[Page 198]]

concluded that both CMS and the provider community would miss an 
important opportunity to create programs that will advance patient care 
and successfully transform systems of care.
    The commenters recommended that CMS establish a solid framework 
upon which to build payment initiatives and transform care. Before 
finalizing any more bundled payment initiatives, some commenters 
believe that CMS should articulate its vision and set a clear path for 
innovative payment models, establishing a consistent, predictable and 
transparent framework, giving providers the necessary tools to succeed 
in creating a higher-quality, more efficient health care system. The 
commenters suggested that the framework should include tools such as 
incorporating a predictable pricing trend factor so that participants 
can make decisions about investing in care design in the context of 
stable future prices; providing necessary risk adjustment 
methodologies; releasing consistent quality measures and reporting 
requirements and reliable target pricing; and holding fast to the 
principle of attributing no more than one patient to one bundled 
payment initiative at a time.
    A few commenters expressed concerns about CMS' proposal to test 
three new bundled payment models. The commenters contended that the 
proposed EPMs would make treatment more difficult to access for high 
need patients; discourage truly innovative approaches to managing 
underlying health problems; encourage unnecessary surgeries; encourage 
further consolidation in the health care industry; provide fewer 
choices for consumers; and result in higher prices for private payers. 
One commenter requested that CMS present a much more comprehensive 
analytic work to understand the prevalence and needs of the 
beneficiaries who have serious illness or disabilities prior to and 
during the episode and who therefore require substantial attention to 
the elements of comprehensive care and quality measurement that are 
tailored for these beneficiaries prior to implementing the EPMs. 
Several commenters recommended CMS not to limit alternative payment 
models to episode payment approaches because for many types of 
patients, the biggest opportunity for improving quality and achieving 
savings is avoiding unnecessary episodes and events, and not simply 
paying differently for episodes and events when they occur. Some 
commenters strongly cautioned against EPMs that may subordinate future 
provider-led models. Other commenters recommended CMS to develop and 
implement payment reform models that incorporate population-based 
models, rather than look exclusively at episode payment models which 
can hamper growth of population-based models by limiting their 
financial opportunity.
    Response: We appreciate the support of many commenters for CMS' 
continued development of new episode payment models and agree with 
these commenters that episode payment models provide substantial 
opportunity to improve the quality and efficiency of care for specific 
clinical conditions. We also agree that bundled payment models are just 
one strategy to incentivize the health care system moving toward the 
provision of more accountable, coordinated, high-value care, while 
provider-led and population-based models, as well as other types of 
payment reform models, play complementary roles. The Innovation Center 
is continuing to develop, implement, and evaluate a variety of 
different types of models that test different approaches to achieving 
better care, lower costs, and improved health. The three EPMs are part 
of that portfolio of models. Issues of concern raised by some of the 
commenters about the proposed EPMs, including the implementation 
timeline, are discussed in the specific sections of this final rule 
that address the relevant policies.
b. SHFFT Model
    The SHFFT model was selected to complement the CJR model. We 
proposed to test the SHFFT model in most of the same hospitals 
participating in the CJR model as discussed in section III.B.4. of the 
proposed rule (81 FR 50794), so that all surgical treatment options for 
Medicare beneficiaries with hip fracture (hip arthroplasty and 
fixation) would be included in episode payment models. Hip fracture is 
a serious and sometimes catastrophic event for Medicare beneficiaries. 
In 2010, 258,000 people aged 65 and older were admitted to the hospital 
for hip fracture, with an estimated $20 billion in lifetime cost for 
all hip fractures in the United States in a single year.\17\ In 2013, 
fracture of the neck of the femur (the most common location for hip 
fracture) was the eighth most common principal discharge diagnosis for 
hospitalized Medicare FFS beneficiaries, constituting 2.7 percent of 
discharges.\18\ Mortality associated with hip fracture is 5-10 percent 
after 1 month and approximately 33 percent at 1 year.\19\ Hip 
arthroplasty and hip fixation, or ``hip pinning,'' represent the two 
broad surgical options for treating hip fractures.\20\ The CJR episodes 
begin with admission to acute care hospitals for LEJR procedures 
assigned to MS-DRG 469 (Major joint replacement or reattachment of 
lower extremity with major complications or comorbidities) or MS-DRG 
470 (Major joint replacement or reattachment of lower extremity without 
major complications or comorbidities) upon beneficiary discharge and 
paid under the IPPS, including total and partial hip replacement in the 
setting of hip fracture (80 FR 73280). Therefore, the SHFFT model, 
which would test an additional episode payment for hip fixation, 
provides an opportunity to complete the transition to episode payment 
for the surgical treatment and recovery of the significant clinical 
condition of hip fracture.
---------------------------------------------------------------------------

    \17\ Smith et al. Increase in Disability Prevalence Before Hip 
Fracture. J Am Geriatr Soc. 2015 Oct;63(10):2029-35.
    \18\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \19\ Parker et al. Hip Fracture. BMJ. 2006 Jul 1;333(7557):27-
30.
    \20\ American Academy of Orthopaedic Surgeons, OrthoInfo: Hip 
Fractures, http://orthoinfo.aaos.org (April 12, 2016).
---------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters expressed support for the SHFFT model, 
which CMS proposed to implement in the same MSAs as the CJR model, 
which was implemented beginning in April 2016, and in particular 
expressed appreciation for the design consistency proposed for the 
SHFFT model with the CJR model and the two proposed cardiac EPMs. 
Analysis by MedPAC found that most SHFFT episodes include at least some 
post-acute care services use and that the spending on post-acute care 
services comprises a sizable share of total episode spending, about 
one-third. MedPAC concluded that SHFFT was a good candidate for bundled 
payment. MedPAC also reasoned that the SHFFT episode would give 
hospitals already participating in the CJR model the experience of 
managing care for hip and femur fracture cases that typically present 
emergently, rather than as the planned, elective surgery that is most 
common for lower extremity joint replacement. MedPAC, which recommended 
proceeding only with the SHFFT model in the context of CMS' proposal 
for three new EPMs, maintained that this

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would simplify the set of models that providers are adapting to and 
simplify the administrative requirements for CMS because CMS would not 
need to select new markets for testing the cardiac EPMs. Other 
commenters found it positive that CMS noted that there are differences 
between CJR and SHFFT beneficiaries, notably the latter being more 
likely to have multiple chronic conditions and frailty.
    However, many commenters opposed CMS' proposal for the SHFFT model, 
encouraging CMS either to abandon the model altogether or to 
substantially delay implementation pending additional CJR model 
experience and evaluation results from BPCI Model 2 regarding SHFFT 
episodes. These commenters recommended that CMS proceed at a more 
deliberate pace and simplify the proposed rule for the three different 
EPMs by eliminating the SHFFT model because CMS is already testing an 
episode payment model that requires participation through the CJR 
model. Therefore, they believe that CMS should test only a cardiac 
bundled payment model in a different clinical area as a next step in 
required bundled payment models. The commenters stated that the SHFFT 
model would be overly burdensome to providers who just began 
participating in the CJR model in April 2016 and had insufficient 
financial safeguards for hospitals and quality safeguards for 
beneficiaries, including no quality measures specific to SHFFT model 
beneficiaries, to substantially improve beneficiaries' care experience 
through successful surgery and recovery. Several commenters stated that 
the proposed SHFFT model was not a true value-based payment model 
because the clinical outcome quality measures that were proposed did 
not capture hip fracture patients. Given CMS' proposal to implement the 
SHFFT model in the same MSAs as the CJR model, the commenters stated 
that due to limited implementation time of the CJR model, it would be 
inappropriate to add the very sick and frail SHFFT cohort to the 
relatively stable CJR model cohort without substantial investigation as 
to how to proceed with adequate monitoring against harm. They also 
recommended not proceeding without risk adjustment to account for 
variable costs experienced by hospitals treating different populations 
of SHFFT model beneficiaries. Several commenters claimed that because 
SHFFT beneficiaries would receive emergency care, care coordination 
would be less predictable and no planning would be possible prior to 
hospital admission, so the burden on potential family caregivers would 
be escalated in comparison to the CJR model if there was only a short 
hospital and/or SNF stay. The commenters stated that in comparison with 
beneficiaries undergoing elective LEJR, those with hip fracture require 
more time and resources from providers to optimize planning and 
rehabilitation and, therefore, limited efficiencies would be possible 
for SHFFT model beneficiaries without significant risk to the quality 
of care.
    Response: We appreciate the perspective of some commenters that the 
opportunities for care redesign to improve quality and reduce spending 
are substantial for Medicare beneficiaries undergoing SHFFT procedures. 
We agree with those commenters about the potential value of the SHFFT 
model for beneficiaries, providers, and CMS to complement the CJR model 
by testing bundled payment for beneficiaries requiring emergency lower 
extremity joint surgery compared to testing episode payment for lower 
extremity surgeries that are mainly elective. We also acknowledge the 
concerns of the commenters around various proposed design elements of 
the SHFFT model, specifically the lack of risk adjustment to protect 
SHFFT model participants from undue financial risk for complex 
beneficiaries and the lack of quality measures that are specific to 
SHFFT beneficiaries in the pay-for-performance methodology to reward 
SHFFT model participants that improve quality for these beneficiaries 
and protect SHFFT beneficiaries from harm due to the model. We refer to 
sections III.D.4.b.(2) and III.E.2.d. of this final rule for further 
discussion of the comments on these issues and our responses.
    We also appreciate the concerns of commenters regarding the 
proposed implementation of the SHFFT model in the same MSAs as CJR 
participant hospitals, and the additional responsibilities this model 
would place on participants early in their CJR model implementation 
experience. However, we continue to believe that there are efficiencies 
in care redesign that can be achieved by testing the models 
concurrently at the same hospitals. We note that those commenters 
opposing CMS' proposal to implement the SHFFT model did not dispute the 
care redesign opportunities identified by CMS for such a model. We 
refer to section III.D.2.a. of this final rule for a discussion of the 
comments on the proposed implementation timeline for the SHFFT model 
and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to implement the SHFFT model, 
with modifications to specific policies as described throughout this 
final rule. We refer to section III.D.2.a. of this final rule for the 
implementation timeline that applies to the SHFFT model.
c. AMI and CABG Models
    The AMI and CABG models, which we proposed to be tested at a single 
set of hospitals as discussed in section III.B.5. of the proposed rule 
(81 FR 50794), were selected to include all beneficiaries who have an 
AMI treated medically or with revascularization with PCI, as well as 
all beneficiaries who undergo CABG (whether performed during the care 
of an AMI or performed electively for stable ischemic heart disease or 
other indication). Both cardiac models represent clinical conditions 
that result in a significant burden of morbidity and expenditures in 
the Medicare population. CABG typically is the preferred 
revascularization modality for patients with ST (the part of an 
electrocardiogram between the QRS complex and the T wave) elevation AMI 
where the coronary anatomy is not amenable to PCI or there is a 
mechanical complication (for example, ventricular septal defect, 
rupture of the free wall of the ventricle, or papillary-muscle rupture 
with severe mitral regurgitation); for patients with CAD other than ST 
elevation AMI where there is left main coronary artery disease or 
multivessel disease with complex lesions; and for patients with 
clinically significant CAD in at least one vessel and refractory 
symptoms despite medical therapy and PCI.\21\ Despite the greater acute 
morbidity related to major cardiothoracic surgery, CABG is associated 
with lower longer-term rates of major adverse cardiac and 
cerebrovascular events in comparison to PCI for certain groups of 
patients.\22\ Moreover, a recent study found that in a group of 
patients with ischemic cardiomyopathy, the rates of death from any 
cause, death from cardiovascular causes, and death from any cause or 
hospitalization for cardiovascular causes were significantly lower over 
10 years among patients who underwent CABG in addition to receiving 
medical

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therapy than among those who received medical therapy alone.\23\ While 
about 30 percent of CABGs are performed during the care of AMIs, we 
proposed to include these particular AMI beneficiaries generally in the 
same episode as CABG for other indications, rather than in the AMI 
episode, since we anticipate hospitals will seek to improve the quality 
and efficiency of care for that surgical intervention, regardless of 
indication.\24\
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    \21\ Alexander JH, Smith PK. Coronary-Artery Bypass Grafting. N 
Engl J Med. 2016 May 19;374(2):1954-1964.
    \22\ Sepehripour et al. Developments in surgical 
revascularization to achieve improved morbidity and mortality. 
Expert Rev Cardiovasc Ther. 2016 Mar;14(3):367-79. doi: 10.1586/
14779072.2016.1123619. Epub 2015 Dec 17.
    \23\ Velazquez et al. Coronary Artery Bypass Surgery in Patients 
with Ischemic Cardiomyopathy. N Engl J Med. 2016 Apr 3.
    \24\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in the proposed rule 
that end in CY 2014.
---------------------------------------------------------------------------

    We proposed AMI as the episode for an EPM because we recognized it 
as a significant clinical condition for which evidence-based clinical 
guidelines are available for the most common AMI scenarios that begin 
with a beneficiary's presentation for urgent care, most commonly to a 
hospital emergency department. The hospital phase involves medical 
management for all patients, as well as potential revascularization, 
most commonly with PCI. Secondary prevention and plans for long-term 
management begin early during the hospitalization, extend following 
hospital discharge, and are addressed in clinical 
guidelines.25 26 The AMI model is the first Innovation 
Center episode payment model that includes substantially different 
clinical care pathways (medical management and PCI) for a single 
clinical condition in one episode in a model and, as such, represents 
an important next step in testing episode payment models for clinical 
conditions which involve a variety of different approaches to treatment 
and management.
---------------------------------------------------------------------------

    \25\ Amsterdam EA, Wenger NK, Brindis RG, Casey DE Jr, Ganiats 
TG, Holmes DR Jr, Jaffe AS, Jneid H, Kelly RF, Kontos MC, Levine GN, 
Liebson PR, Mukherjee D, Peterson ED, Sabatine MS, Smalling RW, 
Zieman SJ. 2014 ACC/AHA guideline for the management of patients 
with non-ST-elevation acute coronary syndromes: a report of the 
American College of Cardiology/American Heart Association Task Force 
on Practice Guidelines. Circulation. 2014;130:e344-e426.
    \26\ O'Gara PT, Kushner FG, Ascheim DD, Casey DE Jr, Chung MK, 
de Lemos JA, Ettinger SM, Fang JC, Fesmire FM, Franklin BA, Granger 
CB, Krumholz HM, Linderbaum JA, Morrow DA, Newby LK, Ornato JP,Ou N, 
Radford MJ, Tamis-Holland JE, Tommaso CL, Tracy CM, Woo YJ, Zhao DX. 
2013 ACCF/AHA guideline for the management of ST-elevation 
myocardial infarction: a report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines. Circulation. 2013;127:
---------------------------------------------------------------------------

    The American Heart Association estimates that every 42 seconds, 
someone in the United States has a myocardial infarction.\27\ AMI 
remains one of the most common hospital diagnoses among Medicare FFS 
beneficiaries, and almost 20 percent of beneficiaries discharged for 
AMI are readmitted within 30 days of hospital 
discharge.28 29 In 2013, AMI was the sixth most common 
principal discharge diagnosis for hospitalized Medicare FFS 
beneficiaries, constituting 2.9 percent of discharges.\30\ Of the 
approximately 395,000 Medicare FFS beneficiaries with short-term acute 
care hospital discharges (excluding Maryland) for AMI in FY 2014, 60 
percent were discharged under MS-DRGs proposed to be included in the 
AMI model, specifically 33 percent under AMI MS-DRGs and 25 percent 
under PCI MS-DRGs.\31\ An additional 3 percent of beneficiaries were in 
MS-DRGs for death from AMI in the hospital. Although 5 percent of 
beneficiaries with hospital discharges for AMI were discharged under 
CABG MS-DRGs, we note that because both PCI and fibrinolysis can 
restore blood flow in an acutely occluded coronary artery more quickly 
than CABG, these interventions are currently preferred to CABG in most 
cases of AMI. Furthermore, over recent years cardiovascular clinical 
practice patterns have generally shifted away from surgical treatment 
of coronary artery occlusion toward percutaneous, catheter-based 
interventions.\32\ The remaining 34 percent of beneficiaries with AMI 
diagnoses were distributed across a heterogeneous group of over 300 
other MS-DRGs, such as septicemia, respiratory system diagnosis with 
ventilator support, and major cardiovascular procedures. For this 
latter group of beneficiaries, the AMI diagnosis appeared in a 
secondary position on the hospital claim in more than 90 percent of the 
cases, therefore most likely representing circumstances where the 
beneficiary while hospitalized for another clinical condition 
experienced an AMI during the hospital stay. By focusing the AMI model 
on AMIs treated medically or with revascularization with PCI, we 
proposed to test a condition-specific EPM that was discretely defined 
and includes a significant majority of beneficiaries with AMI in the 
AMI model. In CYs 2012-2014, the average Medicare spending for an AMI 
episode that extends 90 days post-hospital discharge was approximately 
$24,200.\33\ From the AMI model, we expect to better understand the 
impact that such an EPM can have on efficiency and quality of care for 
beneficiaries across the entire spectrum of AMI care, including 
diagnosis, treatment, and recovery, as well as short-term secondary 
prevention.
---------------------------------------------------------------------------

    \27\ Mozaffarian D, Benjamin EJ, Go AS, Arnett DK, Blaha MJ, 
Cushman M, Das SR, de Ferranti S, Despr[eacute]s J-P, Fullerton HJ, 
Howard VJ, Huffman MD, Isasi CR, Jim[eacute]nez MC, Judd SE, Kissela 
BM, Lichtman JH, Lisabeth LD, Liu S, Mackey RH, Magid DJ, McGuire 
DK, Mohler ER III, Moy CS, Muntner P, Mussolino ME, Nasir K, Neumar 
RW, Nichol G, Palaniappan L, Pandey DK, Reeves MJ, Rodriguez CJ, 
Rosamond W, Sorlie PD, Stein J, Towfighi A, Turan TN, Virani SS, Woo 
D, Yeh RW, Turner MB; on behalf of the American Heart Association 
Statistics Committee and Stroke Statistics Subcommittee. Heart 
disease and stroke statistics--2016 update: a report from the 
American Heart Association. Circulation. 2016 Jan 26; 133(4):447-54.
    \28\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \29\ Dharmarajan K, Hsieh AF, Lin Z, et al. Diagnoses and Timing 
of 30-Day Readmissions After Hospitalization for Heart Failure, 
Acute Myocardial Infarction, or Pneumonia. JAMA. 2013; 309(4):355-
363.
    \30\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \31\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013--September 2014 
Inpatient Claims File located in the Chronic Conditions Warehouse.
    \32\ Epstein et al. JAMA. 2011 May 4; 305(17):1769-1776.
    \33\ Episodes for beneficiaries with AMI diagnosis initiated by 
all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that began in CYs 2012-2014.
---------------------------------------------------------------------------

    Beneficiaries in the AMI and CABG models will all have CAD. In 2010 
in the U.S., the prevalence of CAD in the population 65 years and older 
was about 20 percent.\34\ Patients with CAD also often experience other 
significant health conditions, including diabetes. To improve care for 
patients with CAD, most approaches in the private and public sectors 
focus on improving the efficiency and quality of care around procedures 
such as PCI and CABG. The BPCI models are an example of such an 
approach. As discussed previously in this section, our proposal for the 
AMI model extends beyond a procedure-based EPM to include beneficiaries 
hospitalized for medical management or PCI for AMI in a single EPM, and 
we proposed to test the CABG model, which also would include 
beneficiaries with AMI, at the same participant hospitals. We believe 
that hospitalization for AMI, whether accompanied solely by medical 
management or including revascularization during the initial 
hospitalization or in a planned CABG

[[Page 201]]

readmission, is a sentinel event indicating the need for an increased 
focus on condition-specific management, as well as on care coordination 
and active management to prevent future acute events, both during the 
AMI and CABG episodes and beyond. We also believe that improving the 
quality and efficiency of CAD care over a long period of time is 
important given the chronic nature of this condition that has serious 
implications for beneficiary health.
---------------------------------------------------------------------------

    \34\ National Center for Chronic Disease Prevention and Health 
Promotion, Division for Heart Disease and Stroke Prevention, August 
10, 2015.
---------------------------------------------------------------------------

    The AMI and CABG models provide an opportunity for us to 
incentivize CAD-specific care management and care coordination for AMI 
and CABG model beneficiaries that lays the groundwork for longer-term 
improvements in quality and efficiency of care for beneficiaries with 
CAD. We note that the quality measures proposed for use in the pay-for-
performance methodologies of the AMI and CABG models do not currently 
include longer-term outcomes or patient experience outside of the AMI 
or CABG episode itself, as discussed in sections III.E.2.b. and c. of 
the proposed rule (81 FR 50794), although we were interested in 
comments about potential future measures that could incorporate longer-
term outcomes. Moreover, as discussed in section VI. of the proposed 
rule (81 FR 50794), we also proposed to test a cardiac rehabilitation 
(CR)/intensive cardiac rehabilitation (ICR) incentive payment, 
hereinafter CR incentive payment, in AMI and CABG model participants 
located in some of the MSAs selected for AMI and CABG model 
participation, as well as in hospitals located in some of the MSAs that 
are not selected for AMI or CABG model participation. We proposed to 
evaluate the effects of the CR incentive payment in the context of an 
episode payment model and Medicare FFS on utilization of CR/ICR, as 
well as short-term (within the period of time extending 90 days 
following hospital discharge from an AMI or CABG hospitalization) and 
longer-term outcomes. We believe this test may result in valuable 
findings about effective strategies to increase utilization of CR/ICR 
services that have a strong evidence-base for their effectiveness but a 
long history of underutilization.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters expressed support for the proposed 
AMI and CABG models, characterizing the proposals as a good first step 
toward achieving greater focus not only on cardiac care quality 
improvement but also care coordination for the anchor admission through 
post-acute care management of patients and families. Several commenters 
believe that CMS' proposal to implement separate models for 
beneficiaries undergoing treatment for AMI versus CABG surgery was 
sensible given the typical recovery pathways experienced by 
beneficiaries. One commenter noted that while the majority of 
beneficiaries with AMI or CABG have CAD, not all will have this 
condition as CMS stated in the proposed rule (81 FR 50807).
    Several commenters commended CMS for developing a clinically 
appropriate definition for AMI because AMI is a condition that can 
require a range of treatments, including both medical treatments and 
PCI. The commenters observed that the combination of AMI medical 
management and PCI into a single AMI episode is likely to present AMI 
model participants with greater opportunity than if the hospital 
managed just one of the MS-DRG groupings. They stated that the proposal 
to include both medical and PCI MS-DRG groupings in the AMI model would 
increase each hospital's AMI episode volume relative to a single MS-DRG 
grouping, and further noted that sufficient volume in any bundled 
payment model is key to ensuring that financial results are not 
primarily driven by random variation.
    Several commenters observed that the proposed AMI model would be 
the first Innovation Center bundled payment model to combine medical 
and procedural care in a single episode and that the majority of 
beneficiaries in the AMI model would be experiencing a life-threatening 
emergency. These commenters believe the proposed AMI model has the 
potential for patient harm and serious unintended consequences and 
recommended CMS to maintain a dialogue with practicing clinicians from 
medical specialty and subspecialty societies so that unintended 
consequences are caught early. One commenter recommended that CMS 
refocus the proposed AMI model to be treatment-based, separating 
beneficiaries with AMI into two different treatment-based EPMs based on 
medical management or PCI. The commenter contended that this approach 
would be more straightforward for model participants and allow CMS to 
conduct longer-term analyses of BPCI-like models in a more 
representative cross-section of hospitals.
    Other commenters recommended that CMS pursue only the CABG model, 
arguing that the proposed AMI model, with complex, care pathway-
dependent prices and transfer pathways, would influence attribution and 
result in serious uncertainties for AMI model participants. One 
commenter reasoned that isolated CABG procedures are particularly well-
positioned for a bundled payment model that requires participation 
because, despite the availability of robust clinical guidelines, 
variability in the costs and outcomes of CABG persist. The commenter 
noted that other entities, such as Arkansas and Tennessee Medicaid, 
Washington State's Bree Collaborative, and commercial payers, have seen 
the potential to improve the cost and quality of CABG through the 
implementation of bundled payments. Several commenters stated that 
initial implementation of the CABG model alone would allow CABG model 
participants to focus efforts on a specific population that includes 
the opportunity to excel in the care of CAD and gain some experience in 
the care of emergent patients. This limited implementation strategy 
would allow model participants to start to develop systems and models 
of care that address the unique needs of these populations in a value-
driven equation. The commenters added that as hospitals work through 
implementation and gain experience with the CABG model, CMS could then 
phase in the inclusion of the much more complicated AMI model, which 
would introduce a myriad of factors that would add to the complexity of 
EPMs in which the hospital was a participant.
    Another commenter who did not favor implementation of the proposed 
AMI model reasoned that, in addition to the built-in incentives of MS-
DRGs that currently reward hospitals and physicians for complications 
that occur during the beneficiary's hospitalization by providing a 
higher IPPS payment for beneficiaries with complications, the proposed 
AMI model lacked incentives to manage beneficiaries to reduce CAD 
complications such as AMI. Instead, the commenter stated that the 
proposed AMI model would incentivize admitting patients who are 
marginally symptomatic for AMI that is a complication of CAD, contrary 
to the overall goals of EPMs to lower the incidence of complications. 
The commenter cited a body of research that has shown that optimal 
management of CAD can significantly lower the incidence of AMI. The 
commenter recommended CMS to move toward condition-specific episode 
payment defined by diagnosis codes, and to halt implementation of an 
event-based EPM for AMI that is, in itself, a complication from the 
lack of optimal management of CAD. The commenter also stated that CMS 
should implement site-agnostic

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PCI episodes so the incentives under the model would be to provide care 
in the place of service best suited for the patient. Another commenter 
expressed concerns about bundling AMI care, as it encompasses a broad 
spectrum of many different complex illnesses. Several commenters 
observed that while some AMI patients require less complex care, other 
patients are admitted with multiple comorbidities and require a higher 
intensity of care, which may involve multiple organs and a variety of 
care resources. Other commenters believe that if CMS implements the AMI 
model as proposed, more beneficiaries would move into the CABG model 
because of the AMI model financial incentives, which would not be in 
the best interests of beneficiaries.
    While some commenters recommended a short implementation delay for 
the AMI and/or CABG models, several other commenters recommended that 
CMS delay the AMI and CABG models, with recommendations ranging from 6 
to 36 months. These commenters believe this delay would provide 
sufficient time for CMS to incorporate known best practices from the 
Healthcare Payment Learning and Action Network (LAN) Clinical Episode 
Payment (CEP) Work Group and lessons learned from both the BPCI and CJR 
models into the design of the cardiac EPMs. Otherwise, the commenters 
were concerned that the cardiac EPMs would both put beneficiaries at 
risk and disadvantage providers, as the episodes would be built using 
designs that were not supported by CMS' own panel of industry experts.
    Some commenters expressed concern about expanding EPMs to complex 
conditions such as AMI and CABG, where treatment can follow multiple 
evidence-based care pathways. One commenter pointed out that the 
proposed AMI and CABG models would generally include beneficiaries 
receiving unplanned care due to an acute event, making the population's 
care difficult to manage. The commenter requested that CMS not 
implement the proposed cardiac EPMs. Several commenters stated that the 
complexity of the proposed cardiac EPMs was so great that CMS had 
essentially proposed a completely different payment system for cardiac 
care and would provide EPM participants with little time to prepare and 
plan for implementation. The commenters believe that decisions about 
appropriate care should be made by physicians and their patients and 
should be based on each patient's medical necessity and care 
preferences. They stated that bundling clinically complex episodes with 
multiple care pathways may lead to factors other than medical necessity 
and care preferences influencing the decisions that providers make, and 
that such decisions could have a long-term impact on a patient's health 
and well-being and may increase costs in the long run while achieving 
the short-term goal of reducing episodic costs. The commenters believe 
that this potentially serious issue warranted immediate attention by 
CMS, given the lack of evidence on the impact of the EPMs on key 
patient-centered outcomes, and concluded that the proposed EPMs require 
further consideration and study before additional bundling initiatives 
are implemented.
    MedPAC stated that the proposed AMI episodes did not appear to be a 
promising place to further test bundled payment because AMI episodes 
have relatively low post-acute care use and the associated post-acute 
care spending makes up a small share of total episode spending. They 
concluded that savings opportunities for participating providers would 
be smaller compared with other conditions. Consistent with the 
observations of a few other commenters, MedPAC stated that complex 
medical conditions such as AMI do not involve a single clinical pathway 
but rather can involve patient transfers to hospitals with more 
intensive cardiac capabilities and subsequent readmissions for CABG. 
While MedPAC acknowledged that CMS' proposed rule addressed these 
issues, they noted that if the benchmark prices are not accurate, the 
prices could inadvertently shape clinical practice or encourage 
selective admissions. Instead of an EPM, MedPAC suggested that CMS 
consider allowing hospitals to share savings with physicians as a way 
to focus physicians on reducing the cost of the inpatient stay for AMI 
care.
    MedPAC further concluded that CABG was also not an ideal condition 
for testing bundled payment models because, although the majority of 
beneficiaries undergoing CABG go on to use post-acute care services, 
the spending on post-acute care services is relatively low compared to 
other clinical conditions. They noted that with the inpatient stay 
comprising the vast majority of total episode spending, the 
opportunities to realize savings by changing clinical practice would be 
small. MedPAC presented an additional concern regarding the potential 
for undesirable provider responses to financial incentives, including 
patient selection, in the proposed CABG model. They claimed that 
providers of cardiac care have been shown to engage in patient 
selection and expressed concern that, with larger savings at stake, 
these behaviors could increase. They recommended that CMS delay testing 
the CABG model until the benefits of episode efficiency outweigh the 
concerns about patient selection.
    Response: We appreciate the support of some of the commenters for 
our proposal to implement the AMI and CABG models. The proposed cardiac 
models represent clinical conditions that result in a significant 
burden of morbidity and expenditures in the Medicare population. 
However, we acknowledge the great diversity of views about the AMI and 
CABG models reflected in the comments.
    We proposed AMI as the episode for an EPM because we recognized it 
as a significant clinical condition for which evidence-based clinical 
guidelines are available for the most common AMI scenarios that begin 
with a beneficiary's presentation for urgent care, most commonly to a 
hospital emergency department. The hospital phase involves medical 
management for all patients, as well as potential revascularization, 
most commonly with PCI. As commenters observed, the AMI model is the 
first Innovation Center episode payment model that includes 
substantially different clinical care pathways (medical management and 
PCI) for a single clinical condition in one episode in a model. In this 
sense the AMI model is a condition-specific EPM, although it is not 
focused on the underlying CAD condition that puts some beneficiaries at 
risk for the AMI but rather on the AMI itself. While we recognize that 
AMI may be a complication of care from inadequately managed CAD, we 
continue to believe that there is an important role for the AMI model 
in testing bundled payment for beneficiaries with AMI who follow a 
variety of clinical pathways because AMI is a sentinel event indicating 
the need for an increased focus on condition-specific management. The 
proposed 90 day post-discharge episode duration would provide a 
springboard to heighten the focus on CAD-specific management. While 
future models may focus on CAD management itself, including reducing 
the risk of AMI, in addition to the current Million Hearts[supreg] 
Cardiovascular Risk Reduction Model, we believe that the proposed AMI 
model also plays an important role in testing an EPM for this clinical 
condition which is not always avoidable even in the context of the best 
practices to manage CAD on an ongoing basis.\35\
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    \35\ Million Hearts[supreg]: Cardiovascular Disease Risk 
Reduction Model. https://innovation.cms.gov/initiatives/Million-Hearts-CVDRRM/.
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    We believe that it is important to test EPMs like the AMI model 
where

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beneficiaries can follow multiple clinical pathways, including 
transfers among hospitals with different cardiac care capacity because, 
more commonly than not, beneficiaries who are hospitalized for an 
emergent clinical condition do not constitute as homogeneous a group as 
those who choose to undergo elective surgery. However, there likely are 
significant opportunities to improve the quality and efficiency of 
episode care through care redesign that improves care coordination and 
management for beneficiaries unexpectedly hospitalized for treatment 
following a cardiac event. We disagree with the commenter who 
recommended that we create two treatment-based EPMs, AMI medical 
management and PCI, because, in the context of our proposed pricing 
methodology that sets MS-DRG-specific EPM-episode benchmark prices and 
quality-adjusted target prices as discussed in section III.D.4.b.(1). 
of this final rule, we believe we can appropriately include 
beneficiaries following the two different treatment approaches in the 
same EPM without concern that the financial incentives of the EPM are 
influencing the treatment choice for beneficiaries.
    We appreciate the support of many commenters for the proposed CABG 
model. We believe that CABG may play a role for some beneficiaries with 
symptomatic CAD, either with or without AMI, because CABG is associated 
with lower longer-term rates of major adverse cardiac and 
cerebrovascular events in comparison to PCI for certain groups of 
patients. As a number of commenters pointed out, multiple other 
entities, including states, are testing CABG bundled payment models due 
to the variability in costs and outcomes despite robust clinical 
guidelines.
    In response to those commenters who recommended that the AMI and 
CABG models be delayed in order to incorporate known best practices 
from the LAN CEP Work Group, we note that the LAN is a public-private 
partnership established by the U.S. Department of Health and Human 
Services (HHS) to increase the adoption of APMs that promote better 
care, smarter spending, and healthier people. The LAN has a voluntary 
collaborative structure and its consensus recommendations do not 
necessarily reflect the views of its individual participants. 
Representatives from CMS, along with representatives from states, 
purchasers, providers, commercial payers, and consumers, were active 
participants in the CEP Work Group and developed, with input from the 
broader LAN network, a set of recommendations that reflect a consensus 
view, balancing innovation with current practice to move the health 
care delivery system forward. The CEP Work Group full recommendations 
have not yet been tested in the market. The LAN CEP Work Group 
recommendations and the proposed CMS CABG and AMI EPMs, although 
incorporating different design features, both support the 
implementation of episode-based payment models for cardiac care. We 
anticipate that both the LAN recommendations and the CMS AMI and CABG 
models will expand provider experience and expertise regarding the 
necessary resources and most effective strategies for providing high 
quality, efficient care through episode-based payment models and will 
help prepare the market for further adoption of innovative payment 
models in the future. Therefore, we believe that best practices for 
episode payment models are continuously being identified and refined 
based on providers' actual implementation experiences with episode 
payment models of various designs. Rather than redesigning the proposed 
cardiac care models to conform to the LAN CEP Work Group 
recommendations, we look forward to testing the AMI and CABG models 
based on the policies included in this final rule and sharing our 
evaluation findings with stakeholders to inform other episode payment 
models for cardiac care.
    We do not agree with MedPAC's conclusion that the proposed AMI and 
CABG models do not hold promise because of limited post-acute care 
spending in AMI episodes and the high percentage of CABG episode 
spending due to the anchor hospitalization in CABG episodes coupled 
with the risk of patient selection due to the financial incentives of 
the CABG model. While care redesign to improve the efficiency of post-
acute care use may be an obvious strategy to address variation in 
episode spending for those episodes, such as SHFFT and LEJR episodes 
with high utilization of post-acute care services, AMI and CABG 
beneficiaries have substantial episode spending during 90 days post-
discharge from the anchor hospitalization as a result of complications, 
further treatment, and ongoing care management of their underlying 
chronic conditions. We believe that increased efficiencies in the post-
discharge care and improved care coordination represent a significant 
opportunity to improve the quality and reduce the cost of AMI and CABG 
episodes.
    As commenters pointed out, the cardiac EPMs create some risks of 
harm to beneficiaries from patient selection and different treatment 
choices EPM participants could adopt based on the financial incentives 
under the EPMs, although we believe these concerns are generally 
present for every episode payment model that sets a price that Medicare 
pays for an episode-of-care. As discussed further in sections III.G.4. 
through 6. of this final rule, we will take steps to prevent potential 
harm by monitoring for access to care, quality of care, and delayed 
care under the EPMs and may take remedial action against EPM 
participants if we find evidence that supports concerns in these areas. 
In addition, the evaluation as discussed in section IV. of this final 
rule will analyze beneficiary outcomes and their relationship to 
clinical pathways under the EPMs.
    We refer to section III.D.2.a. of this final rule for a discussion 
of the comments on the proposed implementation timeline for the AMI and 
CABG models and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to implement the AMI and CABG 
models, with modifications to specific policies as described throughout 
this final rule. We refer to section III.D.2.a. of this final rule for 
the implementation timeline that applies to the AMI and CABG models.
2. Advanced Alternative Payment Model Considerations
    For ease of reading the subsequent sections regarding our proposals 
and our final policies around the EPMs as Advanced APMs, we first 
present the proposals outlined in the Quality Payment Program proposed 
rule (81 FR 28161) followed by the policies outlined in the Quality 
Payment Program final rule with comment period (81 FR 77008).
a. Overview for the EPMs
    The MACRA created two paths for eligible clinicians to link quality 
to payments: The MIPS and Advanced APMs. These two paths create a 
flexible payment system called the Quality Payment Program as proposed 
by CMS in the Quality Payment Program proposed rule (81 FR 28161 
through 28586).
    As proposed in the Quality Payment Program proposed rule, an APM 
must meet three criteria to be considered an Advanced APM (81 FR 
28298). First, the APM must provide for payment for covered 
professional services based on quality measures comparable to measures 
described under the performance category described in section 
1848(q)(2)(B)(i) of the Act,

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which is the MIPS quality performance category. We interpret this 
criterion to require the APM to incorporate quality measure results as 
a factor when determining payment to participants under the terms of 
the APM. Under the Quality Payment Program proposed rule, we proposed 
that the quality measures on which the Advanced APM bases payment for 
covered professional services (as that term is defined in section 
1848(k)(3)(A) of the Act) must include at least one of the following 
types of measures, provided that they have an evidence-based focus and 
are reliable and valid (81 FR 28302):
     Any of the quality measures included on the proposed 
annual list of MIPS quality measures.
     Quality measures that are endorsed by a consensus-based 
entity.
     Quality measures developed under section 1848(s) of the 
Act.
     Quality measures submitted in response to the MIPS Call 
for Quality Measures under section 1848(q)(2)(D)(ii) of the Act.
     Any other quality measures that CMS determines to have an 
evidence-based focus and be reliable and valid.
    As we discussed in the Quality Payment Program proposed rule, 
because the statute identifies outcome measures as a priority measure 
type and we wanted to encourage the use of outcome measures for quality 
performance assessment in APMs, we further proposed in that rule that, 
in addition to the general quality measure requirements, an Advanced 
APM must include at least one outcome measure if an appropriate measure 
is available on the MIPS list of measures for that specific QP 
Performance Period, determined at the time when the APM is first 
established (81 FR 28302 through 28303).
    Second, the APM must either require that participating APM Entities 
bear risk for monetary losses of a more than nominal amount under the 
APM or be a Medical Home Model expanded under section 1115A(c) of the 
Act. Except for Medical Home Models, we proposed in the Quality Payment 
Program proposed rule that, for an APM to meet the nominal amount 
standard, the specific level of marginal risk must be at least 30 
percent of losses in excess of expected expenditures; a minimum loss 
rate, to the extent applicable, must be no greater than 4 percent of 
expected expenditures; and total potential risk must be at least 4 
percent of expected expenditures (81 FR 28306).
    Third, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals. Specifically, 
where the APM participants are hospitals, the APM must require each 
hospital to use CEHRT (81 FR 28298 through 28299).
    In the proposed rule (81 FR 50794), we proposed to adopt two 
different tracks for the EPMs--Track 1 in which EPMs and EPM 
participants would meet the criteria for Advanced APMs as proposed in 
the Quality Payment Program proposed rule, and Track 2 in which the 
EPMs and EPM participants would not meet those proposed criteria. For 
the proposed AMI, CABG, and SHFFT models, we proposed pay-for-
performance methodologies that use quality measures that we believe 
would meet the proposed Advanced APM quality measure requirements in 
the Quality Payment Program proposed rule. As discussed in sections 
III.E.2. and 3. of the proposed rule (81 FR 50794), all but one of the 
AMI, CABG, and SHFFT model measures used in the EPM pay-for-performance 
methodologies are NQF-endorsed and have an evidence-based focus and are 
reliable and valid. Therefore, we believe they would meet the proposed 
Advanced APM general quality measure requirements. The Excess Days in 
Acute Care after Hospitalization for AMI (AMI Excess Days) measure, 
which was proposed for the AMI model, is not currently NQF-endorsed, 
but was reviewed, recommended for endorsement, and is expected to be 
formally endorsed within the first quarter of 2017. We believe it meets 
the measure requirements by having an evidence-based focus and being 
reliable and valid because this measure has been proposed and adopted 
through rulemaking for use in the Hospital Inpatient Quality Reporting 
(HIQR) Program.
    Each of the proposed EPM pay-for-performance methodologies included 
one outcome measure that is NQF-endorsed, has an evidence-based focus, 
and is reliable and valid. The EPM quality measures were discussed in 
detail in section III.E. of the proposed rule (81 FR 50794), where we 
assigned the quality measures to quality domains. For the AMI model, we 
proposed to use the Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) 
(MORT-30-AMI) outcome measure. For the CABG model, we proposed to use 
the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558) 
(MORT-30-CABG) outcome measure. Finally, for the SHFFT model, we 
proposed to use the Hospital-level RSCR following elective primary THA 
and/or TKA (NQF #1550) (Hip/Knee Complications) outcome measure. Thus, 
based on the proposed use of these three outcomes measures in the EPMs, 
we believed the proposed AMI, CABG, and SHFFT models would meet the 
requirement proposed for Advanced APMs in the Quality Payment Program 
proposed rule for use of an outcome measure that also meets the general 
quality measure requirements.
    In terms of the proposed nominal risk criteria for Advanced APMs, 
beginning in performance year 2 for episodes ending between April 1, 
2018 and December 31, 2018, we proposed that EPM participants would 
begin to bear downside risk for excess actual EPM-episode spending 
above the quality-adjusted target price as discussed in section 
III.D.2.c. of the proposed rule (81 FR 50794). The marginal risk for 
excess actual EPM-episode spending above the quality-adjusted target 
price would be 100 percent over the range of spending up to the stop-
loss limit, which would exceed 30 percent marginal risk, and there 
would be no minimum loss rate. As a result, we believed the EPMs would 
meet the marginal risk and minimum loss rate elements of the nominal 
risk criteria for Advanced APMs proposed in the Quality Payment Program 
proposed rule. We proposed that total potential risk for most EPM 
participants would be 5 percent of expected expenditures beginning in 
the second quarter of performance year 2, and increasing in subsequent 
performance years as discussed in section III.D.7.b. of the proposed 
rule (81 FR 50794). Therefore, in the proposed rule, we stated our 
belief that the total proposed potential risk applicable to most EPM 
participants, with the lowest total potential risk being 5 percent for 
EPM episodes ending on or after April 1, 2018 in performance year 2, 
would meet the total potential risk element of the nominal risk amount 
standard for Advanced APMs proposed in the Quality Payment Program 
proposed rule because it was greater than the value of at least 4 
percent of expected expenditures.
    We note that we proposed that EPM participants that are rural 
hospitals, sole community hospitals (SCHs), Medicare Dependent 
Hospitals (MDHs) and Rural Referral Centers (RRCs) would have a stop-
loss limit of 3 percent beginning in the second quarter of performance 
year 2 as discussed in section III.D.7.c. of the proposed rule (81 FR 
50794). Because 3 percent was less than the proposed

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threshold of at least 4 percent of expected expenditures for total 
potential risk proposed for Advanced APMs in the Quality Payment 
Program proposed rule, those rural hospitals, SCHs, MDHs, and RRCs that 
are EPM participants subject to special protections would be in Track 2 
EPMs that would not meet the proposed nominal risk standard for 
Advanced APMs for performance year 2. We recognized that this proposal 
might initially limit the ability of rural hospitals, SCHs, MDHs, and 
RRCs to be in Track 1 EPMs that are Advanced APMs. In the proposed 
rule, we explained our belief that this potential limitation on rural 
hospitals, SCHs, MDHs, and RRCs is appropriate for the following 
reasons: (1) Greater risk protections for these hospitals proposed for 
the EPMs beginning in the second quarter of performance year 2 and 
subsequent performance years compared to other EPM participants are 
necessary, regardless of their implications regarding Advanced APMs 
based on the nominal risk standard proposed in the Quality Payment 
Program proposed rule, because these hospitals have unique challenges 
that do not exist for most other hospitals, such as being the only 
source of health care services for beneficiaries or certain 
beneficiaries living in rural areas or being located in areas with 
fewer providers, including fewer physicians and post-acute care 
facilities; and (2) under the risk arrangements proposed for the EPMs, 
these hospitals would not bear an amount of risk in performance year 2 
that we determined to be more than nominal in the Quality Payment 
Program proposed rule. However, we sought comment on whether we should 
allow EPM participants that are rural hospitals, SCHs, MDHs, or RRCs to 
elect a higher stop-loss limit for the part of performance year 2 where 
downside risk applies in order to permit these hospitals to be in Track 
1 EPMs for that part of performance year 2. We noted that by 
performance year 3, the stop-loss limit for these hospitals with 
special protections under the EPMs would increase to 5 percent under 
our proposal, so these hospitals could be in Track 1 EPMs based on the 
nominal risk standard proposed in the Quality Payment Program proposed 
rule.
    As addressed in the Quality Payment Program proposed rule, it would 
be necessary for an APM to require the use of CEHRT in order to meet 
the criteria to be considered to be an Advanced APM. Therefore, 
according to the requirements proposed in the Quality Payment Program 
proposed rule, so that the EPMs may meet the proposed criteria to be 
Advanced APMs, we proposed to require EPM participants to use CEHRT (as 
defined in section 1848(o)(4) of the Act) to participate in Track 1 of 
the EPMs. We proposed that Track 1 EPM participants must use certified 
health IT functions, in accordance with the definition of CEHRT under 
our regulation at Sec.  414.1305 (81 FR 77537), to document and 
communicate clinical care with patients and other health care 
professionals as proposed in the Quality Payment Program proposed rule 
(81 FR 28299). We believed this proposal would allow Track 1 EPMs to be 
able to meet the proposed criteria to be Advanced APMs.
    Without the collection of identifying information on eligible 
clinicians (physicians, non-physician practitioners, physical and 
occupational therapists, and qualified speech-language pathologists) 
who would be considered Affiliated Practitioners as proposed in the 
Quality Payment program proposed rule under the EPMs, CMS would not be 
able to consider participation in the EPMs in making determinations as 
to whom could be considered a QP (81 FR 28320). As detailed in the 
Quality Payment Proposed rule, these determinations are based on 
whether the eligible clinician meets the QP threshold under either the 
Medicare Option starting in payment year 2019 or the All-Payer 
Combination Option, which is available starting in payment year 2021 
(81 FR 28165). Thus, we made proposals in the following sections to 
specifically address these issues that might otherwise preclude the 
EPMs from being considered Advanced APMs, or prevent us from 
operationalizing them as Advanced APMs. Based on the proposals for 
Advanced APM criteria in the Quality Payment Program proposed rule, we 
sought to align the design of the proposed EPMs with the proposed 
Advanced APM criteria and enable CMS to have the necessary information 
on eligible clinicians to make the requisite QP determinations.
    For ease of reading the subsequent sections regarding our proposals 
and final policies for the EPMs as Advanced APMs, we present the 
following definitions from Sec.  414.1305 that have now been finalized 
in the Quality Payment Program final rule with comment period (81 FR 
77008).
    Alternative Payment Model (APM) means any of the following: (1) A 
model under section 1115A of the Act (other than a health care 
innovation award); (2) The shared savings program under section 1899 of 
the Act; or (3) A demonstration under section 1866C of the Act. (4) A 
demonstration required by federal law.
    Episode payment model means an APM or other payer arrangement 
designed to improve the efficiency and quality of care for an episode 
of care by bundling payment for services furnished to an individual 
over a defined period of time for a specific clinical condition or 
conditions.
    APM Entity means an entity that participates in an APM or payment 
arrangement with a non-Medicare payer through a direct agreement or 
through Federal or State law or regulation.
    Advanced Alternative Payment Model (Advanced APM) means an APM that 
CMS determines meets the criteria set forth in Sec.  414.1415.
    Advanced APM Entity means an APM Entity that participates in an 
Advanced APM or Other Payer Advanced APM.
    Participation List means the list of participants in an APM Entity 
that is compiled from a CMS-maintained list.
    Eligible Clinician means ``eligible professional'' as defined in 
section 1848(k)(3) of the Act, as identified by a unique TIN and NPI 
combination and, includes any of the following: (1) A physician; (2) A 
practitioner described in section 1842(b)(18)(C) of the Act; (3) A 
physical or occupational therapist or a qualified speech language 
pathologist; or (4) A qualified audiologist (as defined in section 
1861(ll)(3)(B) of the Act).
    Affiliated Practitioner means an eligible clinician identified by a 
unique APM participant identifier on a CMS-maintained list who has a 
contractual relationship with the Advanced APM Entity for the purposes 
of supporting the Advanced APM Entity's quality or cost goals under the 
Advanced APM.
    Affiliated Practitioner List means the list of Affiliated 
Practitioners of an APM Entity that is compiled from a CMS-maintained 
list.
    Qualifying APM Participant (QP) means an eligible clinician 
determined by CMS to have met or exceeded the relevant QP payment 
amount or QP patient count threshold under Sec.  414.1430(a)(1), 
(a)(3), (b)(1), or (b)(3) for a year based on participation in an 
Advanced APM Entity.
    QP Patient Count Threshold means the minimum threshold score 
specified in Sec.  414.1430(a)(3) and (b)(3) that an eligible clinician 
must attain through a patient count methodology described in Sec. Sec.  
414.1435(b) and 414.1440(c) to become a QP for a year.
    QP Payment Amount Threshold means the minimum threshold score 
specified in Sec.  414.1430(a)(1) and (b)(1) that an eligible clinician 
must attain through the payment amount methodology described in

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Sec. Sec.  414.1435(a) and 414.1440(b) to become a QP for a year.
    Threshold Score means the percentage value that CMS determines for 
an eligible clinician based on the calculations described in Sec.  
414.1435 or Sec.  414.1440.
    Merit-based Incentive Payment System (MIPS) means the program 
required by section 1848(q) of the Act.
    MIPS APM means an APM that meets the criteria specified under Sec.  
414.1370(b).
    Improvement Activities means an activity that relevant MIPS 
eligible clinicians, organizations and other relevant stakeholders 
identify as improving clinical practice or care delivery and that the 
Secretary determines, when effectively executed, is likely to result in 
improved outcomes.
    Based on the proposals for Advanced APM criteria in the Quality 
Payment Program proposed rule (81 FR 28161), we sought to align the 
design of the proposed EPM Advanced APM track with the proposed 
Advanced APM criteria and enable CMS to have the necessary information 
on Eligible Clinicians to make the requisite QP determinations. As 
detailed in the Quality Payment Program final rule with comment period, 
QP determinations are based on whether the Eligible Clinician meets the 
QP threshold under either the Medicare Option starting in payment year 
2019 or the All-Payer Combination Option, which is available starting 
in payment year 2021 (81 FR 77013). Eligible clinicians seeking QP 
determinations as early as performance year 2 would need to meet the QP 
threshold under the Medicare Option. The three criteria for an Advanced 
APM were finalized in the Quality Payment Program final rule with 
comment period (81 FR 77008), and we continue to align the design of 
the finalized EPMs with the finalized Advanced APM criteria so that EPM 
participants who choose to use and attest to use of CEHRT may 
participate in an EPM that meets the criteria of an Advanced APM. To be 
determined to be an advanced APM, an APM must meet three Advanced APM 
criteria identified in Sec.  414.1415 and discussed specifically later 
in this section.
    First, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals (81 FR 77406). 
Specifically, where the APM participants are hospitals, the APM must 
require each hospital to use CEHRT. As addressed in the Quality Payment 
Program final rule with comment period, it is necessary for an APM to 
require the use of CEHRT in order to meet the criteria to be considered 
to be an Advanced APM. Therefore, according to the requirements now 
finalized in the Quality Payment Program final rule with comment 
period, so that the EPMs may meet the finalized criteria to be Advanced 
APMs, we proposed that those EPM participants who choose to participate 
in Track 1 of the EPMs must use certified health IT functions, in 
accordance with the definition of CEHRT under our regulation at 42 CFR 
414.1305, to document and communicate clinical care with patients and 
other health care professionals. We believe that this proposal set 
forth in the EPM proposed rule would allow EPM participants who use and 
attest to use of CEHRT to be in an EPM that meets the first finalized 
Advanced APM criterion.
    Second, the APM must provide for payment to participants based on 
performance on quality measures comparable to measures described under 
the performance category described in section 1848(q)(2)(B)(i) of the 
Act, which is the MIPS quality performance category. We interpret this 
criterion to require the APM to incorporate quality measure results as 
a factor when determining payment to participants under the terms of 
the APM as described in the Quality Payment Program final rule with 
comment period (81 FR 77414). In order to align the EPMs with the 
Quality Payment Program final rule with comment period, the quality 
measures on which the Advanced APM bases payment to participants must 
include at least one of the following types of measures, provided that 
they have an evidence-based focus and are reliable and valid (81 FR 
77418):
    Any of the quality measures included on the proposed annual list of 
MIPS quality measures.
    Quality measures that are endorsed by a consensus-based entity.
    Quality measures developed under section 1848(s) of the Act.
    Quality measures submitted in response to the MIPS Call for Quality 
Measures under section 1848(q)(2)(D)(ii) of the Act.
    Any other quality measures that CMS determines to have an evidence-
based focus and be reliable and valid.
    As we discussed in the Quality Payment Program final rule with 
comment period, because the statute identifies outcome measures as a 
priority measure type and we want to encourage the use of outcome 
measures for quality performance assessment in APMs, we further 
finalized in that rule that, in addition to the general quality measure 
requirements, an Advanced APM must include at least one outcome measure 
if an appropriate measure is available on the MIPS list of measures for 
that specific QP Performance Period, determined at the time when the 
APM is first established (81 FR 77418). Therefore, according to the 
requirements finalized in the Quality Payment Program final rule with 
comment period and the quality measures finalized in section III.E of 
this final rule that are the proposed EPM quality measures with an 
additional voluntary measure for the CABG model, the EPMs will meet the 
second finalized criterion of the Advanced APM criteria.
    Third, the Quality Payment Program final rule with comment period 
requires that for an APM to meet the Advanced APM criteria, the APM 
must either require that participating APM Entities bear risk for 
monetary losses of a more than nominal amount under the APM or be a 
Medical Home Model expanded under section 1115A(c) of the Act. For the 
purposes of the EPM, the generally applicable nominal amount standard 
for an Advanced APM in the Quality Payment Program final rule with 
comment period (81 FR 77425) means the total amount an APM Entity 
potentially owes CMS or foregoes under an APM must be at least equal to 
3 percent of the expected expenditures for which an APM Entity is 
responsible under the APM. The generally applicable financial risk 
standard (81 FR 77422) means when an APM Entity's actual expenditures 
for which the APM Entity is responsible under the APM exceed expected 
expenditures during a specified QP Performance Period, the APM Entity 
is required to owe payment(s) to CMS. We refer to the Quality Payment 
Program final rule with comment period for a discussion regarding why 
we did not finalize the specific level of marginal risk or minimum loss 
rate (81 FR 77426). However, consistent with the commitments we made to 
adhere to the proposed marginal risk and minimum loss rate requirements 
in the Quality Payment Program proposed rule, we note that the 
financial risk in this final rule when the EPMs involve downside risk 
exceeds the proposed marginal risk and minimum loss rate requirements 
proposed for the Quality Payment Program. As discussed in sections 
III.D.7.b. and c. and displayed in Table 12 of this final rule, the 
final total initial risk of expected expenditures for EPM participants 
of 5 percent, and 3 percent for rural hospitals, SCHs, MDHs, RRCs,

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and EPM volume protection hospitals subject to separate stop-loss 
protections, beginning in performance year 3 when downside risk for all 
participants first applies, would meet the total potential risk element 
of the nominal risk amount standard for Advanced APMs finalized in the 
Quality Payment Program final rule with comment period (81 FR 77427) 
because they are greater than or equal to the value of at least 3 
percent of expected expenditures. Those EPM participants who elect 
voluntary downside risk beginning in performance year 2 will be subject 
to the same total risk of expected expenditures in performance year 2 
and, therefore, will be in an EPM that meets the total potential risk 
element of the nominal risk amount standard for Advanced APMs beginning 
in performance year 2. Therefore, according to the requirements 
finalized in the Quality Payment Program final rule with comment period 
and the payment methodology for EPM participants finalized in section 
III.D of this final rule, those EPM participants who voluntarily elect 
downside risk for EPM episodes ending on or after January 1, 2018 will 
be in an EPM that meets the third finalized criterion of the Advanced 
APM criteria in performance year 2. All other EPM participants will be 
in an EPM that meets the third finalized criterion of the Advanced APM 
criteria in performance year 3.
    Finally, we finalized in the Quality Payment Program final rule 
with comment period (81 FR 77442) that for Advanced APMs, such as 
episode payment models, in which there are some Advanced APM Entities 
that include Eligible Clinicians on a Participation List and other 
Advanced APM Entities that identify Eligible Clinicians only on an 
Affiliated Practitioner List, we will identify Eligible Clinicians for 
QP determinations based on the composition of the Advanced APM Entity. 
In the scenario that applies to the EPM which includes only hospitals 
as Advanced APM Entities on the Participation List, for those Advanced 
APM Entities where there is an Affiliated Practitioner List that 
identifies Eligible Clinicians, that Affiliated Practitioner List will 
be used to identify the Eligible Clinicians for purposes of QP 
determinations, and those Eligible Clinicians will be assessed 
individually. Thus, to operationalize the EPM as an Advanced APM, our 
proposal for the EPM to identify Eligible Clinicians on a clinician 
financial arrangements list to construct the Affiliated Practitioner 
list would identify those Eligible Clinicians for purposes of QP 
determination, consistent with the policies finalized in the Quality 
Payment Program final rule with comment period.
    We received a number of public comments on our proposals for the 
EPMs as Advanced APMs. A few commenters requested changes to the 
policies proposed by CMS in the Quality Payment Program proposed rule 
and not to specific proposals for the EPMs set forth in the EPM 
proposed rule. These comments are out of scope for this rulemaking and 
no responses are provided in this final rule. Nevertheless, we have 
summarized this feedback related to the Quality Payment Program 
proposed rule, as CMS will continue work to improve the Quality Payment 
Program in part through future notice and comment rulemaking.
    One commenter requested change to the definition of Affiliated 
Practitioner to include rehabilitation therapists. Many commenters 
requested changes to the definitions of the Affiliated Practitioner 
List and/or Participation List to identify Eligible Clinicians for the 
purposes of Advanced APMs, MIPS APMs, and the assignment by CMS of an 
Improvement Activities score, which fulfills one of four categories for 
MIPS assessment of cost and quality. Another commenter requested 
changes to the performance period or the December 31 date by which an 
Eligible Clinician could qualify for automatic credit for incentive 
payment and/or clinical Improvement Activities performance. This 
commenter reasoned that such changes would permit more Eligible 
Clinicians to receive a QP determination, which may qualify them for an 
APM incentive payment under MACRA. One commenter expressed uncertainty 
regarding the process by which Eligible Clinicians could receive a QP 
determination for the efforts of the EPM participant, and requested 
that CMS clarify on the pathway for participating physicians to be in 
an Advanced APM generally. Another commenter suggested CMS replace the 
QP determination with the proposal that, for EPM providers who meet the 
CEHRT use requirement and have 50 or more Medicare beneficiaries 
attributed to these EPMs, the threshold for Advanced APMs would be met 
automatically. A few commenters wanted CMS to use the Meaningful Use 
program to gather attestation to CEHRT use from hospitals. A few 
commenters strongly recommended CMS lower the patient count and payment 
revenue thresholds used in the calculation of the Threshold Score to 
meet QP Threshold Status as specified in the Quality Payment Program 
proposed rule. Many commenters urged CMS to work closely with the 
affected professional organizations and/or physician specialty 
societies to design QP thresholds. One commenter requested changes to 
the APM Entity such that the APM Entity lose the right to all or part 
of otherwise guaranteed payment or payments as one of the options if 
the APM Entity's actual aggregate expenditures exceed expected 
aggregate expenditures. A few commenters requested changes to the 
categorical exclusion that Medicare Advantage (MA) and other private 
plans paid to act as insurers on the Medicare program's behalf are not 
Advanced APMs, in light of the amount of risk taken by physicians in 
MA. Finally, one commenter requested changes to the allow Independence 
at Home participants who use CEHRT to qualify for Advanced APM 
incentive payments.
    The following is a summary of the comments received on our 
proposals and our responses.
    Comment: MedPAC commented that the EPM and CJR models should not be 
considered Advanced APMs for the purposes of MACRA. MedPAC stated they 
believe the following six principles should apply to Advanced APMs: the 
Advanced APM entity should assume the financial risk and enroll 
clinicians; be at financial risk for total Part A and Part B spending; 
be responsible for a beneficiary population sufficiently large to 
detect changes in spending and quality; have the ability to share 
savings with beneficiaries; be provided certain regulatory relief by 
CMS; and the enrolled clinicians should receive an incentive payment 
only if the Advanced APM entity in which they participate is successful 
in controlling cost, improving quality, or both. Under the proposed 
EPMs, MedPAC believes the proposed rule contemplates large, loosely 
connected groups of clinicians who may have very little involvement 
with the beneficiaries in EPMs and hence have little reason to change 
their practice patterns or reduce inappropriate episodes. If CMS 
intends for clinicians to bear risk, MedPAC made the alternative 
proposal that they could do so directly without having the hospital as 
the intermediary.
    Response: While we appreciate the principles for Advanced APMs 
offered by MedPAC, we note that according to the Advanced APM 
definition in the Quality Payment Program final rule with comment 
period (81 FR 77008), the Track 1 EPMs that we proposed qualify as 
Advanced EPMs as discussed previously in this section.
    While we recognize EPM participants are the participating APM 
Entities for

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the purposes of the Quality Payment Program, CMS will consider 
participation of Eligible Clinicians in the Track 1 EPMs through 
collection of identifying information from Track 1 EPM participants on 
clinician financial arrangements lists as discussed in section 
III.A.2.c. of this final rule who would then be included on the 
Affiliated Practitioner List as defined in the Quality Payment Program 
final rule with comment period at Sec.  414.1305 (81 FR 77537), in 
order to determine who could be considered a QP. The requirements for 
Eligible Clinicians to be reported on the clinician financial 
arrangements lists help ensure that these clinicians have specific 
involvement in caring for EPM beneficiaries and advancing the goals of 
the EPMs to improve the quality and reduce the cost of care. Finally, 
Eligible Clinicians can only be considered Qualifying Professionals or 
Partial Qualifying Professionals and, therefore, potentially be exempt 
from MIPS, if the Eligible Clinician meets the QP threshold or partial 
QP threshold as described in the Quality Payment Program final rule 
with comment period (81 FR 77433). Additionally, while we recognize the 
concerns with EPM participants or CJR participant hospitals 
intermediating the APM incentive payments, we believe that the QP 
threshold incentivizes Eligible Clinicians to work with such 
participants to improve health care delivery for Medicare 
beneficiaries.
    The qualification of the CJR model as an Advanced APM is discussed 
in section V.O. of this final rule.
    Comment: Many commenters expressed support for all organizations to 
have the opportunities to participate as Advanced APMs and noted that 
as proposed, rural hospitals, SCHs, MDHs, and RRCs that are EPM 
participants would not potentially qualify for participation in an 
Advanced APM until performance year 3 due to the proposed lower stop-
loss limits for these hospitals under the EPMs. Additionally, one 
commenter recommended that a distinct CEHRT program be developed and 
funding be allocated for non-physician and non-prescribing 
professionals as soon as possible, as the cost of acquisition, 
implementation, and maintenance of an EHR is a significant barrier to 
adoption, particularly for small practices. One commenter observed this 
proposal as an important illustration of why CMS must be flexible in 
its definition of nominal risk, and how nominal will not mean the same 
thing for every provider. As such, commenters supported retention of 
the proposed stop-loss limits under the EPMs as the default rule for 
these hospitals, thus enabling them to meet the nominal financial risk 
standard for Track 1 EPMs (Advanced APMs) in performance year 3 rather 
than performance year 2 when other EPM participants would be eligible 
for Track 1 EPMs. However, commenters also believe CMS should also 
explore options to allow these hospitals with additional stop-loss 
protection under the EPMs to voluntarily elect a higher stop-loss limit 
in order to participate in Track 1 EPMs in performance year 2.
    Response: The Quality Payment Program final rule with comment 
period (81 FR 77427) finalized the policy that an APM would meet the 
nominal amount standard for an Advanced APM if, under the terms of the 
APM, the total annual amount that an APM Entity potentially owes us or 
foregoes is equal to at least 3 percent of the expected expenditures 
for which an APM Entity is responsible under the APM. Therefore, rural 
hospitals, SCHs, MDHs, RRCs, as well as EPM volume protection hospitals 
as discussed in section III.D.7.c of this final rule, that are EPM 
participants with special stop-loss limits could potentially qualify as 
being in an Advanced APM as participants in a Track 1 EPM in 
performance year 3, along the same timeframe as all other EPM 
participants when downside risk for all participants is implemented, or 
in performance year 2 when voluntary downside risk may be elected by 
EPM participants (section III.D.2.c. of this final rule), based on the 
stop-loss limits finalized in this rule for these hospitals as 
discussed in section III.D.7.c. of this final rule.
    Comment: Commenters proposed alternative processes by which a QP 
determination could be made, including collective assessment of QP 
status across both the AMI and CABG models, so as not to create siloed 
EPMs. In cases where there is an overlap of beneficiaries in more than 
one CMS model or program, other commenters proposed that beneficiaries 
should be counted toward a physician's QP Threshold Score (a part of a 
QP determination) if a beneficiary would have been assigned to a 
particular model if it were not for the fact that a different model 
that has required participation overlapped.
    Response: The QP determination discussed in the Quality Payment 
Program final rule with comment period depends on the level of payments 
or patients furnished services through an Advanced APM based on the 
calculations described in Sec.  414.1435 and Sec.  414.1440, as 
applicable. Under certain Advanced APMs such as a Track 1 EPM, the 
responsibility of cost and quality measurement and reporting is with 
EPM participants that are hospitals rather than Eligible Clinicians. 
However, we have specified that Eligible Clinicians who are on 
Affiliated Practitioner Lists may also be assessed for a QP 
determination based on their Affiliated Practitioner status if there 
are no eligible clinicians on an Advanced APM's Participation List. 
Therefore, as finalized in the Quality Payment Program final rule with 
comment period (81 FR 77443), if an Eligible Clinician participates in 
multiple Advanced APM Entities during a QP Performance Period, and is 
not determined to be a QP based on participation in any of those 
Advanced APM Entities, then we will assess the Eligible Clinician 
individually using combined information for services associated with 
that individual's NPI and furnished through all the Eligible 
Clinician's Advanced APM Entities during the QP Performance Period. 
This includes all Advanced APM Entities for which the Eligible 
Clinician is represented on either a Participation List or Affiliated 
Practitioner List that CMS uses for QP determinations. We will make 
adjustments to ensure that patients and payments for services that may 
be counted in the QP calculations for multiple Advanced APM Entities 
(for example, payments for services furnished to a beneficiary 
attributed to an ACO that are also part of an episode in an episode 
payment model) are not double-counted for the individual. We believe 
that this policy maintains the general principles behind Advanced APM 
Entity-level QP determinations, while acknowledging the broader 
commitment of individual Eligible Clinicians who are participating in 
multiple Advanced APMs. We believe considering these Eligible 
Clinicians individually is the most reasonable approach to capturing 
the multiple potential permutations of participation in Advanced APMs 
and providing Eligible Clinicians an equitable opportunity to become a 
QP.
    Thus, with respect to the commenters' concerns that CMS would only 
make a model-specific QP determination for the Track 1 AMI model and 
Track 1 CABG model and not a collective determination across the two 
models, for Advanced APMs for which there is not a Participation List 
that identifies eligible clinicians and there is an Affiliated 
Practitioner List that identifies eligible clinicians, the Quality 
Payment Program final rule with comment period (81 FR 77442) notes that 
Affiliated Practitioner List will be

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used to identify the eligible clinicians for purposes of QP 
determinations. Eligible clinicians on an Affiliated Practitioner List 
will be assessed individually, unlike eligible clinicians on a 
Participation List who are assessed as a group. Thus, we could make a 
determination across the two models if an Eligible Clinician was not 
determined to be a QP based on participation in any one of the Track 1 
EPMs. Finally, as specified in the Quality Payment Program final rule 
with comment period (81 FR 77013), QPs are Eligible Clinicians in an 
Advanced APM who have a certain percentage of their patients or 
payments through an Advanced APM. Thus, we will only count 
beneficiaries attributed to an Advanced APM Entity toward a clinician's 
QP Threshold Score and will not count those beneficiaries who would 
have been attributed to an Advanced APM Entity if it were not for the 
fact that a different model overlapped. Beneficiary attribution is 
further discussed in the Quality Payment Program final rule with 
comment period (81 FR 77436)
b. EPM Participant Tracks
    To be considered an Advanced APM, the APM must require participants 
to use CEHRT (as defined in section 1848(o)(4) of the Act), as 
specified in section 1833(z)(3)(D)(i)(I) of the Act. We proposed that 
all EPM participants must choose whether to meet the CEHRT use 
requirement. EPM participants that do not choose to meet and attest to 
the CEHRT use requirement would be in Track 2 of the EPMs. EPM 
participants selecting to meet the CEHRT use requirement would be in 
Track 1 of the EPMs and would be required to attest in a form and 
manner specified by CMS to their use of CEHRT that meets the definition 
in our regulation at Sec.  414.1305 (81 FR 77537) to document and 
communicate clinical care with patients and other health professionals, 
consistent with the proposal in the Quality Payment Program proposed 
rule for the CEHRT requirement for Advanced APMs (81 FR 28299). EPM 
participants choosing not to meet and attest to the CEHRT use 
requirement would not be required to submit an attestation.
    We believe that the voluntary selection by EPM participants to 
elect downside risk for EPM episodes ending on or after January 1, 
2018, and to meet and attest to the CEHRT use requirement would create 
no significant additional administrative burden on EPM participants. 
Moreover, the choice of whether to meet and attest to the CEHRT use 
requirement would not otherwise change any EPM participant's 
requirements or opportunity under the EPM. However, to the extent that 
eligible clinicians who enter into financial arrangements related to 
EPM participants in the Track 1 EPM are considered to furnish services 
through an Advanced APM, those services could be considered for 
purposes of determining whether the eligible clinicians are QPs.
    The proposals for CEHRT use and attestation for EPM participants 
were included in proposed Sec.  512.120(a). We sought comment on our 
proposals for EPM participant CEHRT use requirements.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters expressed appreciation for CMS' efforts to 
expand the Advanced APM participation opportunities as they commented 
that the 5 percent Advanced APM incentive payment is time-limited under 
current law. They applauded the proposal to expand the list of eligible 
Advanced APMs through Track 1 EPMs as it provides an incentive for 
physicians to collaborate with hospital participants in the EPM and 
could provide specialists, who otherwise may have limited avenues, to 
participate in an Advanced APM. Other commenters requested specifically 
that CMS clarify the steps necessary when a provider group wishes to 
change from Track 2 to Track 1 in the EPMs.
    Response: We appreciate the commenters' support for our proposal of 
the Track 1 EPMs as Advanced APMs and agree that providing greater 
opportunities for physician participation in Advanced APMs is an 
important goal that can be advanced through our proposal. We remind 
commenters that only the EPM participant can choose to participate in a 
Track 1 EPM by using and attesting to use of CEHRT. If Eligible 
Clinicians enter into a financial arrangement associated with a Track 1 
EPM participant, then the EPM participant must submit a clinician 
financial arrangements list that determines the Eligible Clinicians to 
be included on the Affiliated Practitioner List for the purposes of the 
Track 1 EPM that is an Advanced APM. Therefore, a provider group 
interested in their members becoming Affiliated Practitioners with an 
Advanced EPM Entity in an Advanced APM could work with a Track 1 EPM 
participant to enter into a financial arrangement with that EPM 
participant so that the members of the provider group could be included 
in the clinician financial arrangements list submitted by the Track 1 
EPM participant to CMS.
    Comment: While commenters appreciated the proposal to include two 
tracks for EPM participants and CJR participant hospitals, other 
commenters made additional proposals to CMS to help operationalize 
these tracks. A few commenters urged CMS to go further to align the 
EPMs and the CJR model with the proposed Quality Payment Program and 
configure Track 2 (the Non-Advanced APM) so that it could qualify as a 
MIPS APM. In addition to the request that CMS reconfigure Track 2, 
commenters also proposed that Track 2 EPM participants must also submit 
a clinician financial arrangements list, so that Eligible Clinicians 
could receive credit for Improvement Activities under MIPS and/or 
satisfy criteria to be considered participants in MIPS APMs, for which 
the Quality Payment Program applies unique scoring rules. One commenter 
believes that the multiple options due to the proposed tracks increases 
the level of complexity and administrative burden on the hospitals for 
activities such as record keeping.
    Response: We disagree that the presence of two EPM tracks increases 
administrative burden as we continue to believe that the proposed 
tracks allow flexibility for EPM participants to choose to participate 
in an Advanced APM. While a Track 1 EPM participant needs to attest to 
CEHRT and submit a clinician financial arrangements list to meet the 
requirements for participation in an Advanced APM and allow us to 
operationalize the Track 1 EPM as an Advanced APM, we do not believe 
that these additional requirements create significantly increased 
administrative burden on the Track 1 EPM participant versus a Track 2 
EPM participant in view of the documentation and record access and 
retention requirements for all EPM participants, which require EPM 
participants to maintain a subset of that list that constitutes the 
Eligible Clinicians, nor that the requirements to identify and maintain 
related lists regarding collaboration agents and downstream 
collaboration agents is a substantial burden. Beyond these additional 
activities for Track 1 EPM participants, the policies of the EPMs are 
the same for Track 1 and Track 2 EPM participants.
    In addition, we disagree with the suggestion by commenters that we 
add the requirement for Track 2 EPM participants to submit to CMS 
clinician financial arrangements lists, information that we did not 
propose to require Track 2 EPM participants to submit to us. Submission 
of clinician financial arrangements lists is not necessary for

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implementation of the Track 2 EPMs, and Track 2 EPM participants do not 
meet the definition of Advanced APM Entities in the Quality Payment 
Program final rule with comment period at Sec.  414.1305 (81 FR 77537). 
To require Track 2 EPM participants to submit such a list would create 
unnecessary additional administrative burden on these participants. 
Furthermore, a Track 2 EPM does not meet the criteria of a MIPS APM in 
Sec.  414.1370(b) of the Quality Payment Program final rule with 
comment period. Specifically, the MIPS APM criteria requires at least 
one Eligible Clinician on a Participation List for the APM, while 
currently all EPM and CJR participants are hospitals. Thus, the EPM and 
CJR Participation Lists do not include Eligible Clinicians and, 
therefore, a Track 2 EPM and the Track 2 CJR model are not MIPS APMs. 
As a result, EPM or CJR collaborators, collaboration agents, and 
downstream collaboration agents are not engaged with Track 2 EPM 
participants or Track 2 CJR participant hospitals in a MIPS APM. 
Therefore, we will not adopt a requirement in regulation for Track 2 
EPM participants or Track 2 CJR participant hospitals to submit 
clinician financial arrangements lists at this time.
    We agree with commenters that we should continue to consider 
whether there are opportunities for additional APMs, including episode 
payment models, to become MIPS APMs. We will continue to consider the 
balance in models between the most appropriate, streamlined model 
design for the intended model participants to advance the goals of the 
model and the requirements for models to be MIPS APMs or Advanced APMs 
as we strive to create more opportunities for Eligible Clinicians to 
participate in MIPS APMs and Advanced APMs.
    Comment: Commenters urged CMS to consider reversing the proposed 
Track 1 and Track 2 designations to represent an APM and Advanced APM, 
respectively, or identifying an alternative naming convention as the 
term ``tracks'' are already used in the Shared Savings Program.
    Response: We appreciate the perspective of the commenters but 
believe that our proposed designations of a Track 1 EPM as an Advanced 
APM and a Track 2 EPM as a Non-Advanced APM under the EPMs are 
straightforward and appropriate for the distinctions we make between 
Advanced and Non-Advanced EPMs. The track designations for the EPMs are 
relevant to the EPM participants in the specific track of the EPM and 
the individuals and entities that have financial arrangements under the 
EPMs. We never intend to refer solely to the term Track 1 or Track 2 in 
the context of the EPMs but always in combination with the term EPM as 
a Track 1 EPM or Track 2 EPM. Therefore, we do not believe that Track 1 
EPMs or Track 2 EPMs will be confused with tracks in the Shared Savings 
Program. We will be working closely with EPM participants and other 
stakeholders during EPM implementation to explain the various 
requirements of the EPMs in general and the tracks of the EPMs in 
particular.
    Comment: Additional proposals were submitted by commenters that 
encouraged CMS to work further by creating additional tracks, including 
a MIPS APM track and accommodating those that may wish to accept 
financial risk sooner in order to qualify as an Advanced APM. 
Commenters believe CMS should continue to develop pathways and provide 
assistance to organizations who wish to develop or become participants 
in Advanced APMs; and to expand beyond the current inpatient-based 
episode payment model tracks to include not only a physician-focus but 
also a focus that meaningfully incorporates additional roles and 
activities, for example, specialty service providers, rehabilitation 
therapy providers, BPCI early adopters, home health care, and 
transitional care.
    Response: We appreciate the suggestions of commenters. We respond 
earlier in this section on requests for additional MIPs APMs and for 
voluntary election of early increased downside risk to allow rural 
hospitals, SCHs, MDHs, and RRCs with special stop-loss limits under the 
EPMs to be in a Track 1 EPM at the same time as other EPM participants 
without special stop-loss limits under the EPM. We will continue our 
efforts to develop pathways and provide assistance to organizations who 
wish to develop or become participants in Advanced APMs. We refer the 
commenters to section III.A.3 of this final rule for additional 
considerations for future EPMs.
    Comment: Commenters expressed appreciation for the proposed 
alignment resulting from use of the same definition of CEHRT across the 
EPM and Quality Payment Program, and acknowledged that CMS' proposal to 
permit those EPM participants who do not use CEHRT to be in a different 
track of the EPM offers appropriate flexibility. A few commenters 
requested that CMS consider using a process through the Medicare EHR 
Incentive Program to gather the attestations from the hospitals.
    Response: We appreciate the recognition from commenters of CMS' 
efforts to utilize the flexibilities of the Quality Payment Program for 
Eligible Clinicians to link quality to payments through meaningful 
participation in an Advanced APM.
    We also appreciate the suggestions by the commenters about existing 
processes and information CMS might use to streamline CEHRT use 
attestation for EPM participants in Track 1 EPMs. We reiterate that EPM 
participants choose to attest to CEHRT use and submit a clinician 
financial arrangements list beginning in performance year 3 and, 
therefore, be a Track 1 EPM participant (or elect voluntary downside 
risk in performance year 2, attest to CEHRT use, and submit a clinician 
financial arrangements list, and therefore, be a Track 1 EPM 
participant beginning in performance year 2), or choose not to attest 
to CEHRT use and be a Track 2 EPM participant. We will consider the 
feedback from commenters on CEHRT attestation methodologies as we 
develop the operational information for EPM participants about EPM 
processes and procedures. We further note that CMS and ONC also offer 
continued support and guidance through educational resources to support 
participating in and reporting CEHRT use to CMS models and programs, 
such as the EHR Incentive Program. We will communicate closely with EPM 
participants about the form and manner of attestation to CEHRT use for 
Track 1 EPMs early in the process of EPM implementation.
    Comment: Many commenters urged CMS to consider the significant 
upfront investments in health IT infrastructure that providers must 
make to participate and be successful in the Quality Payment Program 
and EPMs or CJR model, given that, as one commenter stated, this 
investment exists even in upside-only models. As a result, these 
commenters recommended that CMS consider permitting EPM participants to 
be Advanced APM Entities in performance year 1 and/or that entry into 
Track 1 for EPM participants and CJR participant hospitals begin as 
soon as possible. Other commenters pointed out the lack of resources/
support for Eligible Clinicians, such as therapists, to adopt EHRs. The 
commenters believe that Eligible Clinicians participating in an 
Advanced APM where the Advanced APM Entity is a hospital must also use 
and attest to use of CEHRT, and further stated that such a requirement 
would put these professionals at a significant disadvantage. To this 
end, a few commenters requested that CMS clarify whether the CEHRT 
requirement only applies to the hospitals that are EPM

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participants and whether Eligible Clinicians who have entered into 
sharing arrangements as EPM collaborators will potentially meet the 
requirements to attest to use of CEHRT for participating in an Advanced 
APM under the Quality Payment Program.
    Response: Like the commenters, we appreciate the important role 
health IT may play in meeting the goals of Advanced APMs, including 
Track 1 EPMs, to improve the quality and reduce the cost of care. As a 
result of the Quality Payment Program final rule with comment period 
(81 FR 28306), in order for an APM to be considered an Advanced APM, 
the APM must either require that participating APM Entities bear risk 
for monetary losses of a more than nominal amount under the APM or be a 
Medical Home Model expanded under section 1115A(c) of the Act. As a 
result of this final rule, a Track 1 CJR participant hospital will be 
considered to be participating in an Advanced APM, and could qualify as 
an Advanced APM Entity beginning in performance year 2 for episodes 
ending on or after January 1, 2017, the time at which CJR participant 
hospitals would begin to bear downside risk for excess actual CJR 
episode spending above the quality-adjusted target price. Track 1 EPM 
participants will be considered to be participating in an Advanced APM, 
and could qualify as an Advanced APM Entity beginning in performance 
year 2 for episodes ending on or after January 1, 2018, the time at 
which EPM participants in performance year 2 would begin to bear 
downside risk for excess actual episode spending above the quality-
adjusted target price.
    The Advanced APM criteria established in the Quality Payment 
Program final rule with comment period at Sec.  414.1415 (81 FR 77549) 
require that for APMs in which hospitals are the APM Entities, such as 
the EPMs, each hospital must use CEHRT to document and communicate 
clinical care to their patients or other health care providers to meet 
the CEHRT use requirement for Advanced APMs. Thus, there is no 
requirement that Eligible Clinicians who would be included on an 
Affiliated Practitioner List for Track 1 EPMs attest to CEHRT use and, 
therefore, we will not develop CEHRT attestation processes for Eligible 
Clinicians in Track 1 EPMs nor will we provide funds to support EHR 
adoption. In addition, we encourage participants to consider utilizing 
any shared savings obtained as part of the model to invest in health IT 
infrastructure that can help EPM collaborators improve care 
coordination for beneficiaries.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to include in Sec.  512.120(a) 
the CEHRT use and attestation for EPM participants, with modification 
to specify that the policy applies for performance year 2 if the EPM 
participant elects downside risk, and to use the term ``specified'' for 
consistency with CEHRT attestation in other CMS programs.
    For performance year 2 if the EPM participant elects downside risk 
and for performance years 3 through 5, EPM participants choose either 
of the following:
     CEHRT use. EPM participants attest in a form and manner 
specified by CMS to their use of CEHRT as defined in Sec.  414.1305 of 
this chapter to document and communicate clinical care with patients 
and other health professionals.
     No CEHRT use. EPM participants do not attest in a form and 
manner specified by CMS to their use of CEHRT as defined in Sec.  
414.1305 of this chapter to document and communicate clinical care with 
patients and other health professionals.
c. Clinician Financial Arrangements Lists Under the EPMs
    In order for CMS to make determinations as to eligible clinicians 
who could be considered QPs based on services furnished under the EPMs 
(to the extent the models are determined to be Advanced APMs), we 
require accurate information about eligible clinicians who enter into 
financial arrangements under the Track 1 EPMs under which the 
Affiliated Practitioners support the participants' cost or quality 
goals as discussed in section III.I. of this final rule. We note that 
eligible clinicians could be EPM collaborators engaged in sharing 
arrangements with an EPM participant; PGP members who are collaboration 
agents engaged in distribution arrangements with a PGP that is an EPM 
collaborator; or PGP members who are downstream collaboration agents 
engaged in downstream distribution arrangements with a PGP that is also 
an ACO participant in an ACO that is an EPM collaborator. These terms 
as they apply to individuals and entities with financial arrangements 
under the EPMs are discussed in section III.I. of this final rule. A 
list of physicians and nonphysician practitioners in one of these three 
types of arrangements could be considered an Affiliated Practitioner 
List of eligible clinicians who are affiliated with and support the 
Advanced APM Entity in its participation in the Advanced APM as 
proposed in the Quality Payment Program proposed rule. Therefore, this 
list could be used to make determinations of who would be considered 
for a QP determination based on services furnished under the EPMs (81 
FR 28320).
    Thus, we proposed that each EPM participant that chooses to meet 
and attest to the CEHRT use requirement must submit to CMS a clinician 
financial arrangements list in a form and manner specified by CMS on a 
no more than quarterly basis. The list must include the following 
information for the period of the EPM performance year specified by 
CMS:
     For each EPM collaborator who is a physician, nonphysician 
practitioner, or provider of outpatient therapy services during the 
period of the EPM performance year specified by CMS:
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the EPM collaborator.
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the EPM participant and the EPM collaborator.
     For each collaboration agent who is a physician or 
nonphysician practitioner of a PGP that is an EPM collaborator during 
the period of the EPM performance year specified by CMS:
    ++ The TIN of the PGP that is the EPM collaborator, and the name 
and NPI of the physician or nonphysician practitioner.
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the EPM collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
     For each downstream collaboration agent who is a physician 
or nonphysician practitioner member of a PGP that is also an ACO 
participant in an ACO that is an EPM collaborator during the period of 
the EPM performance year specified by CMS:
    ++ The TIN of the PGP that is the ACO participant, and the name and 
NPI of the physician or nonphysician practitioner.
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent that is both 
PGP and an ACO participant and the physician or nonphysician 
practitioner who is a PGP member.
     If there are no individuals that meet the requirements to 
be reported as EPM collaborators, collaboration agents, or downstream 
collaboration agents, the EPM participant must attest in a form and 
manner required by CMS that there

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are no individuals to report on the clinician financial arrangements 
list.
    As discussed in the Quality Payment program proposed rule, those 
physicians or nonphysician practitioners who are included on the 
Affiliated Practitioner List as of December 31 of a performance period 
would be assessed to determine whether they qualify for APM Incentive 
Payments (81 FR 28320). The Quality Payment Program final rule with 
comment period (81 FR 77444) modified this process to identify eligible 
clinicians on the Affiliated Practitioner List for QP determinations at 
any one of three snapshots. The first snapshot will be on March 31 of 
the QP Performance Period, the second snapshot will be on June 30 of 
the QP Performance Period, and the third snapshot will be on August 31, 
which will be the last day of the QP Performance Period.
    We noted that while the required submission of this information 
might create some additional administrative requirements for certain 
EPM participants, we expected that EPM participants in a Track 1 EPM 
could modify their contractual relationships with their EPM 
collaborators and, correspondingly, require those EPM collaborators to 
include similar requirements in their contracts with collaboration 
agents and in the contracts of collaboration agents with downstream 
collaboration agents.
    The proposal for the submission of a clinician financial 
arrangements list by EPM participants that meet and attest to the CEHRT 
use requirement for the EPM was included in Sec.  512.120(b). We sought 
comments on the proposal for submission of this information. We were 
especially interested in comments about approaches to information 
submission, including the periodicity and method of submission to CMS 
that would minimize the reporting burden on EPM participants while 
providing CMS with sufficient information about eligible clinicians in 
order to facilitate QP determinations to the extent EPMs are considered 
Advanced APMs.
    The following is a summary of the comments received and our 
responses.
    Comment: While some commenters supported CMS' plans to recognize 
Eligible Clinicians who participate in APMs from an Affiliated 
Practitioner List, others raised concerns about the means to identify 
Eligible Clinicians as Affiliated Practitioners of Advanced APMs. A few 
commenters disagreed with the development of an Affiliated Practitioner 
List from a clinician financial arrangements list. Some commenters 
believe that to assume risk-taking threatens the financial viability of 
most physician-led entities. Other commenters expressed concern that 
the definition of such an agreement suggests that risk must be shifted 
to the clinicians to achieve QP status. These commenters agreed that 
the clinicians must support the cost or quality goals of the Advanced 
APM, but do not believe that to be included on the Affiliated 
Practitioner List the clinician must take risk. Other commenters 
assumed that Eligible Clinicians must assume risk under the EPM to 
qualify for QP incentive payment under the Quality Payment Program, and 
suggested that CMS base the risk requirements on physician practice or 
APM organization revenues. One commenter noted that not all physicians 
bound contractually to the requirements of the EPMs would be captured 
on clinician financial arrangements lists, as hospitals may have 
agreements with their employed physicians that cascade the programmatic 
requirements of the EPMs, but do not necessarily alter their underlying 
compensation or include gainsharing/risk-sharing/internal cost savings 
parameters. Instead, commenters offered alternatives to the submission 
of clinician financial arrangements lists, including such proposals as 
modeling the EPM along the lines of the Medical Home Model standard and 
using claims data to identify and attribute Eligible Clinicians to 
populate the EPM Affiliated Practitioner List for the purposes of the 
Quality Payment Program.
    Response: Under Track 1 EPMs, the Advanced APM Entity is always a 
hospital, and no physicians are EPM participants. As we discussed in 
the Quality Payment Program final rule with comment period (81 FR 
77442), for Advanced APMs, such as episode payment models, in which 
there are some Advanced APM Entities that include Eligible Clinicians 
on a Participation List and other Advanced APM Entities that identify 
Eligible Clinicians only on an Affiliated Practitioner List, we will 
identify Eligible Clinicians for QP determination based on the 
composition of the Advanced APM Entity: (1) For Advanced APM Entities 
that include and identify Eligible Clinicians on a Participation List, 
that Participation List will be used to define the Advanced APM Entity 
group, regardless of whether or not there is also an Affiliated 
Practitioner List or other list of Eligible Clinicians, and those 
Eligible Clinicians will be assessed as a group; (2) for Advanced APM 
Entities that do not include and identify Eligible Clinicians on a 
Participation List and there is an Affiliated Practitioner List that 
identifies Eligible Clinicians, that Affiliated Practitioner List will 
be used to identify the Eligible Clinicians for purposes of QP 
determinations, and those Eligible Clinicians will be assessed 
individually. Track 1 EPMs fall into the second category because the 
EPMs do not include and identify Eligible Clinicians on a Participation 
List so, therefore, we will use an Affiliated Practitioner List for 
Track 1 EPMs to identify Eligible Clinicians for purposes of QP 
determinations.
    In the Quality Payment Program final rule with comment period in 
Sec.  414.1305 (81 FR 77537), an Affiliated Practitioner is defined as 
an Eligible Clinician identified by a unique APM participant identifier 
on a CMS-maintained list who has a contractual relationship with the 
Advanced APM Entity for the purposes of supporting the Advanced APM 
Entity's quality or cost goals under the Advanced APM. Furthermore, in 
the Quality Payment Program final rule with comment period (81 FR 
77440), we provided the example that an Affiliated Practitioner List 
comprised of gainsharers under an APM might include Eligible Clinicians 
whereas a Participation List may only include hospitals. We believe 
this example applies to the Track 1 EPMs.
    We believe that constructing the Affiliated Practitioner List from 
the list of clinicians with financial arrangements submitted by each 
EPM participant that chooses to use and attest to use of CEHRT allows 
us to appropriately identify clinicians for the Affiliated Practitioner 
List under the EPMs. All of these clinicians have contractual 
relationships under the EPMs, and because the determination of the 
amount of gainsharing payment, distribution payment, or downstream 
distribution payment under their arrangement is required to be 
substantially based on quality of care and the provision of EPM 
activities (activities related to promoting accountability for the 
quality, cost, and overall care for EPM beneficiaries, including 
managing and coordinating care; encouraging investment in 
infrastructure, enabling technologies, and redesigned care processes 
for high quality and efficient service delivery; the provision of items 
and services during an EPM episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
the EPM), we believe that their contractual relationship supports the 
cost and quality goals of the Track 1 EPM participant and, therefore, 
that they meet the definition of Affiliated Practitioner.

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    Regarding those commenters who were concerned that constructing the 
Affiliated Practitioner List in this way would shift the financial risk 
of the APM Entity (Track 1 EPM participant) to the clinician in order 
for the clinician to be eligible for a QP determination, we want to 
emphasize that distribution arrangements and downstream distribution 
arrangements allow only distribution of payments that may be comprised 
of hospital internal cost savings and/or reconciliation payments for 
savings beyond the quality-adjusted target price under the EPMs, 
without allowing the collaboration agent or downstream collaboration 
agents to assume any downside risk. Sharing arrangements may include 
the sharing of upside and downside risk with EPM collaborators, but we 
note that in our experience with other bundled payment models, sharing 
with individual physicians has generally been upside risk only. We 
understand that the Quality Payment Program final rule with comment 
period does not require that an Affiliated Practitioner take on upside 
or downside risk to be eligible for a QP determination, while our 
proposed methodology to identify Eligible Clinicians for the EPM 
Affiliated Practitioner List requires those clinicians to have a 
financial arrangement under the EPM. However, we based our proposal on 
the most streamlined approach to identifying Eligible Clinicians under 
the Track 1 EPM who meet the definition of Affiliated Practitioner to 
build off policies that apply across the EPMs in general, in order to 
limit any additional administrative burden on EPM participants for 
Track 1 participation. Under the EPMs, the only contractual 
relationships for which we specify requirements as part of the model 
design for all participants and which ensure the Eligible Clinicians 
meet the Affiliated Practitioner definition are financial arrangements. 
Therefore, under our proposal for identifying Eligible Clinicians for 
each EPM participant that chooses to use and attest to use of CEHRT we 
would use the clinician financial arrangements list submitted to us to 
construct the EPM Affiliated Practitioner List.
    In terms of constructing the Affiliated Practitioner List from 
claims data based on those clinicians furnishing services to EPM 
beneficiaries, we would not be able to know if such physicians, 
nonphysician practitioners, or therapists had a contractual 
relationship with the EPM participant to support the EPM participant's 
cost or quality goals under the Track 1 EPM (the requirement for 
Affiliated Practitioners), so we are unable to adopt this suggestion by 
the commenters. Moreover, we believe we can only know the information 
about contractual relationships between an EPM participant and an 
Eligible Clinician if the EPM participant reports this to us as we do 
not otherwise require such reporting under the EPMs.
    We understand that there are circumstances where an EPM participant 
might want to enter into a contract with a clinician to support the 
cost or quality goals of the EPM. At this point, EPM participants that 
choose to use and attest to use of CEHRT may not report these 
clinicians to us through the clinician financial arrangements list for 
inclusion on the Affiliated Practitioner List because we made no 
specific proposals about what such contractual relationships would 
entail. As discussed previously in this section, MedPAC expressed 
concern that the EPMs contemplate large, loosely connected groups of 
clinicians who may have very little involvement with the beneficiaries 
in EPMs and hence have little reason to change their practice patterns 
or reduce inappropriate episodes. Thus, in order to identify the 
circumstances in which Eligible Clinicians without financial 
arrangements under a Track 1 EPM participant could meet the definition 
of Affiliated Practitioner, we will further consider the scenarios 
raised by the commenters and intend to propose an additional 
methodology for EPM participants to identify other Eligible Clinicians 
who may be included on the Affiliated Practitioner List in future 
rulemaking. This additional methodology would be targeted for 
implementation in performance year 3 when downside risk for all 
participants under the EPMs applies.
    We are finalizing our proposal to construct the EPM's Affiliated 
Practitioner List from the clinician financial arrangements lists 
submitted by those EPM participants that attest to CEHRT use.
    Comment: Several commenters urged CMS to identify Eligible 
Clinicians through a streamlined reporting process, and ensure that a 
minimum burden is applied to EPM participants when providing lists. To 
this end, the commenters proposed alterations to the proposed contents 
of the clinician financial arrangements list, including the 
recommendation that CMS require EPM participants or CJR participant 
hospitals to submit an electronic form listing all collaborators, 
collaboration agents, and downstream collaboration agents and their tax 
identification numbers (TIN) on a yearly basis. Finally, some 
commenters requested that CMS enable more frequent updates to the list.
    Response: We appreciate the interest of the commenters in creating 
the minimal necessary reporting burden on EPM participants and CJR 
participant hospitals. For those EPM participants that choose to use 
and attest to use of CEHRT and are required to submit a clinician 
financial arrangements list, we agree with the commenters that the most 
streamlined process that provides us with the timely, necessary 
information is desirable. We proposed that the submission must occur on 
a no more than quarterly basis and we continue to believe that this 
timing is the most appropriate. It establishes the maximum required 
submission burden on EPM participants of quarterly in view of the three 
planned ``snapshots'' of the Affiliated Practitioner List each year (81 
FR 77444) to capture timely new Affiliated Practitioners that were not 
previously identified for the EPM participant, while allowing us the 
flexibility to determine a lower reporting periodicity for EPM 
participants whose list does not change during the EPM performance 
year. We also note that while under our proposal we could not require 
submission of the list more than quarterly, the submission timing 
requirement does not preclude us from accepting more frequent than 
quarterly voluntary updates to the list if EPM participants have more 
frequent changes to their list of clinicians with financial 
arrangements under the EPM.
    We proposed that Eligible Clinicians on the clinician financial 
arrangements list that we would use to construct an Affiliated 
Practitioner List would be EPM collaborators who are physicians, 
nonphysician practitioners, and providers of outpatient therapy 
services engaged in sharing arrangements with an EPM participant; PGP 
members who are physicians and nonphysician practitioners who are 
collaboration agents engaged in distribution arrangements with a PGP 
that is an EPM collaborator; and PGP members who are physicians and 
nonphysician practitioners who are downstream collaboration agents 
engaged in downstream distribution arrangements with a PGP that is also 
an ACO participant in an ACO that is an EPM collaborator. To reflect 
our final policies for financial arrangements discussed in section 
III.I. of this final rule, and taking into consideration the issues 
discussed later in this section, we are revising the categories of 
individuals who qualify as Eligible Clinicians and clarifying the 
information to be reported on the clinician financial arrangements list 
in this final rule. It was our intention in

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the proposed rule and our policy in this final rule that the full 
complement of physicians, nonphysician practitioners, and therapists 
who have financial arrangements under the EPMs be reported on the EPM 
participant's clinician financial arrangements list. We see no reason 
to treat physicians, nonphysician practitioners, or therapists 
differently for purposes of being considered Eligible Clinicians based 
on their specific type of financial arrangement under the EPM as the 
requirements for each type of contractual relationship are aligned with 
the cost and quality goals of the EPM.
    We proposed that providers of outpatient therapy services that are 
EPM collaborators be reported on the clinician financial arrangements 
list, although the term provider of outpatient therapy services also 
encompassed entities that were not individual therapists and that, 
therefore, could not be Eligible Clinicians. However, as discussed in 
section III.I.3. of this final rule we are adopting the specific term 
therapist in private practice for those individual therapists who are 
EPM collaborators. Thus, we are refining the reporting of EPM 
collaborators on the clinician financial arrangements list to include 
physicians, nonphysician practitioners, and therapists in private 
practice to focus on individual therapists in private practice, who may 
be Eligible Clinicians under the provisions of the Quality Payment 
Program final rule with comment period, rather than all providers of 
outpatient therapy services.
    In addition, our proposal did not identify as Eligible Clinicians 
therapists who are collaboration agents and downstream collaboration 
agents as members of PGPs or ACO providers/suppliers who are 
physicians, nonphysician practitioners, or therapists who are 
collaboration agents. While we did not propose that therapists who are 
collaboration agents or downstream collaboration agents as members of 
PGPs be reported on the clinician financial arrangements list, we did 
propose that a therapist could be a PGP member and we note that 
therapists can also be Eligible Clinicians under the provisions of the 
Quality Payment Program final rule with comment period. We also did not 
identify in our proposal that physicians, nonphysician practitioners, 
and therapists who are collaboration agents and ACO providers/suppliers 
in an ACO that is an EPM collaborator would be Eligible Clinicians on 
the clinician financial arrangements list. This was an oversight as we 
intended to include all collaboration agents who are physicians, 
nonphysician practitioners, and therapists on the clinician financial 
arrangements list, regardless of the entity that is their associated 
EPM collaborator. Moreover, our proposal did not take into account the 
provisions of this final rule that allow NPPGPs and TGPs to be EPM 
collaborators or collaboration agents and, therefore, we did not 
propose that the nonphysician practitioners and therapists who have 
financial arrangements with these entities would also be Eligible 
Clinicians on the clinician financial arrangements list. Therefore, in 
this final rule we are clarifying that all physicians, nonphysician 
practitioners, and therapists who are collaboration agents or 
downstream collaboration agents are reported on the clinician financial 
arrangements list, without regard to the type of entity that is the 
associated party with which the collaboration agent or downstream 
collaboration agent has his or her distribution arrangement or 
downstream distribution arrangement. We note that we proposed to 
require that physicians and nonphysician practitioners who are members 
of a PGP that is an EPM collaborator or members of a PGP that is also 
an ACO participant in an ACO that is an EPM collaborator and that have 
a distribution arrangement or downstream distribution arrangement, 
respectively, with the PGP be reported on the list. Therefore, we 
believe there is only a small additional burden on EPM participants to 
report on the list all collaboration agents or downstream collaboration 
agents that are physicians, nonphysician practitioners, or therapists 
with distribution arrangements or downstream distribution arrangements, 
in order to ensure that the clinician financial arrangements list 
reports all Eligible Clinicians with financial arrangements under the 
EPM.
    We proposed that the information to be reported on the clinician 
financial arrangements list would include the name and NPI and, in some 
cases the TIN, of the Eligible Clinician with the financial arrangement 
under the EPM. We also proposed to collect the TIN of the PGP that is 
an EPM collaborator or collaboration agent and with which the physician 
or nonphysician practitioner reported on the list has a financial 
relationship, which would have provided us with information for 
purposes of monitoring and compliance on some of the entities related 
to the contracts of those physicians or nonphysician practitioners 
under the EPM. While we did not propose to similarly require 
information be submitted on the ACO that would be an EPM collaborator 
for those Eligible Clinicians that are collaboration agents or 
downstream collaboration agents, in this final rule, we are clarifying 
that the name and NPI of the entity (that is, the PGP, NPPGP, TGP, or 
ACO) that is an EPM collaborator and the entity (that is, the PGP, 
NPPGP, or TGP) that is a collaboration agent, if applicable, must also 
be reported on the clinician financial arrangements list for each 
Eligible Clinician who is a collaboration agent or downstream 
collaboration agent. Thus, the final requirements provide us with 
sufficient information to monitor the full series of related financial 
relationships under the EPM that result in the reporting of an Eligible 
Clinician on the clinician financial arrangements list. Because we do 
not expect that EPM participants will enter into sharing arrangements 
with many ACOs, due to the limited number of ACOs to which 
beneficiaries are typically assigned in a given geographic area, we do 
not believe that requiring the reporting of the name and TIN of the ACO 
that is an EPM collaborator is a significant additional burden on the 
EPM participant submitting the list to CMS.
    In summary, based on the previous discussion, for purposes of 
clarity and consistency we are streamlining the requirements for 
reporting information on the clinician financial arrangements list. For 
each physician, nonphysician practitioner, or therapist that is an EPM 
collaborator, collaboration agent, or downstream collaboration agent, 
we require the name, TIN, and NPI to be reported, in addition to the 
start date and, if applicable, end date, for the individual's sharing 
arrangement, distribution arrangement, or downstream distribution 
arrangement. We further require for a collaboration agent that the name 
and TIN of the EPM collaborator be reported and that for a downstream 
collaboration agent the name and TIN of the EPM collaborator and the 
name and TIN of the collaboration agent be reported.
    We will be working closely with EPM participants on the format and 
process for submission of clinician financial arrangements lists, 
including the potential for electronic submission of the required 
information, during the early phases of EPM implementation, seeking to 
ensure that the format and process is as streamlined as possible for 
EPM participants that choose to use and attest to use of CEHRT, while 
meeting CMS' need to maintain an EPM Affiliated Practitioner List that 
can be used to identify Eligible Clinicians for a QP determination.

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    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal in Sec.  512.120(b) for EPM 
participants that use and attest to use of CEHRT to submit to CMS a 
clinician financial arrangements list on a no more than quarterly 
basis, with modification to include on that list information on all 
physicians, nonphysician practitioners, and therapists with financial 
arrangements under the EPM and, if applicable, identifying information 
for the related parties with sharing arrangements, distribution 
arrangements, and downstream distribution arrangements under the EPM as 
finalized in section III.I. of this final rule.
    Each EPM participant that chooses CEHRT use must submit to CMS a 
clinician financial arrangements list in a form and manner specified by 
CMS on a no more than quarterly basis. The list must include the 
following information on individuals and entities for the period of the 
EPM performance year specified by CMS:
     EPM collaborators. For each physician, nonphysician 
practitioner, or therapist in private practice who is an EPM 
collaborator during the period of the EPM performance year specified by 
CMS:
    ++ The name, TIN, and NPI of the EPM collaborator.
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the EPM participant and the EPM collaborator.
    Collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a collaboration agent during the 
period of the EPM performance year specified by CMS:
    ++ The name and TIN of the EPM collaborator and the name, TIN, and 
NPI of the collaboration agent.
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the EPM collaborator and the 
collaboration agent.
     Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the period of the EPM performance year 
specified by CMS:
    ++ The name and TIN of the EPM collaborator, the name and TIN of 
the collaboration agent and the name, TIN, and NPI of the downstream 
collaboration agent.
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent and the 
downstream collaboration agent
     Attestation to no individuals. If there are no individuals 
that meet the requirements to be reported, as specified in paragraphs 
(b)(1) through (3) of this section, the EPM participant must attest in 
a form and manner required by CMS that there are no individuals to 
report on the clinician financial arrangements list.
d. Documentation Requirements
    For each EPM participant that chooses to meet and attest to CEHRT 
use, we proposed that the EPM participant must maintain documentation 
of their attestation to CEHRT use and clinician financial arrangements 
lists submitted to CMS. These documents would be necessary to assess 
the completeness and accuracy of materials submitted by an EPM 
participant in the Track 1 EPM and to facilitate monitoring and audits. 
For the same reason, we further proposed that the EPM participant must 
retain and provide access to the required documentation in accordance 
with Sec.  512.110.
    The proposal for documentation of attestation to CEHRT use and 
clinician financial arrangements lists submitted to CMS was included in 
Sec.  512.120(c). We sought comment on this proposal for required 
documentation.
    Final Decision: We did not receive comments pertaining to Sec.  
512.120(c). Therefore, we are finalizing the proposal, without 
modification, for EPM participant documentation of attestation to CEHRT 
use and clinician financial arrangements lists submitted to CMS.
    The following documentation requirements apply to EPM participants 
choosing to use and attest to use of CEHRT.
     Each EPM participant that chooses CEHRT use must maintain 
documentation of their attestation to CEHRT use and clinician financial 
arrangements lists.
     The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.
3. Future Directions for Episode Payment Models
a. Refinements to the BPCI Initiative Models
    The BPCI initiative Models 2, 3, and 4 would not currently qualify 
as Advanced APMs based on two of the Advanced APM criteria in the 
Quality Payment Program (QPP) final rule with comment period (81 FR 
77008), payment based on quality measures and CEHRT use. Specifically, 
BPCI participants are not currently required to use CEHRT, and although 
CMS examines the quality of episode care in the BPCI evaluation, BPCI 
episode payments are not specifically tied to quality performance. 
Instead, BPCI episode payments are based solely on episode spending 
performance, although we expect that reductions in spending would 
generally be linked to improved quality through reductions in hospital 
readmissions and complications. However, building on the BPCI 
initiative, the Innovation Center intends to implement new bundled 
payment model for CY 2018 where the model(s) would be designed to meet 
the criteria to be an Advanced APM.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters expressed support for a new 
voluntary bundled payment model in CY 2018. Specifically, commenters 
expected any new design to include the ability of the BPCI Initiative 
to qualify as meeting the requirements for an advanced APM under the 
QPP. Commenters also requested that data be provided by CMS on a 
monthly basis with quarterly reconciliation reports to allow 
participants to meaningfully engage in reforms to the delivery of 
health care. Consistent with the existing BPCI model, CMS was 
encouraged by commenters to continue assigning precedence to self-
selected model participants over participants in assigned models. 
Additional recommended features included financial stop-gain and stop-
loss limits and the incorporation of composite quality score similar to 
that used in the CJR model. Other specific features included 
recommendations for additional post-acute care bundles and the 
exclusion of ACOs.
    More broadly, CMS received several recommendations calling for 
increased stakeholder input in the design, implementation, and 
evaluation of new voluntary bundled payment models. Commenters 
requested that hospitals currently participating in BPCI should be 
allowed to test additional episodes, and new hospitals should be 
allowed to enter the program. While ranging in degree, most commenters 
highlighted a need for input from external clinical experts in addition 
to consumers, patients, and purchasers as well as institutional 
stakeholders such as QIOs. To better align with other available EHR 
incentive payments, several commenters stated a need for future bundled 
payment models to include CEHRT measures.
    Response: We appreciate these considerations as we design a new 
voluntary bundled payment model.
    Comment: A few commenters suggested that since post-acute care

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providers are the predominant care provider for LEJR patients, post-
acute care should play a more prominent role in the BPCI initiative.
    Response: CMS thanks the commenters for this suggestion.
    Comment: One commenter recommended CMS use a consistent policy to 
address overlap of all Medicare bundled payment initiatives and 
population-based payment models. The commenter raised concerns with 
respect to overlap of beneficiaries in the EPMs, CJR model, and BPCI 
initiative, and suggested that, in a future BPCI initiative, 
beneficiaries should be excluded from bundled payments unless a 
collaborative agreement exists between an ACO and a hospital that is 
not a participant in that ACO. The commenter also had concerns for the 
extent to which Medicare beneficiaries benefit from allowing private 
for-profit awardee conveners to absorb the risk for providers. 
Therefore, the commenter recommended also that CMS exclude for-profit 
risk-taking conveners which do not provide patient care.
    Response: We acknowledge and appreciate all comments, and 
specifically recognize the shared interest in improving Medicare for 
its beneficiaries.
    Comment: A few commenters requested that CMS take into 
consideration several additional pricing flexibilities and regulatory 
waivers for a new voluntary bundled payment model. Specifically, 
commenters believed that reducing costs and increasing shared savings 
could be difficult, therefore, participants should have the flexibility 
in a new voluntary bundled payment model to modify practice or 
utilization patterns by reducing length of stay or intensity of 
services. Commenters stated that the next iteration of BPCI should 
feature program elements such as caps on total losses that gradually 
increase over time, variable discounts based on quality scoring, and 
elimination of financial responsibility for payments above a threshold. 
Other commenters proposed that CMS adopt a method of population risk 
stratification, as this could provide incentive to providers by 
reimbursing more for greater comorbidities. Finally, in setting the 
bundled payment amounts, commenters recommended that CMS incorporate 
clinical practice guidelines and appropriate use criteria to ensure 
that patients are not receiving inadequate care. One commenter 
suggested that CMS provide patient navigators to Medicare beneficiaries 
receiving items or services paid under an EPM. Additionally, the 
regulatory waivers requested included the home health homebound 
requirement, the IRF 60 percent rule, the IRF 3-hour therapy intensity 
rule, and the LTCH 25 day average length of stay restriction. One 
commenter suggested that occupational therapy be recognized as a 
``qualifying service'' under the Medicare home health care benefit and 
occupational therapists could, in future APMs be permitted to open 
`therapy only' cases if occupational therapy is in the physician's 
order.
    Response: We recognize commenters' requests for consideration of 
additional flexibilities in care redesign efforts as part of a new 
voluntary bundled payment model.
    Final Decision: As we did not propose changes to the BPCI 
initiative in the proposed rule, we do not have any changes to finalize 
in this final rule.
b. Potential Future Condition-Specific Episode Payment Models
    In the context of our proposal for the AMI and CABG models that 
include beneficiaries with CAD who experience an acute event or a major 
surgical procedure, we sought comment on model design features for 
potential future condition-specific episode payment models that could 
focus on an acute event or procedure or longer-term care management, 
including other models for beneficiaries with CAD that may differ from 
the design of the EPMs proposed in the proposed rule (81 FR 50794). We 
believe such future models may have the potential to be Advanced APMs 
that emphasize outpatient care and, like the proposed AMI and CABG 
models, could incentivize the alignment of physicians and other 
eligible professionals participating in the Advanced APM through 
accountability for the costs and quality of care. Such condition-
specific episode payment models may provide for a transition from 
hospital-led EPMs to physician-led accountability for episode quality 
and costs, especially given the importance of care management over long 
periods of time for beneficiaries with many chronic conditions.
    We requested that commenters provide specific information regarding 
all relevant issues for potential future condition-specific episode 
payment models, including identifying beneficiaries for the model; 
including services in the episode definition; beginning and ending 
episodes; pricing episodes, including risk-adjustment; designating the 
accountable entity for the quality and cost of the episode, including 
the role of physician-led opportunities; sharing of responsibility for 
quality and spending between primary care providers, specialty 
physicians, and other health care professionals; incentivizing the 
engagement of physicians and other providers and suppliers in episode 
care; measuring quality and including quality performance and 
improvement in the payment methodology; interfacing with other CMS 
models and programs responsible for population health and costs, such 
as ACOs and Primary Care Medical Homes (PCMHs); other considerations 
specific to identifying future models as Advanced APMs; and any other 
issues of importance for the design of such an EPM.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters requested that in future condition-
specific EPMs, CMS should consider episodes beginning before a 
hospitalization, as one commenter believed that this earlier future EPM 
episode trigger would engage more meaningful shared care planning. 
Other commenters stated that future condition-specific EPMs should be 
based on episodes that are not necessarily tied to a hospital stay. One 
commenter noted that there is a great degree of variation in cardiac 
care beyond the two proposed EPM episodes. For example, the commenter 
noted regional differences in ambulatory and hospital care for heart 
failure, which the commenter did not believe are explained by disease 
severity and therefore the commenter suggested such additional cardiac 
care may become a favorable population-based payment model. Several 
commenters provided recommendations and perspectives on future 
condition-specific episode payment models based on MS-DRGs, including 
examples such as sepsis. However, other commenters suggested the 
alternative to use the Episode Grouper for Medicare (EGM) for future 
condition-specific EPMs. The framework for the EGM involves organizing 
administrative claims data into episodes-of-care, or simply episodes, 
which are sets of services provided to care for an illness or injury 
during a defined period of time. One commenter stated that the EGM 
organizes Medicare beneficiary total cost around two constructs--
episodes for specific conditions and episodes for specific treatments. 
For condition-specific episodes, each episode would be defined by one 
or more diagnosis codes, however, treatment episodes would be defined 
by a combination of procedure and diagnosis codes. A few commenters 
provided specific diagnoses that could be attributable to organized 
future EPMs, including but not limited to gastroesophageal reflux 
disease and

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obesity. Another commenter disagreed, stating it is inappropriate to 
expand the current EPM approach to future treatment of chronic 
conditions because, the commenter suggested, a bigger opportunity for 
improving quality and achieving savings is avoiding unnecessary 
episodes and events. In turn, the costs of treatment episodes could be 
packaged into the costs of managing underlying condition episodes. 
Commenters stated further that the EGM should also examine utilization 
patterns, perform comparative analyses for similar conditions, and 
identify care-improvement opportunities. As such, commenters suggested 
that the EGM would be better suited to pricing and resource allocation 
while identifying chronic conditions.
    Response: We thank the commenters for their suggestion.
    Comment: Another commenter, referencing the Program of All-
Inclusive Care for the Elderly (PACE), recommended that CMS consider a 
comprehensive episode payment model for services for medical care that 
could be tied with private payment, enrollment in available community 
services, or an arrangement with Medicaid. Beneficiaries requiring 
daily help or supervision would serve as a qualifying condition, which 
could extend for varying durations.
    Response: We appreciate the commenter's support for PACE and will 
work internally to incorporate lessons learned from existing programs 
in the proposal of future condition-specific EPMs.
    Comment: Highlighting the efforts of national medical specialty 
societies, several commenters provided several condition-specific EPMs 
which may be successful in reducing emergency department visits, 
hospital admissions, and excessive testing. Specifically, several 
commenters gave such examples as coronary artery disease, headache, 
epilepsy, asthma, opioid use disorder, diabetes, and specialty medical 
home. Of note, commenters stated that CMS should give additional 
consideration to defined episode triggers. For example, some commenters 
suggested that each new episode should be accompanied by time criteria 
and have a unique but expected time course. These efforts, commenters 
suggested, might further result in disease prevention, reduced 
exacerbations, and improved care.
    Response: We appreciate commenters' eagerness to participate in 
this dialogue and to be a part of transforming care.
    Comment: Commenters believed that CMS should view organized 
provider models as qualifying for condition-specific EPMs. Other 
commenters suggested that CMS simply include more types of 
participants, including examples such as ACOs and PCMHs. Still, others 
commented that participation in future condition-specific EPMs be 
limited to those organizations that are fully committed to coordinated 
care planning, shared decision-making, comparative quality information, 
chronic disease management, transparent payments and care transition 
support. As an alternative approach to considering future condition-
specific EPMs, MedPAC suggested that CMS consider allowing hospitals to 
share savings with physicians as a way to focus doctors on reducing the 
cost of the inpatient stay.
    Response: We acknowledge and appreciate the suggestion to 
incorporate more participant types in future condition-specific EPMs.
    Comment: Additionally, MedPAC recommended that for conditions that 
are not promising for bundled payments, CMS could focus on an array of 
other strategies to support providers in lowering costs while improving 
patient outcomes. For example, the Medicare spending per beneficiary 
(MSPB) measure in the hospital value-based purchasing (VBP) program 
encourages lower spending and improved care coordination. Alteration of 
the ``weight'' of the MSPB could be increased to further incentivize 
hospitals to reduce spending. Furthermore, MedPAC noted that the 
hospital readmission policy already encourages hospitals to avoid 
readmissions for AMIs and CABGs. To increase the pressure to reduce 
readmissions, it was suggested that CMS move forward with readmission 
policies in all sectors to increase the penalties for providers with 
high risk- adjusted potentially avoidable readmission rates.
    Response: We appreciate any recommendations MedPAC can provide and 
will continue to collaborate with stakeholders to develop additional 
means to improve patient outcome measures. Furthermore, we will work 
internally to find additional alignment between Innovation Center 
programs and Medicare payment policies.
    Comment: One commenter recommended consideration of an episode that 
should address behavioral health integration with primary care. The 
commenter suggested that guidelines which embed behavioral health 
measurements into any care setting would equip providers with 
quantification necessary to impact both physical and mental health of 
patients.
    Response: We appreciate the commenter's proposal. We appreciate the 
many comments received regarding the request for comment and while we 
did not propose any changes to this section of the final rule, we 
intend to continually seek to connect those interested to further 
information on consideration of future condition-specific EPMs that 
would result in improvement in care for Medicare beneficiaries.
c. Potential Future Event-Based Episode Payment Models for Procedures 
and Medical Conditions
    Given the proposed EPM methodology discussed in section III.C.4.a. 
of this final rule for the three models that would begin the episodes 
with initial hospitalizations, the proposed AMI, CABG, and SHFFT 
episodes are similar to the LEJR episodes in the CJR model because they 
reflect clinical conditions for which care is almost always begun 
during an inpatient hospitalization, either on an emergency or elective 
basis. In addition, the clinical conditions represented by these EPM 
episodes generally result in straightforward assignment to MS-DRGs at 
discharge that are specific to clinical conditions included in the 
episodes. This contrasts with procedure-related clinical conditions for 
which the site-of-service can be inpatient or outpatient (for example, 
elective PCI for non-AMI beneficiaries) or hospitalization for medical 
conditions for which the ultimate MS-DRG assigned is less clear at the 
beginning of an episode (for example, hospitalization for respiratory 
symptoms which may lead to discharge from heart failure, pneumonia, or 
other MS-DRGs based on reporting of ICD-CM diagnosis codes on hospital 
claims).
    To address the issues related to the development of future episode 
payment models for a broader range of clinical conditions, we sought 
comment on model design features that would be important for episode 
payment models targeting procedures that may be performed in both the 
inpatient and outpatient setting, as well as models focused on 
hospitalization for acute medical conditions which may overlap or 
interact (for example, sepsis related to pneumonia or acute kidney 
injury related to congestive heart failure exacerbation). In 
particular, episode payment models must clearly define the beginning of 
the episode as well as set an episode price that is appropriate for 
beneficiaries included in the episode, which has commonly been based on 
historical spending for such beneficiaries in both existing CMS models 
and the three proposed EPMs. These parameters pose specific challenges 
as the variety of clinical

[[Page 218]]

conditions targeted for episode payments expands beyond lower extremity 
orthopedic procedures and acute cardiac conditions, and we expect that 
such potential future models would need to be designed differently than 
the CJR model or the EPMs in this rulemaking.
    For example, because procedures such as PCI for non-AMI 
beneficiaries or cardioverter defibrillator implantations can occur in 
the inpatient or outpatient setting, an episode payment model would 
need to include beneficiaries receiving such procedures at all sites-
of-service so as to not influence decisions on where procedures are 
performed based on payment-related rather than clinical considerations. 
Episode payment models that begin with the same procedure performed in 
the inpatient or outpatient setting would require methodological 
development beyond the approaches that have been used thus far in CMS' 
other EPMs that rely upon the MS-DRG for a hospitalization to begin an 
episode and identify historical episodes for setting episode prices. 
Such models that involve episode payment for procedures furnished in 
the inpatient or outpatient setting may allow for significant 
physician-led opportunities that would allow the models to be 
identified as Advanced APMs. We sought comment on how these types of 
procedures could be included in future episode payment models, 
including identifying the accountable entity, and the role of 
physician-led opportunities; defining the episode beginning and end; 
setting episode prices; applying risk-adjustment to account for 
differences in expected episode spending for a heterogeneous population 
of beneficiaries; and any other issues of importance for the design of 
such an episode payment model.
    We also sought comment on potential future episode payment models 
that would include care for medical conditions that result in the 
serious health event of an inpatient hospitalization, which often 
represents, regardless of the specific reason for the hospitalization, 
a common pathway that includes failure of outpatient care management 
and care coordination for beneficiaries with chronic conditions. While 
we include beneficiaries who solely receive medical treatment in the 
proposed AMI model, we note that beneficiaries with AMI are almost 
always hospitalized and their MS-DRGs at discharge are generally 
predictable and consistent based on their AMI diagnoses. This is not 
the case for a number of medical conditions for which grouping by MS-
DRGs is more complicated or less consistent. Many non-procedural 
hospitalizations of Medicare beneficiaries are ultimately categorized 
based on the principal ICD-CM diagnosis code reported on a claim, which 
in turn is mapped to a Major Diagnostic Category (MDC) based on the 
involved organ system, which then leads to the assignment of any of 
various specific MS-DRGs based on the medical groups in the MDC. For 
example, the medical groups for the Respiratory System MDC are 
pulmonary embolism, infections, neoplasms, chest trauma, pleural 
effusion, pulmonary edema and respiratory failure, chronic obstructive 
pulmonary disease, simple pneumonia, RSV pneumonia and whooping cough, 
interstitial lung disease, pneumothorax, bronchitis and asthma, 
respiratory symptoms and other respiratory diagnoses.\36\ Unlike a 
beneficiary who undergoes a surgical procedure or who is hospitalized 
for a specific medical condition such as AMI, the ultimate MS-DRG at 
discharge assigned to a beneficiary hospitalized for diagnosis and 
management of respiratory symptoms may not be clear during the 
hospitalization itself, or even afterward, until the inpatient claim is 
submitted and paid by Medicare. This makes it challenging for providers 
to engage in care delivery redesign targeted to a specific patient 
population identified by MS-DRG. Additionally, it is possible that 
beneficiaries hospitalized for certain medical conditions also may 
follow common clinical pathways before and after discharge for which 
similar care redesign strategies could be developed and used despite 
those beneficiaries' assignments to different MS-DRGs for their anchor 
hospitalizations. Thus, we believe that hospitalization for most 
medical conditions would require special consideration in the 
development of potential future episode payment models that goes beyond 
CMS's current approach of relying upon the MS-DRG for the anchor 
hospitalization to begin an episode and identify historical episodes 
for setting episode prices. We sought comment on design features needed 
to address these considerations, including defining the beginning and 
end of episodes; setting episode prices, including risk-adjustment, 
that would support the provision of appropriate and coordinated care 
for beneficiaries following hospital discharge for a period of time 
during the episode; and any other issues of importance for the design 
of such an episode payment model.
---------------------------------------------------------------------------

    \36\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015).
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    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed support for the continued 
commitment of the Agency to testing episode-based payment models under 
a range of settings. One commenter suggested that CMS generally 
consider both clinical and economic expertise as well as include large 
databases as part of the development of future event-based EPM. While 
recommendations included both specific surgical procedures, such as PCI 
or spine surgery, chronic conditions, such as diabetes, and discrete 
events including colonoscopy and an arm arthroplasty, several 
commenters submitted more general suggestions that CMS take an 
expansive approach in general for the consideration of future models 
and not limit alternative payment models to episode payment approaches. 
When considering future models to qualify as Advanced APMs, one 
commenter suggested that CMS count capitated MA relationships in 
MACRA's APM threshold calculation.
    Some commenters preferred an emphasis on future EPMs that consider 
the role of preventative efforts. For example, one commenter suggested 
that conditions such as osteoporosis could include efforts to improve 
bone health and functional level to achieve meaningful reduction in 
falls and subsequent fracture. The commenter followed that concerns 
such as fracture prevention be included in future models. To this end, 
one commenter stated that CMS should take a ``bottom-up approach'' that 
encourages providers to develop alternative payment models.
    Response: We thank the commenters for their remarks, and will 
continue to apply the bottom-up approach to improving the coordination 
among providers in future EPMs.
    Comment: Some commenters expressed concern about the continuation 
of hospital-based models and recommended that future expansions should 
include more types of participants, including physicians, and 
participation should be voluntary. Physicians, one commenter suggested, 
are best suited to ensure efficient utilization of resources while 
preserving patient quality by virtue of their direct relationship with 
the patient during an acute episode. One commenter suggested expansion 
of physician-focused payment models beyond the Focused Payment Model 
Technical Advisory Committee (PTAC). In a parallel thought process, 
many other commenters expressed a desire for CMS to consider post-acute 
care bundles, ACO based models, and shared

[[Page 219]]

accountability payment models for Inpatient Rehabilitation Facilities 
(IRFs). One commenter strongly recommended CMS to allow manufacturers 
to enter into voluntary agreements with CMS to link payment to 
outcomes. One such outcome proposed by the commenter was the long-term 
revision rates for total joint arthroplasty (TJA). Any shared savings 
relative to the average rate of revision among Medicare patients, the 
commenter suggested, could be shared between implanting surgeons, 
hospitals and medical device manufacturers. Commenters stated that 
these additional types of participants could provide a means to ensure 
efficient utilization within a particular market. In addition, another 
commenter noted that procedures performed in ambulatory surgical 
centers may be better situated to serve as the financially accountable 
entity in order to optimize care coordination to better achieve the 
goals envisioned by episode-based payment models.
    Response: We thank the commenters for their commitment to working 
with CMS in developing future episode payment models.
    Comment: Commenters commonly recommended that future bundles be 
sensitive to considering risk adjustment, appropriate use criteria, 
patient expectations, stage of disease progression, treatment options, 
and appropriate quality measures regardless of setting. Commenters also 
recommended that future measures in future condition-specific payment 
models should be more directly related to the condition of the 
beneficiaries within the EPM. To this end, one commenter recommended 
that CMS include measures of patient engagement and shared care 
planning. Another commenter suggested that those who participate in 
geriatric fracture programs and/or obtain CORE Certification, be 
incentivized to continue such progress. Even as CMS proposed to exclude 
IPPS new technology add-on payments and OPPS transitional pass-through 
payments for medical technologies from EPM episodes, one commenter 
requested that future EPM episodes include additional innovative 
technologies to qualify for a payment adjustment similar to the 
Medicare New-Technology add-on payment.
    Many commenters stressed the importance of shared decision-making 
in the development of future models. One commenter, for example noted 
the Clinical Practice Improvement Activities Category of the MIPS could 
be an important first step to greater shared decision-making across 
healthcare delivery and recommended CMS look to research conducted by 
PCORI and others for future direction. Specifically, one commenter also 
noted that shared decision-making and patient engagement tools could be 
especially informative in situations not triggered by an acute care 
hospitalization. Several other commenters further strongly encouraged 
the participation of hospitals, physicians, patients, and other 
stakeholders in the development, implementation, and testing of future 
models. Additionally, in future EPM models, a few comments directed CMS 
to consider directly extending the risk to the other providers, 
including clinicians as physicians shape the spending during the 
hospital stay and the selection of the initial post-acute care provider 
but are not required to be at risk for the 90-day episode spending. 
Similarly, some commenters noted that post-acute care providers can 
influence how much spending for post-acute care services is used and 
the rate of hospital readmissions but are not directly at risk for the 
90-day episode spending. Therefore, these commenters suggested such 
changes to future EPMs would ensure that the financial incentives of 
the key actors shaping care are aligned.
    In addition to model design, one commenter recommended that QIOs 
serve in a technical assistance role for model participants to include 
data analyses, convening providers in the area, structuring 
implementation of improvement activities, and monitoring tests of 
improvement.
    Response: We thank the commenters for these suggestions and will 
consider the recommendations as we consider future event-based 
procedures and medical conditions to include in future rulemaking.
    Comment: One commenter pointed to the Continuing Care Hospital 
model, and suggested CMS pilot future event-based episode payment 
models for procedures and medical conditions. The commenter stated that 
the CCH would allow predictable and reduced costs to the Medicare 
program.
    Response: We thank the commenter for the reference.
    Comment: One commenter suggested the implementation of an 
evaluation EPM, whereby the episode initiates when a beneficiary enters 
an inpatient setting with a set of symptoms that may be difficult to 
attribute to one or more MS-DRGs. Such an evaluation EPM, stated the 
commenter, would need to be limited to a specific set of symptoms, such 
as the example CMS provided regarding respiratory symptoms.
    Response: We thank the commenter for this specific suggestion.
    Comment: One commenter recommended CMS to exclude other potentially 
high cost drivers, such as psychiatric readmissions and high cost IV 
therapy, from future EPM bundles.
    Response: We acknowledge this suggestion and will consider if it is 
applicable to specific future EPMs.
    Comment: One commenter noted other considerations specific to 
identifying future models, specifically that CMS update the claims 
adjudication system and develop contracting tools. The commenter 
suggested that such changes would encourage participant providers to 
improve their care pathways and care coordination.
    Response: We acknowledge these additional considerations and re-
affirm our commitment to continuously engage stakeholders as we 
establish and operationalize future policies.
    Comment: A few commenters requested a meeting with CMS to discuss 
the specifics of a future innovation model.
    Response: We appreciate the interest in meeting with CMS to discuss 
future models. Commenters should note that ideas can also be submitted 
through https://innovation.cms.gov/Share-Your-Ideas/Submit/index.html.
    Final Decision: After seeking comments on future directions for 
episode payment models, we thank the public for these comments and will 
evaluate the suggestions for future consideration.
d. Health Information Technology Readiness for Potential Future Episode 
Payment Models
    We are particularly interested in issues related to readiness of 
providers and suppliers that are not hospitals to take on financial 
responsibility for episode cost and quality in potential future episode 
payment models. We have some experience in BPCI Models 2 and 3 with 
non-hospital providers and suppliers, specifically post-acute care 
providers and physician group practices (PGPs), who assume financial 
responsibility for the cost of episode care. In BPCI Model 2, PGPs may 
directly bear financial responsibility for episode cost for up to 48 
clinical conditions for the anchor inpatient admission and up to 90 
days post-hospital discharge. In BPCI Model 3, PGPs and post-acute care 
providers, including skilled nursing facilities, home health agencies, 
inpatient rehabilitation facilities, and long-term care hospitals, may 
directly bear financial responsibility for episode cost for up to 48 
clinical conditions for a duration that extends up to 90 days

[[Page 220]]

following initiation of post-acute care following discharge from an 
inpatient hospitalization.
    Under these circumstances, PGPs and post-acute care providers 
typically need to use health IT to assist them in effectively 
coordinating the care of BPCI beneficiaries across settings throughout 
the episodes. The risk-bearing entities participating in BPCI have 
expressed readiness to take on financial responsibility for episode 
cost, and they commonly rely upon health IT for assistance in managing 
the care for BPCI beneficiaries across settings for episodes that 
extend for a substantial period of time. However, a recent national 
survey of IT in nursing homes showed common use of IT for 
administrative activities but less use for clinical care.\37\ 
Anecdotally, stakeholders have told us that accountable non-hospital 
providers and suppliers, especially those that are not integrated with 
health systems, may have less well-developed tools for following 
patients throughout episodes, potentially resulting in greater 
challenges in reducing the cost and improving the quality of episode 
care under the BPCI models. Therefore, we understand that limitations 
in the availability of health IT that can be used in beneficiary 
management across care settings may pose a significant barrier to the 
readiness of non-hospital providers and suppliers to assume financial 
responsibility for episodes in potential future episode payment models.
---------------------------------------------------------------------------

    \37\ Alexander, Gregory L. ``An Analysis of Nursing Home Quality 
Measures and Staffing.'' Quality management in health care 17.3 
(2008): 242-251. PMC. Web. 16 July 2016.
---------------------------------------------------------------------------

    In the CJR model, acute care hospitals are financially responsible 
for cost and quality during LEJR episodes-of-care. CJR model 
participant hospitals may form partnerships with post-acute care 
providers such as skilled nursing facilities and home health agencies, 
as well as physicians and PGPs, to share financial risk and collaborate 
on care redesign strategies, as in BPCI. Although hospitals are the 
financially responsible entities under the CJR model, we recognize that 
partnerships with post-acute care providers could be a crucial driver 
of episode spending and quality, given that many beneficiaries in the 
CJR model receive post-acute care services after discharge from the 
hospital. We also recognize that tools such as health IT may be 
critical for certain care management and quality strategies targeted 
toward the goal of lower cost and higher quality episode care. 
Limitations in the availability of health IT may pose a barrier to 
effective post-acute care provider collaboration and sharing of 
financial risk in episode payment models even when hospitals are the 
financially responsible entities under such models, such as the CJR 
model and the three new EPMs in this rule.
    We recognize that there is wide variation in the readiness of other 
providers and suppliers to bear financial responsibility for episodes, 
either directly or indirectly through sharing arrangements with the 
directly responsible entities where those arrangements may include 
upside and downside risk. For instance, adoption of health IT among 
providers in the post-acute care market, such as skilled nursing 
facilities, continues to lag behind hospitals and providers of 
ambulatory care services. In addition to facing significant resource 
constraints, post-acute care providers were not included as an eligible 
provider type under the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs. The recent extension of Medicaid 90/10 
funding offers new opportunities for states to include post-acute care 
providers in projects focused on infrastructure development, but will 
not address the cost of health IT adoption among post-acute care 
providers.\38\
---------------------------------------------------------------------------

    \38\ https://www.medicaid.gov/federal-policy-guidance/downloads/SMD16003.pdf.
---------------------------------------------------------------------------

    To ensure that post-acute care providers and other types of 
providers and suppliers can succeed under future episode payment 
models, either as the directly financially responsible entity or as 
collaborators with other directly financially responsible entities, we 
are interested in opportunities to increase provider readiness as part 
of the design of potential future episode payment models and the 
potential refinement of current episode payment models. Specifically, 
we would like to explore: Incentives to encourage post-acute care 
providers, as well as other providers and suppliers that furnish 
services to episode payment model beneficiaries, to make necessary 
investments in health IT infrastructure; payment mechanisms that could 
leverage savings achieved under episode payment models to contribute to 
these investments; and any other strategies to enhance the adoption, 
implementation, and upgrading of certified health IT. We sought comment 
on these ideas, as well as the following questions:
     What are key challenges associated with the inclusion of 
post-acute care providers as the financially responsible entity or as 
collaborators with other financially responsible entities in episode 
payment models today?
     What would be a sufficient financial incentive or bonus to 
enhance the adoption, implementation, and upgrading of certified health 
IT in post-acute care settings?
     How else can episode payment models encourage the use of 
certified health IT and information sharing among providers and 
suppliers caring for episode payment model beneficiaries to improve 
care coordination and patient outcomes?
     Within the existing CJR model, are there additional 
opportunities to encourage investment in adoption, implementation, and 
upgrading of certified health IT among post-acute care providers to 
support improvements in care coordination and patient outcomes? What 
CJR model refinements could enable direct investments to support these 
improvements, particularly among post-acute care providers who are 
unaffiliated with CJR model participant hospitals but who provide 
services to CJR model beneficiaries, including post-acute care 
providers who may enter into financial arrangements with CJR model 
participant hospitals as CJR collaborators?
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters recognized the importance that health IT plays 
in the modern health care landscape, and overall supported the 
implementation of a more robust health IT system, as such a system may 
improve the ability to convey quick, accurate information from acute 
care hospitals related to the discharge MS-DRG and identification of 
patients who are under a bundled payment program. Many commenters 
expressed a need for future episode payment models to align with EHR 
incentive payments, and several commenters expressed concern that post-
acute care providers were largely disadvantaged for health IT readiness 
relative to their inpatient counterparts. For example, commenters 
stated that post-acute care providers and nonphysician clinicians were 
marginalized by the Medicare and Medicaid EHR Incentive Programs. Some 
commenters believe this population represents a significant portion of 
the health care provider community without the technical and financial 
support necessary to adopt and implement EHRs in a meaningful way. As 
many of the measures used under meaningful use, such as e-prescribing, 
are not applicable to nonphysician practitioners, commenters suggested 
these and other clinicians have not had the benefit of experience with 
EHRs at the same rate as their peers who work

[[Page 221]]

in hospitals. As a result, one commenter noted that small practices who 
may face financial responsibility, such as physical therapists, would 
face considerable challenges implementing health IT systems in their 
practices.
    Several commenters recommended that CMS to consider all possible 
approaches to address this specific concern. One commenter, for 
example, recommended an approach similar to the ACO Investment Model 
program whereby participants could receive supplemental payments to 
offset their upfront investment. Other commenters preferred not to 
provide specific approaches as the sufficiency of financial incentives 
or bonus payments may differ for example among Skilled Nursing 
Facilities (SNFs), Home Health Agencies (HHAs), and institutional or 
hospital-based post-acute care providers, but highlighted the need for 
CMS to otherwise incentivize health IT adopters within future models. 
To effectively implement any such expansion, one commenter further 
stressed the need for health IT interoperability to be considered, 
while another commenter stressed instead that CMS should specifically 
cite the availability of the safe harbors of the Stark and Physician 
Self-Referral rules, through which health care organizations could 
choose to assist post-acute, or other providers, in making available 
EHRs meeting certain requirements in any potential approach. One 
commenter recommended that CMS continue to engage the long-term and 
post-acute care community to explore in more detail potential 
strategies to help overcome challenges providers face, such as the high 
costs of participating in health information exchange or the 
operational investment of an EHR system. Other comments on ways to 
incentivize health IT investment by post-acute care providers included: 
quicker or premium reimbursement for health IT adoption or upgrade, 
returning savings to post-acute care providers to offset health IT 
costs and incentive grants for training staff in health IT.
    Response: We will consider these and other possible approaches to 
address the concerns and challenges associated with implementing health 
IT systems.
    Final Decision: After consideration of the public comments 
received, we believe we have a better understanding of the issues 
related to readiness of providers and suppliers that are not hospitals 
to take achieve interoperability through CEHRT in potential future 
episode payment models.

B. Definition of the Episode Initiator and Selected Geographic Areas

1. Background
    The new EPMs will complement the current CJR model and continue 
efforts to move Medicare towards paying providers based on quality and 
value. As discussed during rulemaking for the CJR model and in the EPMs 
proposed rule, CMS is interested in testing and evaluating the impact 
of an episode payment approach for a broad range of episodes in a 
variety of other circumstances. In addition to including hospitals that 
have not chosen to voluntarily participate in earlier models, we also 
are interested in expanding the range of episodes included beyond 
elective surgical procedures such that the impact on a broader range of 
beneficiaries, hospitals, and circumstances may be tested. We also are 
interested in evaluating the impact on hospitals when an increasing 
percentage of care to Medicare beneficiaries is paid for through 
alternative payment models.
    As with CJR, we proposed in Sec.  512.105(c) that the hospital be 
the accountable financial entity and that these episode payment models 
be implemented in all IPPS hospitals in the geographic areas selected, 
subject to exclusions as specified in Sec. Sec.  512.230 and 512.240 of 
the proposed rule. While these are considered new episode payment 
models and do not reflect an expansion or extension of any previous 
models, they do intentionally build significantly upon the work of BPCI 
and, most significantly, the framework established for CJR under 42 CFR 
part 510 published on November 24, 2015 (80 FR 73274). Given the 
extensive consideration given to many of these issues during the CJR 
model planning and rulemaking periods, we believe this is important as 
we seek to build a model that is scalable across all providers and 
episode types. We also seek to limit the burden for hospitals and other 
providers that may be participating across multiple episode types. 
Therefore, to the extent applicable and appropriate, we have sought 
consistency with rules established for the CJR model. We sought comment 
on those areas where alternative options were proposed or should be 
considered that would not add additional operational burden or 
complexity. A summary of comments received and CMS' response to those 
comments are included in the following sections.
2. Definition of Episode Initiator
    Under the proposed EPMs, consistent with our episode initiator 
definition under the CJR model, we proposed that episodes would begin 
with the admission to an IPPS acute-care hospital that triggers an AMI, 
CABG or SHFFT episode as specified in section III.C.4.a. of the 
proposed rule (81 FR 50834). As with the CJR model, we proposed that 
hospitals would be the only episode initiators in these episode payment 
models. For purposes of these episodes payment models. 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 and payments to Maryland 
hospitals would be excluded in the regional pricing calculations as 
described in section III.D.4. of the proposed rule (81 FR 50847). This 
is the same policy that is being followed with the CJR model. In 
addition, we also proposed to exclude other all-payer state models 
which may be implemented in the future. We welcomed comments on this 
proposal and sought comment on potential approaches for including 
Maryland acute-care hospitals or, potentially, other hospitals in 
future all-payer state models in these episode payment models.
    As implemented with the CJR model, we proposed to designate IPPS 
hospitals as the episode initiators to ensure that all services covered 
under FFS Medicare and furnished by EPM participant hospitals in 
selected geographic areas to beneficiaries who do not meet the 
exclusion criteria specified in section III.C.4. of the proposed rule 
(81 FR 50834) are included. In addition, the episodes must not be BPCI 
episodes that we are proposing to exclude as outlined in this section 
and in section III.C.4. of the proposed rule. We believe that utilizing 
the hospital admission as the episode initiator is a straightforward 
approach for these models because patients covered under these DRGs and 
diagnoses require hospital admission for these services, whether 
provided on an emergent or planned basis. Under these new models 
covering medical admissions and services that are not necessarily 
elective, as stated in the proposed rule, we will be able to expand our 
testing of a more generalized bundled payment model. Finally, as 
described in section III.B.4. of the proposed rule (81 FR 50815) our 
proposed geographic area selection approach relied upon our definition 
of hospitals as the entities that initiate episodes.

[[Page 222]]

    The following is a summary of the comments received on our proposed 
episode definition and our responses.
    Comment: We received many comments supporting our proposal to 
initiate these EPM episodes of care with the inpatient hospital 
admission. However, we also received multiple comments noting the 
important role that physicians play in managing patient care throughout 
the episode period including after discharge from the hospital. These 
same commenters expressed support for more physician based payment 
models so that physicians can have a more substantial role in managing 
episodes.
    Response: We appreciate the support commenters expressed for 
initiating the EPM episodes with the inpatient hospital admission. 
While we acknowledge and understand that inpatient initiated episodes 
represent only one of many potential models for improving the quality 
of care while restraining the growth in costs, we continue to believe 
that the appropriate initiating point for the episodes in these EPMs is 
the inpatient admission. Hospitals play a central role in coordinating 
episode-related care and ensuring smooth transitions for beneficiaries 
undergoing services related to these episodes and a large portion of a 
beneficiary's recovery trajectory from an AMI or CABG or SHFFT begins 
during the hospital stay which is why we are finalizing the inpatient 
admission as the initiating event in the episode definition. We also 
note that CMS has supported and is supporting other voluntary 
demonstrations and models that focus on providing financial support for 
care coordination services as recommended by these commenters. In 
addition, in recent years, the range of services eligible for payment 
under the Medicare physician fee schedule has expanded to include care 
transition and chronic care management codes. For further discussion of 
future models, we refer the reader to section III.A.3. of this final 
rule, ``Future Directions for Episode Payment Models.''
    We did not receive any comments related to our exclusion of 
Maryland nor on the potential inclusion or exclusion of future all-
payer state models. Therefore we are finalizing our proposal to exclude 
Maryland providers from this model.
    Subsequent to the publication of this final rule CMS announced on 
October 26, 2016 the implementation of the Vermont All Payer ACO Model 
which will begin on January 1, 2017. Since this new Vermont model is an 
all payer model and since we proposed to exclude all of the all payer 
state models from the EPM we are also finalizing the exclusion of 
Vermont providers from selection for participation in the EPMs. We note 
that currently none of the MSAs in Vermont are participating in the CJR 
model and would, therefore, not have been selected to participate in 
the SHFFT EPM.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposed episode definition, without 
modification, such that these EPM episodes will be initiated with the 
admission to an IPPS acute-care hospital that triggers an AMI, CABG or 
SHFFT episode as specified in section III.C.4.a. of this final rule. We 
are also finalizing the exclusion of hospitals in Maryland and Vermont 
from participation in the EPMs.
3. Financial Responsibility for the Episode of Care
    As with the CJR model, and as discussed in the proposed rule, we 
continue to believe it is most appropriate to identify a single type of 
provider to bear financial responsibility for making repayment, if any, 
to CMS under the model. Therefore, we proposed to make hospitals, as 
the episode initiators, financially responsible for the episode of care 
for the following several reasons:
     Hospitals play a central role in coordinating episode-
related care and ensuring smooth transitions for beneficiaries 
undergoing services related to SHFFT, AMI and CABG episodes. A large 
portion of a beneficiary's recovery trajectory from an AMI, CABG, or 
SHFFT begins during the hospital stay.
     Most hospitals already have some infrastructure related to 
health IT, patient and family education, and care management and 
discharge planning. This includes post-acute care coordination 
infrastructure and resources such as case managers, which hospitals can 
build upon to achieve efficiencies under these EPMs.
     By definition, these episodes always begin with an acute 
care hospital stay. While often preceded by an emergency room visit and 
possible transfer from another hospital's emergency room, or followed 
by post-acute care, these parties are not necessarily always present 
and would not be appropriate to target as the financially responsible 
party for this purpose.
    EPM episodes may be associated with multiple hospitalizations 
through transfers. When multiple hospitalizations occur, we proposed 
that the financial responsibility be given to the hospital to which the 
episode is attributed, as described in section III.C.4 of the proposed 
rule. We recognize that, particularly where the admission may be 
preceded by an emergency room visit and subsequent transfer to a 
tertiary or other regional hospital facility, patients often wish to 
return home to their local area for post-acute care. Many hospitals 
have recently heightened their focus on aligning their efforts with 
those of community providers, both those in the immediate area as well 
as more outlying areas from which they receive transfers and referrals, 
to provide an improved continuum of care. In many cases, this is due to 
the incentives under other CMS models and programs, including ACO 
initiatives such as the Shared Savings Program, the Hospital 
Readmissions Reduction Program (HRRP), and the CJR model. By focusing 
on the hospital as the accountable or financially responsible entity, 
we hope to continue encouraging this coordination across providers and 
sought comment on ways we can best encourage these relationships within 
the scope of these EPMs.
    In support of our proposal that hospitals be the episode initiators 
under these EPMs, 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 these EPMs. We also believe that 
hospitals are most likely to have access to resources that would allow 
them to appropriately manage and coordinate care throughout these 
episodes. Finally, the hospital staff is already involved in discharge 
planning and placement recommendations for Medicare beneficiaries, and 
more efficient post-acute care service delivery provides substantial 
opportunities for improving quality and reducing costs under EPMs. For 
those hospitals that are already participating in CJR, we believe the 
efforts that have been put in place to support patients receiving LEJR 
will be supportive of the new EPMs proposed under this rule, 
particularly for SHFFT episodes which we proposed to implement in the 
same geographic areas as the CJR model.
    Finally, as noted when planning for the CJR model, although the 
BPCI initiative includes the possibility of a physician group practice 
as a type of episode 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. These physician groups are 
not necessarily representative of the typical group practice. As with 
the CJR

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model, the infrastructure necessary to accept financial responsibility 
for episodes is not present across all physician group practices, and 
thus, as we stated in the proposed rule, 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 EPMs. We sought comment on our proposal to establish financial 
responsibility and accountability under the AMI, CABG, and SHFFT EPMs 
consistent with our implementation of the CJR model.
    Currently, there are SHFFT, AMI, and CABG episodes being tested in 
BPCI Models 2, 3 or 4. The last remaining BPCI Model 1 hospital will 
end December 31, 2016 and will, therefore, not overlap with EPM. In 
addition, under BPCI, there are episodes for PCI, which, if an AMI were 
also involved, would fall under the AMI model proposed. We proposed 
that IPPS hospitals located in an area selected for any one of the 
episode payment models proposed in the proposed rule (81 FR 50834) that 
also are episode initiators for episodes in the risk-bearing phase of 
BPCI Models 2 or 4 be excluded from participating in the AMI, CABG, or 
SHFFT EPMs if the applicable episode otherwise would qualify to be 
covered under BPCI. This exclusion would be in effect only during the 
time that the relevant qualifying episodes are included in one of the 
BPCI models. Likewise, we proposed that if the EPM participant is not 
an episode initiator for overlapping episodes under BPCI Models 2 or 4, 
but these same episodes are initiated during the anchor hospitalization 
by a physician group practice (PGP) under BPCI Model 2 (where the 
services are provided at the episode initiating hospital) then the 
episode also shall be covered under BPCI and be excluded from the EPMs 
proposed under the proposed rule (81 FR 50834). Otherwise qualifying 
EPM episodes (that is, those that are not part of an overlapping BPCI 
AMI, CABG, PCI or SHFFT episode) at the participant hospital would be 
included in these new EPMs. However, because BPCI participation is 
voluntary and participating providers may select which episodes to 
participate in, we proposed that a BPCI participating provider will 
participate in any of the proposed AMI, CABG, or SHFFT EPMs for any 
episodes not otherwise preempted under their BPCI participation. For 
example, a BPCI Model 2 hospital in an AMI episode model geographic 
area participating in BPCI only for CABGs will be an EPM participant in 
the AMI model. Similarly, an acute care hospital participating in BPCI 
for LEJR but not SHFFT episodes would be exempt from participation in 
the CJR model in a CJR model geographic area but would participate in 
the SHFFT model for SHFFT episodes. In addition, providers 
participating in BPCI may also collaborate with an EPM participant for 
episodes not covered under BPCI. It should be noted that due to 
differences in how the AMI episode is defined under the AMI model 
versus BPCI and the inclusion of PCI MS-DRGs under the latter, a 
patient with the same discharge MS-DRG and diagnoses may qualify for a 
PCI episode under BPCI and an AMI episode under the AMI model. As 
stated in the proposed rule, our intent is to give precedence to BPCI 
regardless of which episode a patient qualifies for if the patient 
would be covered under BPCI.
    In section III.D.6. of the proposed rule we discussed in more 
detail how we proposed to handle situations when a beneficiary receives 
services that would qualify for inclusion in more than one CMS payment 
model during the same or overlapping periods of time. We welcomed input 
on how these overlaps should be handled to best encourage ongoing care 
coordination while minimizing the impact on other models and limiting 
confusion and operational burden for providers.
    While we proposed that the EPM participant be financially 
responsible for the episode of care under these EPMs, we also stated 
that we believe that effective care redesign requires meaningful 
collaboration among acute care hospitals, post-acute care providers, 
physicians, and other providers and suppliers within communities to 
achieve the highest value care for Medicare beneficiaries. We continue 
to believe it is essential for key providers to be aligned and engaged, 
financially and otherwise, with the EPM participants, with the 
potential to share financial responsibility with those EPM 
participants. We noted 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 in 
this section and in sections III.I. and III.J. of the proposed rule. 
Depending on a hospital's current degree of clinical integration, new 
and different contractual relationships among hospitals and other 
health care providers may be important, although not necessarily 
required, for EPM success in a community. We acknowledge that financial 
incentives for other providers may be important aspects of the model in 
order for EPM participants to partner with these providers and 
incentivize certain strategies to improve episode efficiency.
    While we acknowledged the important role of conveners in the BPCI 
model, and that AMI, CABG, and SHFFT model participants may wish to 
enter into relationships with EPM collaborators and other entities in 
order to manage the episode of care or distribute risk, we proposed 
that the ultimate financial responsibility of the episode would remain 
with the EPM participant. Exceptions to this general rule for 
beneficiaries covered under certain risk bearing ACO arrangements are 
outlined in section III.D.6. of this final rule. As with the CJR model, 
we did not intend to restrict the ability of EPM participants to enter 
into administrative or risk sharing arrangements related to these EPMs, 
except to the extent that such arrangements are already restricted or 
prohibited by existing law. We referred readers to section III.I. of 
the final rule for further discussion of model design elements that may 
outline financial arrangements between EPM participants and other 
providers and suppliers.
    The following is a summary of the comments received and our 
responses.
    Comment: We received numerous comments related to our proposal to 
have the hospital be the single accountable entity for the EPM 
episodes. Many commenters were supportive of this policy and, while not 
ignoring the importance of other providers, agreed that hospitals were 
best positioned to assume risk for these episodes. Other commenters 
were less supportive of this proposal, noting that hospitals could be 
disadvantaged if physicians and post-acute care providers were not also 
at risk or if conflicting interests hindered their willingness to 
collaborate. A few commenters expressed concern that while hospitals 
would bear the risk, hospitals might be limited in their ability to 
control that same risk. For example, one commenter referenced the 
penalty that hospitals already face for readmissions which may not be 
correlated to inpatient care. One commenter stated that post-acute care 
providers would be more motivated if they were required to share in 
even a small percentage of the incentives or risk directly. Another 
commenter noted that the current per-diem payment system for SNFs put 
SNF providers at particular risk. Although SNFs will invest resources 
to reduce/shorten SNF stays, which can create significant savings for 
the EPM participant, the

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commenter stated SNF providers will be disadvantaged/harmed as the 
proposed regulations do not require proportional sharing of 
reconciliation payments by the EPM participant with post-acute care 
providers and requested that we amend the language to more clearly 
outline how reconciliation payments should be shared proportionally 
among all EPM collaborators, noting that this change would also likely 
require these same providers to share in downside risk as well.
    Other commenters objected to the hospital holding sole financial 
accountability for the models as they believe that physicians, 
including hospitalists, surgeons, and internal medicine subspecialists 
are best positioned to impact the process of care. These commenters 
stated that CMS should be giving priority to physician-centered 
alternative payment models. One commenter believes that having the 
hospital in charge of the bundle could give the hospital inappropriate 
leverage over other participants and or lead to the exclusion of 
providers if they failed to agree to the hospital's terms. Other 
commenters wanted the flexibility for conveners to assume risk and 
organize groups of providers, as is allowed under BPCI.
    One commenter specifically stated that determination of the 
accountable entity should be based not only on the ability to accept 
risk but also the ability to change care delivery patterns. While one 
commenter explicitly stated that ``only physicians can make the 
determination as to what types of care could effectively address 
patients' needs,'' that commenter also wanted payment to physicians to 
be predictable and physician financial accountability limited to 
``costs that are within their control.'' The perspective that 
physicians were best positioned to manage the episode of care and 
desire for them to have the opportunity to bear risk, particularly as 
it might pertain to eligibility for advanced alternative payment model 
status, was expressed by a number of commenters although the focus in 
such comments was on voluntary models.
    Response: We appreciate the support expressed by certain commenters 
for our proposed policy to hold the initiating hospital as the 
financially accountable entity for the EPM episodes. While we 
acknowledge the critical importance of physicians and other providers, 
in particular those providing post-acute care, in managing episodes 
which extend 90 days beyond discharge from the anchor hospitalization, 
we continue to believe the hospital should be the financially 
accountable entity for these models. For hospitals to be successful in 
managing EPMs, we firmly believe that they will need to actively 
solicit the support of physicians, post-acute care providers, and other 
clinical care providers in order to provide the best quality of care in 
a cost effective manner. In many, if not most situations, this may 
involve establishing collaborative agreements with a risk sharing 
arrangement. We support other types of providers assuming risk where 
they are financially able to do so and agree that providers that have a 
share in the risk, both positive and negative, may be more motivated to 
establish collaborative agreements. However, we do not believe that in 
a model with required participation, any other provider group is 
consistently as financially positioned to assume risk as is the 
hospital to which the episode is attributed. We also do not want to 
mandate a specific division of risk between providers or to direct the 
specific terms of any collaborator agreements that may be established. 
We disagree that the current proposal to make hospitals the financially 
accountable entity undermines the role of the physician, and in 
providing for a range of collaborator agreements, we hope that EPM 
participants will actively engage in gainsharing with others. We refer 
readers to section III.I of this final rule for a fuller discussion of 
allowable collaborator relationships. We believe that in order to be 
most successful, hospitals will reach out to other providers to 
establish agreements with collaborators, although we acknowledge that 
it may take time to negotiate and establish such arrangements. While 
some physician groups and post-acute care providers are in a position 
to take on risk, we continue to believe that many, particularly those 
in smaller groups and those in more rural areas, are not and, in fact, 
no commenter suggested that this was the case. Even where the focus of 
a comment was on providing more opportunities for physicians to assume 
risk, it was in the context of voluntary models such as BPCI. We 
appreciate those comments and, in fact, will give precedence to BPCI 
participants where there is such overlap. Readers are referred to 
section III.D.6. of this final rule, ``Adjustments for Overlaps with 
Other Innovation Center Models and CMS Programs,'' which addresses in 
more detail how situations where there is an overlap between EPMs and 
other episode based models will be handled. We address in section 
III.D.6.b.(2). of this final rule, how patients attributed to other 
physician-centric episode models will be attributed. We also note in 
section III.A.3 of this final rule opportunities for future alternative 
payment models which may be more physician-centric. We are committed to 
testing a number of alternative payment models, many of which may be 
voluntary and more appropriate for physicians or other providers to 
assume risk.
    Comment: We received a few comments that not only advocated for 
more flexibility in which entity would be allowed to assume risk for 
the episode but also suggested that CMS more actively encourage 
collaboration by providing more specific operational guidance regarding 
how risk should be shared among different providers. A few commenters 
noted that financial agreements may not always be feasible. One 
commenter noted that in markets where physicians, hospitals and post-
acute care providers already work well together, the foundation for 
effective gainsharing arrangements are more likely to be in place. 
Others noted that some organizations may be willing to share in any 
savings but not be willing to accept downside risk.
    One commenter recommended that CMS require that EPM participants 
execute gainsharing arrangements with providers to establish a third 
party entity to receive and distribute reconciliation payments in 
accordance with the terms of such sharing agreements.
    Response: We acknowledge the challenges that some EPM participants 
may have in establishing effective collaborative agreements. Similarly, 
we acknowledge the potential challenges that non-hospital providers 
such as physicians and post-acute care providers may have in getting 
EPM participants to share risk in a manner that is believed to be 
equitable to all. However, we do not believe it is appropriate for CMS 
to either require or establish specific criteria for the terms of such 
agreements nor to specify how they should be operationalized. We 
continue to believe, however, that the most successful EPMs will be 
motivated to engage other providers so that interests and incentives 
are aligned. We refer readers to section III.I. of this final rule, 
``Financial Arrangements under EPM,'' for a full discussion of EPM 
financial arrangements.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to make 
hospitals the episode initiators and financially responsible for the 
episode of care.

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4. Geographic Unit of Selection and Exclusion of Selected Hospitals
    In order to determine the geographic unit of selection for these 
episode payment models, we conducted an analysis similar to that used 
for the CJR model. For the CJR 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 concluded that selection based on MSAs provided the best 
balance between choosing smaller geographic units while still capturing 
the impact of market patterns reflecting the mobility of patients and 
providers and limiting the potential risk for patient shifting and 
steerage between MSAs. HRRs are based on where patients receive 
selected tertiary care services, which do not include orthopedic 
services. Therefore, HRRs may not be representative of where patients 
receive specialty orthopedic care or more routine orthopedic services 
such as hip and knee arthroplasty. Selection of states rather than MSAs 
would have greatly reduced the number of independent geographic areas 
subject to selection and, therefore, the statistical power of the 
evaluation. For similar reasons and to maintain consistency with the 
CJR model, we proposed implementation at the MSA level.
    We also similarly considered whether these new models should be 
limited to hospitals where a high volume of these episodes occur, 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. However, as 
with the CJR model, if we were to limit participation based on volume, 
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 payments for these episodes 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.D.6. of the proposed rule as model participants would help 
to minimize the risk of participant hospitals shifting higher cost 
cases out of the EPM.
    In determining where to implement these EPMs, we also considered 
whether implementation of the CJR model in the same geographic area 
should be a factor. We realize that there is likely to be considerable 
overlap in the selection criteria between MSAs where the SHFFT EPM 
might be appropriate and those MSAs where the CJR model is now being 
implemented. While limiting burden on hospitals is an important 
consideration, we also believe that the infrastructure being put in 
place as a result of the CJR model presents significant advantages for 
implementation of the SHFFT model. For similar reasons, and in order to 
minimize patient steerage and/or transfer for reasons due solely to the 
implementation of these new payment models, we believe that it is 
appropriate to implement the AMI model and CABG model together in the 
same geographic areas, albeit not necessarily in the same areas as the 
CJR and SHFFT models.
    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 proposed that the SHFFT model be 
implemented in those MSAs where the CJR model is being implemented.
    We also proposed that the AMI and CABG models be implemented in 
MSAs selected independently based on the criteria discussed in the 
proposed rule (81 FR 50815). This would result in four separate 
categories of MSAs: (1) MSAs where only the CJR and SHFFT model 
episodes are being implemented; (2) MSAs where only the CABG model and 
AMI model episodes are being implemented; (3) MSAs where the CJR as 
well as the AMI, CABG, and SHFFT models are being implemented; and (4) 
MSAs where neither CJR nor any of the new episode payment models are 
being implemented. We believe this will provide an opportunity to test 
the impact of implementing EPMs across not only a greater diversity of 
episodes but also as an increasing percentage of hospital discharges. 
We sought comment on our proposal to implement the SHFFT model in the 
same geographic region as the CJR model and to implement both the AMI 
model and the CABG model in the same MSAs, some of which may overlap 
with MSAs where the CJR and SHFFT models also are being implemented.
    The following is a summary of the comments received and our 
responses.
    Comment: While several commenters explicitly noted concurrence with 
our proposed method for selecting the MSAs where these models will be 
implemented, we did receive a few comments related to the selection of 
areas based on MSAs vs. other geographic units such as CBSAs as well as 
other recommended criteria upon which to base our selection. We address 
some of the specific factors in the comments located in this section. 
Independent of the selection methodology, several commenters requested 
that CMS publish a list of the hospitals CMS believed were in the 
selected MSAs and allow hospitals 60 days to comment. Other commenters 
requested that CMS publish the list of MSAs selected as soon as 
possible to allow those hospitals impacted additional preparatory time 
prior to the initial effective date of EPMs. Other commenters 
emphasized the importance of maintaining beneficiary freedom of choice 
in selecting where and how to receive care regardless of the 
beneficiary's geographic residence or the MSAs selected for EPMs.
    Response: With regard to MSAs as the geographic unit of selection, 
we continue to believe, consistent with CJR, that MSAs allow us to 
observe the impact of the model in a variety of circumstances and 
provide the best balance between choosing smaller geographic units 
while still capturing the impact of market patterns reflecting the 
mobility of patients and providers. We also believe that MSAs limit the 
potential risk for patient shifting and steerage. As such, we see no 
reason to change the unit of selection or to be inconsistent with what 
has already been implemented with CJR. For an in depth discussion of 
this, we refer the reader to the final CJR rule (42 CFR part 510, 80 FR 
73288). We concur that it is important that all participants clearly 
understand which hospitals will be impacted. Prior to implementation 
and in conjunction with the publication of this final rule, CMS will 
publish a list of hospitals that, based on the geographic location 
associated with the hospital's CMS Certification Number (CCN), we 
believe are located in the selected MSAs and will be subject to 
participation in these EPMs. Hospitals identified using this method 
will have the opportunity to correct any information CMS has on file 
that may impact whether they are or are not in a selected MSA by 
contacting [email protected] within 45 days after the publication of the 
Final Rule. Finally, we concur that beneficiaries continue to have the 
freedom to choose where they will receive services, regardless of the 
payment model in place in a particular geographic area. We refer 
readers to

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section III.G. of this final rule, ``Monitoring and Beneficiary 
Protection,'' for a discussion of these issues.
    Comment: A number of commenters expressed concern about 
implementing the SHFFT EPMs in those MSAs where the CJR model is being 
implemented. Some commenters expressed concern that we were adding the 
SHFFT model to the existing CJR model. Other commenters expressed 
concern that sufficient time had not elapsed to allow hospitals or CMS 
to learn from their experience. Many believe they needed more time to 
be able to analyze the results from at least the first year of CJR as 
well as incorporating findings from the BPCI experience before adding 
the additional burden of implementing a new model with required 
participation. While both CJR and SHFFT involve some of the same 
providers and specialties, some commenters noted that the SHFFT patient 
population was distinctly different requiring different care pathways 
and resources. Because of the concern about additional burden on those 
MSAs where the CJR model has been implemented, some commenters believe 
that those same MSAs should, therefore, be exempt from implementing the 
additional cardiac EPMs.
    Response: To clarify for commenters, the SHFFT model is separate 
and distinct from the CJR model although it is designed to run in the 
same MSAs in which the CJR model is currently operational. We 
acknowledge the challenges that hospitals implementing CJR may have in 
order to implement the SHFFT EPM. While recognizing that the patients 
covered under the SHFFT EPM may be frailer and potentially require 
different and/or a more intensive level of care, we also continue to 
believe that SHFFT is similar to CJR in that it involves many of the 
same specialties and provider types. While there may be different care 
pathways, we hope that much of the infrastructure and collaborator 
agreements put in place will provide a solid base upon which to build 
for SHFFT. As CMS seeks to move away from fee for service payment 
systems to more value based purchasing, we believe that SHFFT 
represents a reasonable next step in this transition.
    We also acknowledge that in those MSAs where the cardiac EPMs will 
be alongside CJR and now SHFFT, EPM participants will face additional 
burdens and challenges. However, we do not believe that it is 
appropriate to exclude those MSAs where CJR and SHFFT will be 
implemented from eligibility for selection for the cardiac EPMs. 
Exclusion of these MSAs would result in a comparative over 
representation in the cardiac EPMs of lower cost and lower population 
MSAs due to the manner in which the CJR MSAs were selected. For a full 
discussion of the criteria for selecting cardiac EPMs, we refer readers 
to section III.B.5. of this final rule, ``Overview and Options for 
Geographic Area Selection for AMI and CABG Episodes''. As we move 
towards more inpatient care being covered under these types of models, 
we will monitor and evaluate the impact on different types of hospitals 
implementing multiple EPMs so as to minimize operational burden and 
improve outcomes.
    Comment: Several commenters did not disagree with the use of MSAs 
specifically, but did note the potential for negative impact on certain 
hospitals in a model where all hospitals in the MSA providing the 
covered services are required to participate. This included concern for 
both high performing regional and national referral centers which may 
already be providing high quality care at a lower cost as well as 
hospitals with more limited numbers of eligible discharges and/or those 
serving at risk populations which often have lower operating margins 
and thus may be at greater financial risk. These commenters suggested 
that demographic factors such as age, race, and poverty levels could be 
used to limit which MSAs were selected.
    Response: We acknowledge that some hospitals may face particular 
challenges in implementing EPMs whether it be due to demographic 
factors related to their patient base, a lower number of potential EPMs 
each year, or other factors. A key reason for doing a model with 
required participation is, in fact, to examine and better understand 
the impact of a model on a broader range of facility types and 
communities than are usually included in a voluntary model. Although we 
do not believe that using specific demographic factors in MSA selection 
is appropriate, in response to comments on other sections of this rule 
around risk-adjustment, we are finalizing a timeframe for the 
implementation of downside risk that allows us time to look carefully 
at different approaches for recognizing and adjusting for risk in these 
models which we will discuss via notice and comment rulemaking for FY 
2019 and we believe that these actions will help to resolve concerns 
expressed regarding greater financial risk for high performing regional 
and national referral centers.
    A key rationale for conducting a model with required participation 
is the ability to examine variations in the impact of the model on a 
broad range of hospitals in a variety of different market conditions in 
order to better understand how the model operates in a variety of 
circumstances. Although demographic factors are not proposed to be part 
of the selection process for MSAs, we do consider, as noted in the 
proposed and this final rule, these factors to be important to the 
proper understanding of the impact of the models and where is more or 
less successful. The evaluation will consider the suggested demographic 
domains and other measures in determining which MSAs are appropriate 
comparison markets as well as for possible subgroup analyses.
    Comment: A few commenters suggested eliminating those MSAs that had 
a higher penetration of Medicare Advantage plans or suggested that we 
select MSAs that will minimize overlap with BPCI and ACO participating 
hospitals.
    Response: We note in this rule the reasons for aligning the MSAs 
where the SHFFT EPM will be implemented with those MSAs where the CJR 
model has already been implemented. In doing so, we accept the 
exclusion of those MSAs that were excluded from the CJR model due to 
the limited volume of LEJR procedures performed there.
    In the proposed rule we similarly proposed elimination of some MSAs 
from selection for the cardiac EPMs due to having lower numbers of 
episodes and having a higher number of episodes covered under the BPCI 
models. We refer readers to section III.B.5. of this final rule for a 
full discussion of the selection criteria for MSAs where the cardiac 
episodes will be implemented.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
implement the SHFFT EPM in those MSAs where the CJR model is being 
implemented. Further, we are finalizing the proposal to implement the 
cardiac EPMs in randomly selected MSAs from among all those in the 
country meeting the criteria specified in section III.B.5. of this 
final rule.
5. Overview and Options for Geographic Area Selection for AMI and CABG 
Episodes
    We proposed that the AMI and CABG EPMs be implemented together in 
the same MSAs. These AMI/CABG-participating MSAs may or may not also be 
CJR/SHFFT-EPM participating MSAs. The selection of MSAs for AMI/CABG 
EPMs would occur through a random selection of eligible MSAs.
    We proposed to require participation in the AMI and CABG models of 
all hospitals, with limited exceptions as

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previously discussed in section III.B.4. of the proposed rule, paid 
under the IPPS that are physically located in a county in an MSA 
selected through the methodology outlined in section III.B.5.b. of the 
proposed rule (81 FR 50815), to test and evaluate the effects of an 
episode-based payment approach for the proposed EPMs. We proposed 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 counties added or 
removed from certain MSAs, we proposed to maintain the same cohort of 
selected hospitals throughout the 5-year performance periods of the 
EPMs with limited exceptions as described later in this section. Thus, 
we proposed neither to add hospitals to an EPM if after the start of 
such EPM new counties are added to one of the selected MSAs nor to 
remove hospitals from an EPM 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 EPMs, which is crucial for our 
ability to evaluate their respective results. 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.D. of this final rule for 
discussion of how target prices will be determined for such hospitals.)
    The manner in which CMS tracks and identifies hospitals is through 
the CMS Certification Number (CCN). In keeping with this approach, 
these EPMs will administer model related activities at the CCN level 
including the determination of physical location. The physical location 
associated with the CCN at the time of an EPM's start will be used to 
determine whether that CCN is located in a selected MSA. For hospitals 
that share a CCN across various locations, all hospitals under that CCN 
would be required to participate in the applicable EPM if the physical 
address associated with the CCN is in the MSA selected, unless 
otherwise excluded. Similarly, all hospitals under the same CCN, even 
if some are physically located in the MSA selected for participation, 
would not participate in the applicable EPM if the physical address 
associated with the CCN is not in the MSA.
    We considered including hospitals in a given MSA based on whether 
the hospitals were classified into the MSA for IPPS wage index 
purposes. However, such a process would be more complicated, and we 
could not find any compelling reasons favoring such approach. For 
example, we could assign hospitals to metro divisions of MSAs when 
those divisions exist. In addition, there is the IPPS process of 
geographic reclassification by which a hospital's payments can be based 
on a geographic area other than the one where the hospital is 
physically located. For the purpose of the EPMs, it is simpler and more 
straightforward to use a hospital's physical location as the basis of 
its assignment to a geographic unit. This decision would have no impact 
on a hospital's payment under the IPPS. We sought comment on our 
proposal to include a hospital as an EPM participant based on the 
physical location associated with the CCN of the hospital in one of the 
counties included in a selected MSA.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter expressed that implementing the two cardiac 
EPMs, CABG and AMI, in the same geographic areas would overburden 
participant hospitals. They stated that the two cardiac conditions are 
characterized by clinically different populations and require distinct 
care teams and the opportunities for common care redesign approaches 
are limited.
    Response: We understand the amount of effort required to redesign 
care processes and that often these are specific to a condition and not 
always immediately transferrable between conditions. In regards to 
implementing two cardiac episodes there is an expectation that some 
economies of scale will present themselves with the cardiac episode-
based approaches even though the care teams and patient populations are 
distinct.
    As discussed in section III.C. of this final rule, the AMI and CABG 
model episodes primarily include beneficiaries with cardiovascular 
disease, a chronic condition which likely contributed to the acute 
events or procedures that initiate the episodes. Beneficiaries 
experiencing an AMI can be treated by different clinical modalities 
including medical management and surgical intervention such as PCI and 
CABG. The decision as to which treatment is medically appropriate for a 
given beneficiary is both complex and subject to evolving medical 
knowledge and practice norms. Furthermore, approximately 30 percent of 
CABGs are performed during the care of AMIs. Because of the close 
connection between these two models, CMS believes that testing the AMI 
and the CABG EPMs in the same markets decreases the probability that 
clinical decision making regarding the course of treatments would be 
unduly influenced by inclusion or exclusion in one of the two cardiac 
EPMs. If the two cardiac EPMs were in different areas, the AMI EPM 
would be structured in such a way as to include AMIs treated with CABG. 
Thus, the separation of the two cardiac EPMs into different MSAs would 
not reduce the burdens associated with hospitals who are simultaneously 
needing to manage patients treated under a variety of modalities. It 
would, on the other hand, conceivably increase the complexity of 
management for participants who would be faced with the situation of 
having only the 30 percent of CABGs done in conjunction with an AMI 
included in a model.
    Comment: One commenter requested that if a health system had member 
hospitals within MSAs selected for inclusion in a cardiac EPM that they 
be allowed to have their member hospitals in non-selected areas also be 
included in the model. They stated that the ability to have all of 
their member hospitals in one model would allow for care to be provided 
under a unified system and would result in increased coordination.
    Response: The cardiac EPMs are structured as required models. As 
such, they will require hospitals within selected geographic areas to 
participate (unless otherwise excluded as set forth in this final 
rule). Hospitals who are not in a selected MSA but are part of a health 
system that includes selected included hospitals will not subject to 
the EPM rules and incentives structures. However, if a health system 
wishes to implement certain care coordination activities across their 
entire spectrum of hospitals they would not be precluded from doing so 
as long as they comply with current regulations and law. The inclusion 
of additional hospitals outside of these selected areas would 
constitute a major change to the model that was not considered in the 
proposed rule. CMS previously offered solicited participation in the 
BPCI initiative, a bundled payment model. Please refer to section 
III.A.3. of this final rule for a discussion of the possibility of 
future bundled payment models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
implement the CABG and the AMI EPMs in the same areas, and to 
administer model-related activities at the CCN level including the 
determination of physical location. The physical location associated 
with the CCN at the time of an EPM's start will

[[Page 228]]

be used to determine whether that CCN is located in a selected MSA.
a. Exclusion of Certain MSAs
    We considered whether certain MSAs should be exempt from the 
possibility of selection for the AMI/CABG EPMs' implementation. We 
considered exclusions based on the anticipated number of AMI episodes 
and CABG episodes in the MSA. We also considered exclusions based on 
the degree to which such EPMs' episodes would be impacted by overlaps 
with other payment initiatives, including BPCI and ACOs.
    First, we considered the advisability of MSA exclusions based on 
the number of episodes in a year. We identified qualifying AMI and CABG 
episodes that initiated between January 1, 2014, and December 31, 2014. 
AMI and CABG episodes were attributed to an MSA based on the location 
of the CCN associated with the initiating hospital using the Provider 
of Service file. Due to the smaller number of relevant AMI and CABG 
episodes occurring in some MSAs, an exclusion rule that required a 
large number of episodes in each MSA would result in fewer MSAs 
eligible for selection than was necessary given the desired number of 
MSAs and the requirement to have 50 percent or more of MSAs remain in a 
pool of possible comparison MSAs. From the perspective of evaluating 
changes to utilization and spending under EPMs, there is no analytic 
need to eliminate MSAs with small numbers. In fact, including smaller 
MSAs has the analytic advantage of giving CMS more experience operating 
EPMs in the smaller-MSA contexts that will help us generalize our EPM-
evaluation findings.
    We have a strong interest in being able to observe how well EPMs 
operate in areas with a lower volume of episodes, and, in particular, 
the consequences of the models for AMI episodes where CABG is not 
commonly performed or where standard practice is to refer all CABGs 
outside of the MSA. Given our desire to assess the operation of the AMI 
EPM in areas with little or no CABG episodes and the desire to have the 
two cardiac EPMs be administered together in the same MSAs, we proposed 
that the MSA exclusion rules be based on the number of AMI episodes 
only. This will allow for the inclusion of MSAs with no CABGs.
    There is no analytic requirement for a minimum number of cases and 
there are advantages to including smaller cities. At the same time, we 
acknowledge that areas with few AMI cases may believe that they will 
face challenges under the EPMs. Therefore, we proposed an exclusion 
rule that MSAs with fewer than 75 AMI episodes (determined as discussed 
in section III.C. of this final rule) will be removed from the 
possibility of selection. Cases in hospitals paid under either the CAH 
methodology or the Maryland All-Payer Model are not included in the 
count of eligible episodes. We examined a number of different minimum-
episode-number cutoffs. The use of the 75 AMIs in a year was a designed 
to balance limiting the impact of outlier cases on the MSA average 
episode spending and the desire to retain a non-negligible 
representation of MSAs in the under 100,000 population and the 100,000 
to 200,000 population ranges in our selection pool. The application of 
Exclusion Rule 1: ``Less than 75 qualifying AMI episodes in the 
reference year'' resulted in the removal of 49 MSAs from possible 
selection.
    Second, we assessed exclusion rules based on overlap with BPCI. We 
proposed Exclusion Rule 2 such that MSAs are removed from possible 
selection if there were fewer than 75 non-BPCI AMI episodes in the MSA 
in the reference year. For the purposes of this exclusion, the number 
of non-BPCI episodes was estimated by subtracting BPCI cases from the 
total number of cases used in Exclusion Rule 1. BPCI cases for this 
purpose are ones during the reference year associated with a hospital 
or a PGP BPCI Model 2 or 4 episode initiator participating in an AMI, 
PCI, or CABG episode as of January 1, 2016. Such criterion removed an 
additional 26 MSAs from potential selection.
    Third, we proposed to exclude MSAs from possible selection based on 
whether the number of non-BPCI AMI episodes calculated under Exclusion 
Rule 2 is less than 50 percent of the total number of AMI episodes 
calculated under Exclusion Rule 1. We anticipate that some degree of 
overlap in the BPCI and other EPMs will be mutually helpful. However, 
we acknowledge that some providers may have concerns that a BPCI Model 
2 AMI and PCI participation rate of more than 50 percent may impair the 
ability of participants in either the EPMs or the BPCI models to 
succeed in the objectives of their respective initiatives. As a result 
of this third criterion, 13 additional MSAs were removed from possible 
selection.
    We considered whether there should be an exclusion rule based on 
the anticipated degree of overlap between the AMI and CABG EPMs and 
patients who are aligned prospectively to ACOs that are taking two-
sided risk, such as ACOs participating in the Next Generation ACO model 
or Track 3 of the Shared Savings Program. We examined numbers 
associated with ACOs meeting this status as of May 1, 2016, and this 
examination did not result in any additional MSAs falling below the 
threshold of 75 AMI episodes. Consequently, we did not propose any MSA 
exclusion rule based on the presence of ACOs.
    Please refer to Table 1 for the status of each MSA based on these 
exclusion criteria, available at http://innovation.cms.gov/initiatives/epm. After applying these three exclusions, 294 MSAs out of 384 total 
MSAs are eligible for selection using our proposed selection 
methodology.

             Table 1--MSA Exclusion Rule Status and Eligibility for Selection Status for Inclusion in AMI and CABG EPMs in the Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Rule 2: 75+ non- BPCI    Rule 3: <50% BPCI     MSA eligible for
             CBSA_OMB                        MSA name              Rule 1: 75+ AMIs             AMI                    AMI                selection
--------------------------------------------------------------------------------------------------------------------------------------------------------
10180.............................  Abilene, TX...............  Pass.................  Pass.................  Pass................  Include.
10380.............................  Aguadilla-Isabela, PR.....  Fail.................  Fail.................  Pass................  Exclude.
10420.............................  Akron, OH.................  Pass.................  Pass.................  Pass................  Include.
10500.............................  Albany, GA................  Pass.................  Pass.................  Pass................  Include.
10540.............................  Albany, OR................  Fail.................  Fail.................  Pass................  Exclude.
10580.............................  Albany-Schenectady-Troy,    Pass.................  Pass.................  Fail................  Exclude.
                                     NY.
10740.............................  Albuquerque, NM...........  Pass.................  Pass.................  Pass................  Include.
10780.............................  Alexandria, LA............  Pass.................  Pass.................  Pass................  Include.

[[Page 229]]

 
10900.............................  Allentown-Bethlehem-        Pass.................  Pass.................  Pass................  Include.
                                     Easton, PA-NJ.
11020.............................  Altoona, PA...............  Pass.................  Pass.................  Pass................  Include.
11100.............................  Amarillo, TX..............  Pass.................  Pass.................  Pass................  Include.
11180.............................  Ames, IA..................  Pass.................  Pass.................  Pass................  Include.
11260.............................  Anchorage, AK.............  Pass.................  Pass.................  Pass................  Include.
11460.............................  Ann Arbor, MI.............  Pass.................  Pass.................  Pass................  Include.
11500.............................  Anniston-Oxford-            Pass.................  Pass.................  Pass................  Include.
                                     Jacksonville, AL.
11540.............................  Appleton, WI..............  Pass.................  Pass.................  Pass................  Include.
11640.............................  Arecibo, PR...............  Fail.................  Fail.................  Pass................  Exclude.
11700.............................  Asheville, NC.............  Pass.................  Pass.................  Pass................  Include.
12020.............................  Athens-Clarke County, GA..  Pass.................  Pass.................  Pass................  Include.
12060.............................  Atlanta-Sandy Springs-      Pass.................  Pass.................  Pass................  Include.
                                     Roswell, GA.
12100.............................  Atlantic City-Hammonton,    Pass.................  Pass.................  Pass................  Include.
                                     NJ.
12220.............................  Auburn-Opelika, AL........  Pass.................  Pass.................  Pass................  Include.
12260.............................  Augusta-Richmond County,    Pass.................  Pass.................  Pass................  Include.
                                     GA-SC.
12420.............................  Austin-Round Rock, TX.....  Pass.................  Pass.................  Pass................  Include.
12540.............................  Bakersfield, CA...........  Pass.................  Pass.................  Fail................  Exclude.
12620.............................  Bangor, ME................  Pass.................  Pass.................  Pass................  Include.
12700.............................  Barnstable Town, MA.......  Pass.................  Pass.................  Pass................  Include.
12940.............................  Baton Rouge, LA...........  Pass.................  Pass.................  Pass................  Include.
12980.............................  Battle Creek, MI..........  Fail.................  Fail.................  Pass................  Exclude.
13020.............................  Bay City, MI..............  Pass.................  Pass.................  Pass................  Include.
13140.............................  Beaumont-Port Arthur, TX..  Pass.................  Pass.................  Pass................  Include.
13220.............................  Beckley, WV...............  Pass.................  Pass.................  Pass................  Include.
13380.............................  Bellingham, WA............  Pass.................  Pass.................  Pass................  Include.
13460.............................  Bend-Redmond, OR..........  Pass.................  Pass.................  Pass................  Include.
13740.............................  Billings, MT..............  Pass.................  Pass.................  Pass................  Include.
13780.............................  Binghamton, NY............  Pass.................  Fail.................  Fail................  Exclude.
13820.............................  Birmingham-Hoover, AL.....  Pass.................  Pass.................  Pass................  Include.
13900.............................  Bismarck, ND..............  Pass.................  Pass.................  Pass................  Include.
13980.............................  Blacksburg-Christiansburg-  Fail.................  Fail.................  Pass................  Exclude.
                                     Radford, VA.
14010.............................  Bloomington, IL...........  Pass.................  Pass.................  Pass................  Include.
14020.............................  Bloomington, IN...........  Pass.................  Pass.................  Pass................  Include.
14100.............................  Bloomsburg-Berwick, PA....  Pass.................  Pass.................  Pass................  Include.
14260.............................  Boise City, ID............  Pass.................  Pass.................  Pass................  Include.
14460.............................  Boston-Cambridge-Newton,    Pass.................  Pass.................  Pass................  Include.
                                     MA-NH.
14500.............................  Boulder, CO...............  Pass.................  Fail.................  Pass................  Exclude.
14540.............................  Bowling Green, KY.........  Pass.................  Fail.................  Fail................  Exclude.
14740.............................  Bremerton-Silverdale, WA..  Pass.................  Fail.................  Fail................  Exclude.
14860.............................  Bridgeport-Stamford-        Pass.................  Pass.................  Pass................  Include.
                                     Norwalk, CT.
15180.............................  Brownsville-Harlingen, TX.  Pass.................  Pass.................  Pass................  Include.
15260.............................  Brunswick, GA.............  Pass.................  Pass.................  Pass................  Include.
15380.............................  Buffalo-Cheektowaga-        Pass.................  Pass.................  Fail................  Exclude.
                                     Niagara Falls, NY.
15500.............................  Burlington, NC............  Fail.................  Fail.................  Pass................  Exclude.
15540.............................  Burlington-South            Pass.................  Pass.................  Pass................  Include.
                                     Burlington, VT.
15940.............................  Canton-Massillon, OH......  Pass.................  Pass.................  Pass................  Include.
15980.............................  Cape Coral-Fort Myers, FL.  Pass.................  Pass.................  Pass................  Include.
16020.............................  Cape Girardeau, MO-IL.....  Pass.................  Pass.................  Pass................  Include.
16060.............................  Carbondale-Marion, IL.....  Pass.................  Pass.................  Pass................  Include.
16180.............................  Carson City, NV...........  Pass.................  Pass.................  Pass................  Include.
16220.............................  Casper, WY................  Pass.................  Fail.................  Pass................  Exclude.
16300.............................  Cedar Rapids, IA..........  Pass.................  Pass.................  Pass................  Include.
16540.............................  Chambersburg-Waynesboro,    Pass.................  Pass.................  Pass................  Include.
                                     PA.
16580.............................  Champaign-Urbana, IL......  Pass.................  Pass.................  Pass................  Include.
16620.............................  Charleston, WV............  Pass.................  Pass.................  Pass................  Include.
16700.............................  Charleston-North            Pass.................  Pass.................  Pass................  Include.
                                     Charleston, SC.
16740.............................  Charlotte-Concord-          Pass.................  Pass.................  Pass................  Include.
                                     Gastonia, NC-SC.
16820.............................  Charlottesville, VA.......  Pass.................  Pass.................  Pass................  Include.
16860.............................  Chattanooga, TN-GA........  Pass.................  Pass.................  Pass................  Include.
16940.............................  Cheyenne, WY..............  Pass.................  Pass.................  Pass................  Include.
16980.............................  Chicago-Naperville-Elgin,   Pass.................  Pass.................  Pass................  Include.
                                     IL-IN-WI.
17020.............................  Chico, CA.................  Pass.................  Pass.................  Pass................  Include.
17140.............................  Cincinnati, OH-KY-IN......  Pass.................  Pass.................  Pass................  Include.
17300.............................  Clarksville, TN-KY........  Pass.................  Pass.................  Pass................  Include.
17420.............................  Cleveland, TN.............  Fail.................  Fail.................  Pass................  Exclude.
17460.............................  Cleveland-Elyria, OH......  Pass.................  Pass.................  Pass................  Include.
17660.............................  Coeur d'Alene, ID.........  Pass.................  Pass.................  Pass................  Include.
17780.............................  College Station-Bryan, TX.  Pass.................  Pass.................  Pass................  Include.

[[Page 230]]

 
17820.............................  Colorado Springs, CO......  Pass.................  Pass.................  Pass................  Include.
17860.............................  Columbia, MO..............  Pass.................  Pass.................  Pass................  Include.
17900.............................  Columbia, SC..............  Pass.................  Pass.................  Pass................  Include.
17980.............................  Columbus, GA-AL...........  Pass.................  Pass.................  Pass................  Include.
18020.............................  Columbus, IN..............  Pass.................  Pass.................  Pass................  Include.
18140.............................  Columbus, OH..............  Pass.................  Pass.................  Fail................  Exclude.
18580.............................  Corpus Christi, TX........  Pass.................  Pass.................  Pass................  Include.
18700.............................  Corvallis, OR.............  Pass.................  Pass.................  Pass................  Include.
18880.............................  Crestview-Fort Walton       Pass.................  Pass.................  Pass................  Include.
                                     Beach-Destin, FL.
19100.............................  Dallas-Fort Worth-          Pass.................  Pass.................  Pass................  Include.
                                     Arlington, TX.
19140.............................  Dalton, GA................  Pass.................  Fail.................  Fail................  Exclude.
19180.............................  Danville, IL..............  Fail.................  Fail.................  Pass................  Exclude.
19300.............................  Daphne-Fairhope-Foley, AL.  Pass.................  Pass.................  Pass................  Include.
19340.............................  Davenport-Moline-Rock       Pass.................  Pass.................  Pass................  Include.
                                     Island, IA-IL.
19380.............................  Dayton, OH................  Pass.................  Pass.................  Pass................  Include.
19460.............................  Decatur, AL...............  Fail.................  Fail.................  Pass................  Exclude.
19500.............................  Decatur, IL...............  Pass.................  Pass.................  Pass................  Include.
19660.............................  Deltona-Daytona Beach-      Pass.................  Pass.................  Pass................  Include.
                                     Ormond Beach, FL.
19740.............................  Denver-Aurora-Lakewood, CO  Pass.................  Pass.................  Pass................  Include.
19780.............................  Des Moines-West Des         Pass.................  Pass.................  Pass................  Include.
                                     Moines, IA.
19820.............................  Detroit-Warren-Dearborn,    Pass.................  Pass.................  Pass................  Include.
                                     MI.
20020.............................  Dothan, AL................  Pass.................  Pass.................  Pass................  Include.
20100.............................  Dover, DE.................  Pass.................  Pass.................  Pass................  Include.
20220.............................  Dubuque, IA...............  Pass.................  Fail.................  Fail................  Exclude.
20260.............................  Duluth, MN-WI.............  Pass.................  Pass.................  Pass................  Include.
20500.............................  Durham-Chapel Hill, NC....  Pass.................  Pass.................  Pass................  Include.
20700.............................  East Stroudsburg, PA......  Pass.................  Fail.................  Pass................  Exclude.
20740.............................  Eau Claire, WI............  Pass.................  Pass.................  Pass................  Include.
20940.............................  El Centro, CA.............  Fail.................  Fail.................  Fail................  Exclude.
21060.............................  Elizabethtown-Fort Knox,    Pass.................  Pass.................  Pass................  Include.
                                     KY.
21140.............................  Elkhart-Goshen, IN........  Pass.................  Pass.................  Pass................  Include.
21300.............................  Elmira, NY................  Pass.................  Pass.................  Pass................  Include.
21340.............................  El Paso, TX...............  Pass.................  Pass.................  Pass................  Include.
21500.............................  Erie, PA..................  Pass.................  Pass.................  Pass................  Include.
21660.............................  Eugene, OR................  Pass.................  Pass.................  Pass................  Include.
21780.............................  Evansville, IN-KY.........  Pass.................  Pass.................  Pass................  Include.
21820.............................  Fairbanks, AK.............  Fail.................  Fail.................  Pass................  Exclude.
22020.............................  Fargo, ND-MN..............  Pass.................  Pass.................  Pass................  Include.
22140.............................  Farmington, NM............  Pass.................  Pass.................  Pass................  Include.
22180.............................  Fayetteville, NC..........  Pass.................  Pass.................  Pass................  Include.
22220.............................  Fayetteville-Springdale-    Pass.................  Pass.................  Pass................  Include.
                                     Rogers, AR-MO.
22380.............................  Flagstaff, AZ.............  Fail.................  Fail.................  Pass................  Exclude.
22420.............................  Flint, MI.................  Pass.................  Pass.................  Pass................  Include.
22500.............................  Florence, SC..............  Pass.................  Pass.................  Pass................  Include.
22520.............................  Florence-Muscle Shoals, AL  Pass.................  Pass.................  Pass................  Include.
22540.............................  Fond du Lac, WI...........  Fail.................  Fail.................  Pass................  Exclude.
22660.............................  Fort Collins, CO..........  Pass.................  Pass.................  Pass................  Include.
22900.............................  Fort Smith, AR-OK.........  Pass.................  Pass.................  Fail................  Exclude.
23060.............................  Fort Wayne, IN............  Pass.................  Pass.................  Pass................  Include.
23420.............................  Fresno, CA................  Pass.................  Pass.................  Pass................  Include.
23460.............................  Gadsden, AL...............  Pass.................  Pass.................  Pass................  Include.
23540.............................  Gainesville, FL...........  Pass.................  Pass.................  Pass................  Include.
23580.............................  Gainesville, GA...........  Pass.................  Pass.................  Pass................  Include.
23900.............................  Gettysburg, PA............  Fail.................  Fail.................  Pass................  Exclude.
24020.............................  Glens Falls, NY...........  Fail.................  Fail.................  Pass................  Exclude.
24140.............................  Goldsboro, NC.............  Fail.................  Fail.................  Pass................  Exclude.
24220.............................  Grand Forks, ND-MN........  Pass.................  Pass.................  Pass................  Include.
24260.............................  Grand Island, NE..........  Fail.................  Fail.................  Pass................  Exclude.
24300.............................  Grand Junction, CO........  Pass.................  Pass.................  Pass................  Include.
24340.............................  Grand Rapids-Wyoming, MI..  Pass.................  Pass.................  Pass................  Include.
24420.............................  Grants Pass, OR...........  Fail.................  Fail.................  Pass................  Exclude.
24500.............................  Great Falls, MT...........  Fail.................  Fail.................  Pass................  Exclude.
24540.............................  Greeley, CO...............  Pass.................  Pass.................  Pass................  Include.
24580.............................  Green Bay, WI.............  Pass.................  Pass.................  Pass................  Include.
24660.............................  Greensboro-High Point, NC.  Pass.................  Pass.................  Pass................  Include.
24780.............................  Greenville, NC............  Pass.................  Pass.................  Pass................  Include.
24860.............................  Greenville-Anderson-        Pass.................  Pass.................  Pass................  Include.
                                     Mauldin, SC.
25020.............................  Guayama, PR...............  Fail.................  Fail.................  Pass................  Exclude.

[[Page 231]]

 
25060.............................  Gulfport-Biloxi-            Pass.................  Pass.................  Pass................  Include.
                                     Pascagoula, MS.
25180.............................  Hagerstown-Martinsburg, MD- Pass.................  Fail.................  Fail................  Exclude.
                                     WV.
25220.............................  Hammond, LA...............  Fail.................  Fail.................  Pass................  Exclude.
25260.............................  Hanford-Corcoran, CA......  Fail.................  Fail.................  Pass................  Exclude.
25420.............................  Harrisburg-Carlisle, PA...  Pass.................  Pass.................  Pass................  Include.
25500.............................  Harrisonburg, VA..........  Pass.................  Fail.................  Fail................  Exclude.
25540.............................  Hartford-West Hartford-     Pass.................  Pass.................  Pass................  Include.
                                     East Hartford, CT.
25620.............................  Hattiesburg, MS...........  Pass.................  Pass.................  Pass................  Include.
25860.............................  Hickory-Lenoir-Morganton,   Pass.................  Pass.................  Pass................  Include.
                                     NC.
25940.............................  Hilton Head Island-         Pass.................  Pass.................  Pass................  Include.
                                     Bluffton-Beaufort, SC.
26140.............................  Homosassa Springs, FL.....  Pass.................  Pass.................  Pass................  Include.
26300.............................  Hot Springs, AR...........  Pass.................  Pass.................  Pass................  Include.
26380.............................  Houma-Thibodaux, LA.......  Pass.................  Pass.................  Pass................  Include.
26420.............................  Houston-The Woodlands-      Pass.................  Pass.................  Pass................  Include.
                                     Sugar Land, TX.
26580.............................  Huntington-Ashland, WV-KY-  Pass.................  Pass.................  Pass................  Include.
                                     OH.
26620.............................  Huntsville, AL............  Pass.................  Pass.................  Pass................  Include.
26820.............................  Idaho Falls, ID...........  Pass.................  Pass.................  Pass................  Include.
26900.............................  Indianapolis-Carmel-        Pass.................  Pass.................  Pass................  Include.
                                     Anderson, IN.
26980.............................  Iowa City, IA.............  Pass.................  Pass.................  Pass................  Include.
27060.............................  Ithaca, NY................  Fail.................  Fail.................  Pass................  Exclude.
27100.............................  Jackson, MI...............  Pass.................  Pass.................  Pass................  Include.
27140.............................  Jackson, MS...............  Pass.................  Pass.................  Pass................  Include.
27180.............................  Jackson, TN...............  Pass.................  Fail.................  Fail................  Exclude.
27260.............................  Jacksonville, FL..........  Pass.................  Pass.................  Pass................  Include.
27340.............................  Jacksonville, NC..........  Fail.................  Fail.................  Pass................  Exclude.
27500.............................  Janesville-Beloit, WI.....  Pass.................  Pass.................  Pass................  Include.
27620.............................  Jefferson City, MO........  Pass.................  Pass.................  Pass................  Include.
27740.............................  Johnson City, TN..........  Pass.................  Fail.................  Fail................  Exclude.
27780.............................  Johnstown, PA.............  Pass.................  Pass.................  Pass................  Include.
27860.............................  Jonesboro, AR.............  Pass.................  Pass.................  Pass................  Include.
27900.............................  Joplin, MO................  Pass.................  Pass.................  Pass................  Include.
27980.............................  Kahului-Wailuku-Lahaina,    Fail.................  Fail.................  Pass................  Exclude.
                                     HI.
28020.............................  Kalamazoo-Portage, MI.....  Pass.................  Pass.................  Pass................  Include.
28100.............................  Kankakee, IL..............  Pass.................  Pass.................  Pass................  Include.
28140.............................  Kansas City, MO-KS........  Pass.................  Pass.................  Pass................  Include.
28420.............................  Kennewick-Richland, WA....  Pass.................  Pass.................  Pass................  Include.
28660.............................  Killeen-Temple, TX........  Pass.................  Pass.................  Pass................  Include.
28700.............................  Kingsport-Bristol-Bristol,  Pass.................  Pass.................  Pass................  Include.
                                     TN-VA.
28740.............................  Kingston, NY..............  Fail.................  Fail.................  Pass................  Exclude.
28940.............................  Knoxville, TN.............  Pass.................  Pass.................  Pass................  Include.
29020.............................  Kokomo, IN................  Fail.................  Fail.................  Pass................  Exclude.
29100.............................  La Crosse-Onalaska, WI-MN.  Pass.................  Pass.................  Pass................  Include.
29180.............................  Lafayette, LA.............  Pass.................  Pass.................  Pass................  Include.
29200.............................  Lafayette-West Lafayette,   Pass.................  Pass.................  Pass................  Include.
                                     IN.
29340.............................  Lake Charles, LA..........  Pass.................  Pass.................  Pass................  Include.
29420.............................  Lake Havasu City-Kingman,   Pass.................  Pass.................  Pass................  Include.
                                     AZ.
29460.............................  Lakeland-Winter Haven, FL.  Pass.................  Pass.................  Pass................  Include.
29540.............................  Lancaster, PA.............  Pass.................  Fail.................  Fail................  Exclude.
29620.............................  Lansing-East Lansing, MI..  Pass.................  Pass.................  Pass................  Include.
29700.............................  Laredo, TX................  Pass.................  Fail.................  Pass................  Exclude.
29740.............................  Las Cruces, NM............  Pass.................  Pass.................  Pass................  Include.
29820.............................  Las Vegas-Henderson-        Pass.................  Pass.................  Pass................  Include.
                                     Paradise, NV.
29940.............................  Lawrence, KS..............  Fail.................  Fail.................  Pass................  Exclude.
30020.............................  Lawton, OK................  Pass.................  Pass.................  Pass................  Include.
30140.............................  Lebanon, PA...............  Pass.................  Fail.................  Pass................  Exclude.
30300.............................  Lewiston, ID-WA...........  Fail.................  Fail.................  Pass................  Exclude.
30340.............................  Lewiston-Auburn, ME.......  Pass.................  Pass.................  Pass................  Include.
30460.............................  Lexington-Fayette, KY.....  Pass.................  Pass.................  Pass................  Include.
30620.............................  Lima, OH..................  Pass.................  Pass.................  Pass................  Include.
30700.............................  Lincoln, NE...............  Pass.................  Pass.................  Pass................  Include.
30780.............................  Little Rock-North Little    Pass.................  Pass.................  Pass................  Include.
                                     Rock-Conway, AR.
30860.............................  Logan, UT-ID..............  Fail.................  Fail.................  Pass................  Exclude.
30980.............................  Longview, TX..............  Pass.................  Pass.................  Pass................  Include.
31020.............................  Longview, WA..............  Fail.................  Fail.................  Pass................  Exclude.
31080.............................  Los Angeles-Long Beach-     Pass.................  Pass.................  Pass................  Include.
                                     Anaheim, CA.
31140.............................  Louisville/Jefferson        Pass.................  Pass.................  Pass................  Include.
                                     County, KY-IN.
31180.............................  Lubbock, TX...............  Pass.................  Pass.................  Pass................  Include.
31340.............................  Lynchburg, VA.............  Pass.................  Pass.................  Pass................  Include.

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31420.............................  Macon, GA.................  Pass.................  Pass.................  Pass................  Include.
31460.............................  Madera, CA................  Fail.................  Fail.................  Pass................  Exclude.
31540.............................  Madison, WI...............  Pass.................  Pass.................  Pass................  Include.
31700.............................  Manchester-Nashua, NH.....  Pass.................  Pass.................  Pass................  Include.
31740.............................  Manhattan, KS.............  Fail.................  Fail.................  Pass................  Exclude.
31860.............................  Mankato-North Mankato, MN.  Fail.................  Fail.................  Pass................  Exclude.
31900.............................  Mansfield, OH.............  Pass.................  Pass.................  Pass................  Include.
32420.............................  Mayag[uuml]ez, PR.........  Fail.................  Fail.................  Pass................  Exclude.
32580.............................  McAllen-Edinburg-Mission,   Pass.................  Pass.................  Fail................  Exclude.
                                     TX.
32780.............................  Medford, OR...............  Pass.................  Pass.................  Pass................  Include.
32820.............................  Memphis, TN-MS-AR.........  Pass.................  Pass.................  Pass................  Include.
32900.............................  Merced, CA................  Fail.................  Fail.................  Pass................  Exclude.
33100.............................  Miami-Fort Lauderdale-West  Pass.................  Pass.................  Pass................  Include.
                                     Palm Beach, FL.
33140.............................  Michigan City-La Porte, IN  Pass.................  Pass.................  Pass................  Include.
33220.............................  Midland, MI...............  Pass.................  Pass.................  Pass................  Include.
33260.............................  Midland, TX...............  Pass.................  Fail.................  Pass................  Exclude.
33340.............................  Milwaukee-Waukesha-West     Pass.................  Pass.................  Pass................  Include.
                                     Allis, WI.
33460.............................  Minneapolis-St. Paul-       Pass.................  Pass.................  Pass................  Include.
                                     Bloomington, MN-WI.
33540.............................  Missoula, MT..............  Pass.................  Pass.................  Pass................  Include.
33660.............................  Mobile, AL................  Pass.................  Pass.................  Pass................  Include.
33700.............................  Modesto, CA...............  Pass.................  Pass.................  Pass................  Include.
33740.............................  Monroe, LA................  Pass.................  Pass.................  Pass................  Include.
33780.............................  Monroe, MI................  Pass.................  Pass.................  Pass................  Include.
33860.............................  Montgomery, AL............  Pass.................  Pass.................  Pass................  Include.
34060.............................  Morgantown, WV............  Pass.................  Pass.................  Pass................  Include.
34100.............................  Morristown, TN............  Fail.................  Fail.................  Pass................  Exclude.
34580.............................  Mount Vernon-Anacortes, WA  Pass.................  Fail.................  Pass................  Exclude.
34620.............................  Muncie, IN................  Pass.................  Pass.................  Pass................  Include.
34740.............................  Muskegon, MI..............  Pass.................  Pass.................  Pass................  Include.
34820.............................  Myrtle Beach-Conway-North   Pass.................  Pass.................  Pass................  Include.
                                     Myrtle Beach, SC-NC.
34900.............................  Napa, CA..................  Pass.................  Fail.................  Fail................  Exclude.
34940.............................  Naples-Immokalee-Marco      Pass.................  Pass.................  Pass................  Include.
                                     Island, FL.
34980.............................  Nashville-Davidson--        Pass.................  Pass.................  Pass................  Include.
                                     Murfreesboro--Franklin,
                                     TN.
35100.............................  New Bern, NC..............  Pass.................  Pass.................  Pass................  Include.
35300.............................  New Haven-Milford, CT.....  Pass.................  Pass.................  Pass................  Include.
35380.............................  New Orleans-Metairie, LA..  Pass.................  Pass.................  Pass................  Include.
35620.............................  New York-Newark-Jersey      Pass.................  Pass.................  Pass................  Include.
                                     City, NY-NJ-PA.
35660.............................  Niles-Benton Harbor, MI...  Pass.................  Pass.................  Pass................  Include.
35840.............................  North Port-Sarasota-        Pass.................  Pass.................  Pass................  Include.
                                     Bradenton, FL.
35980.............................  Norwich-New London, CT....  Pass.................  Pass.................  Pass................  Include.
36100.............................  Ocala, FL.................  Pass.................  Pass.................  Fail................  Exclude.
36140.............................  Ocean City, NJ............  Fail.................  Fail.................  Pass................  Exclude.
36220.............................  Odessa, TX................  Pass.................  Pass.................  Pass................  Include.
36260.............................  Ogden-Clearfield, UT......  Pass.................  Pass.................  Pass................  Include.
36420.............................  Oklahoma City, OK.........  Pass.................  Pass.................  Pass................  Include.
36500.............................  Olympia-Tumwater, WA......  Pass.................  Pass.................  Pass................  Include.
36540.............................  Omaha-Council Bluffs, NE-   Pass.................  Pass.................  Pass................  Include.
                                     IA.
36740.............................  Orlando-Kissimmee-Sanford,  Pass.................  Pass.................  Fail................  Exclude.
                                     FL.
36780.............................  Oshkosh-Neenah, WI........  Fail.................  Fail.................  Pass................  Exclude.
36980.............................  Owensboro, KY.............  Pass.................  Pass.................  Pass................  Include.
37100.............................  Oxnard-Thousand Oaks-       Pass.................  Pass.................  Fail................  Exclude.
                                     Ventura, CA.
37340.............................  Palm Bay-Melbourne-         Pass.................  Pass.................  Pass................  Include.
                                     Titusville, FL.
37460.............................  Panama City, FL...........  Pass.................  Pass.................  Pass................  Include.
37620.............................  Parkersburg-Vienna, WV....  Pass.................  Pass.................  Pass................  Include.
37860.............................  Pensacola-Ferry Pass-       Pass.................  Pass.................  Pass................  Include.
                                     Brent, FL.
37900.............................  Peoria, IL................  Pass.................  Pass.................  Pass................  Include.
37980.............................  Philadelphia-Camden-        Pass.................  Pass.................  Pass................  Include.
                                     Wilmington, PA-NJ-DE-MD.
38060.............................  Phoenix-Mesa-Scottsdale,    Pass.................  Pass.................  Pass................  Include.
                                     AZ.
38220.............................  Pine Bluff, AR............  Fail.................  Fail.................  Pass................  Exclude.
38300.............................  Pittsburgh, PA............  Pass.................  Pass.................  Pass................  Include.
38340.............................  Pittsfield, MA............  Pass.................  Fail.................  Pass................  Exclude.
38540.............................  Pocatello, ID.............  Fail.................  Fail.................  Pass................  Exclude.
38660.............................  Ponce, PR.................  Fail.................  Fail.................  Pass................  Exclude.
38860.............................  Portland-South Portland,    Pass.................  Pass.................  Pass................  Include.
                                     ME.
38900.............................  Portland-Vancouver-         Pass.................  Pass.................  Pass................  Include.
                                     Hillsboro, OR-WA.
38940.............................  Port St. Lucie, FL........  Pass.................  Pass.................  Pass................  Include.
39140.............................  Prescott, AZ..............  Pass.................  Pass.................  Pass................  Include.
39300.............................  Providence-Warwick, RI-MA.  Pass.................  Pass.................  Pass................  Include.

[[Page 233]]

 
39340.............................  Provo-Orem, UT............  Pass.................  Pass.................  Pass................  Include.
39380.............................  Pueblo, CO................  Pass.................  Pass.................  Pass................  Include.
39460.............................  Punta Gorda, FL...........  Pass.................  Pass.................  Pass................  Include.
39540.............................  Racine, WI................  Fail.................  Fail.................  Pass................  Exclude.
39580.............................  Raleigh, NC...............  Pass.................  Pass.................  Pass................  Include.
39660.............................  Rapid City, SD............  Pass.................  Pass.................  Pass................  Include.
39740.............................  Reading, PA...............  Pass.................  Pass.................  Pass................  Include.
39820.............................  Redding, CA...............  Pass.................  Pass.................  Pass................  Include.
39900.............................  Reno, NV..................  Pass.................  Pass.................  Pass................  Include.
40060.............................  Richmond, VA..............  Pass.................  Pass.................  Pass................  Include.
40140.............................  Riverside-San Bernardino-   Pass.................  Pass.................  Pass................  Include.
                                     Ontario, CA.
40220.............................  Roanoke, VA...............  Pass.................  Pass.................  Pass................  Include.
40340.............................  Rochester, MN.............  Pass.................  Pass.................  Pass................  Include.
40380.............................  Rochester, NY.............  Pass.................  Pass.................  Pass................  Include.
40420.............................  Rockford, IL..............  Pass.................  Pass.................  Pass................  Include.
40580.............................  Rocky Mount, NC...........  Pass.................  Pass.................  Pass................  Include.
40660.............................  Rome, GA..................  Pass.................  Pass.................  Pass................  Include.
40900.............................  Sacramento--Roseville--Ard  Pass.................  Pass.................  Pass................  Include.
                                     en-Arcade, CA.
40980.............................  Saginaw, MI...............  Pass.................  Pass.................  Pass................  Include.
41060.............................  St. Cloud, MN.............  Pass.................  Pass.................  Pass................  Include.
41100.............................  St. George, UT............  Pass.................  Pass.................  Pass................  Include.
41140.............................  St. Joseph, MO-KS.........  Pass.................  Pass.................  Pass................  Include.
41180.............................  St. Louis, MO-IL..........  Pass.................  Pass.................  Pass................  Include.
41420.............................  Salem, OR.................  Pass.................  Pass.................  Pass................  Include.
41500.............................  Salinas, CA...............  Pass.................  Pass.................  Pass................  Include.
41540.............................  Salisbury, MD-DE..........  Pass.................  Pass.................  Pass................  Include.
41620.............................  Salt Lake City, UT........  Pass.................  Pass.................  Pass................  Include.
41660.............................  San Angelo, TX............  Pass.................  Pass.................  Pass................  Include.
41700.............................  San Antonio-New Braunfels,  Pass.................  Pass.................  Fail................  Exclude.
                                     TX.
41740.............................  San Diego-Carlsbad, CA....  Pass.................  Pass.................  Pass................  Include.
41860.............................  San Francisco-Oakland-      Pass.................  Pass.................  Pass................  Include.
                                     Hayward, CA.
41900.............................  San Germ[aacute]n, PR.....  Fail.................  Fail.................  Pass................  Exclude.
41940.............................  San Jose-Sunnyvale-Santa    Pass.................  Pass.................  Pass................  Include.
                                     Clara, CA.
41980.............................  San Juan-Carolina-Caguas,   Fail.................  Fail.................  Pass................  Exclude.
                                     PR.
42020.............................  San Luis Obispo-Paso        Pass.................  Pass.................  Pass................  Include.
                                     Robles-Arroyo Grande, CA.
42100.............................  Santa Cruz-Watsonville, CA  Pass.................  Fail.................  Fail................  Exclude.
42140.............................  Santa Fe, NM..............  Pass.................  Pass.................  Pass................  Include.
42200.............................  Santa Maria-Santa Barbara,  Pass.................  Pass.................  Pass................  Include.
                                     CA.
42220.............................  Santa Rosa, CA............  Pass.................  Pass.................  Pass................  Include.
42340.............................  Savannah, GA..............  Pass.................  Pass.................  Pass................  Include.
42540.............................  Scranton--Wilkes-Barre--    Pass.................  Pass.................  Pass................  Include.
                                     Hazleton, PA.
42660.............................  Seattle-Tacoma-Bellevue,    Pass.................  Pass.................  Pass................  Include.
                                     WA.
42680.............................  Sebastian-Vero Beach, FL..  Pass.................  Pass.................  Pass................  Include.
42700.............................  Sebring, FL...............  Pass.................  Pass.................  Pass................  Include.
43100.............................  Sheboygan, WI.............  Fail.................  Fail.................  Pass................  Exclude.
43300.............................  Sherman-Denison, TX.......  Pass.................  Pass.................  Pass................  Include.
43340.............................  Shreveport-Bossier City,    Pass.................  Pass.................  Pass................  Include.
                                     LA.
43420.............................  Sierra Vista-Douglas, AZ..  Pass.................  Fail.................  Fail................  Exclude.
43580.............................  Sioux City, IA-NE-SD......  Pass.................  Pass.................  Pass................  Include.
43620.............................  Sioux Falls, SD...........  Pass.................  Pass.................  Pass................  Include.
43780.............................  South Bend-Mishawaka, IN-   Pass.................  Fail.................  Fail................  Exclude.
                                     MI.
43900.............................  Spartanburg, SC...........  Pass.................  Pass.................  Pass................  Include.
44060.............................  Spokane-Spokane Valley, WA  Pass.................  Pass.................  Pass................  Include.
44100.............................  Springfield, IL...........  Pass.................  Pass.................  Pass................  Include.
44140.............................  Springfield, MA...........  Pass.................  Pass.................  Fail................  Exclude.
44180.............................  Springfield, MO...........  Pass.................  Pass.................  Pass................  Include.
44220.............................  Springfield, OH...........  Fail.................  Fail.................  Pass................  Exclude.
44300.............................  State College, PA.........  Fail.................  Fail.................  Pass................  Exclude.
44420.............................  Staunton-Waynesboro, VA...  Pass.................  Pass.................  Pass................  Include.
44700.............................  Stockton-Lodi, CA.........  Pass.................  Pass.................  Pass................  Include.
44940.............................  Sumter, SC................  Fail.................  Fail.................  Fail................  Exclude.
45060.............................  Syracuse, NY..............  Pass.................  Pass.................  Pass................  Include.
45220.............................  Tallahassee, FL...........  Pass.................  Pass.................  Pass................  Include.
45300.............................  Tampa-St. Petersburg-       Pass.................  Pass.................  Pass................  Include.
                                     Clearwater, FL.
45460.............................  Terre Haute, IN...........  Pass.................  Pass.................  Pass................  Include.
45500.............................  Texarkana, TX-AR..........  Pass.................  Pass.................  Fail................  Exclude.
45540.............................  The Villages, FL..........  Pass.................  Pass.................  Pass................  Include.
45780.............................  Toledo, OH................  Pass.................  Pass.................  Pass................  Include.

[[Page 234]]

 
45820.............................  Topeka, KS................  Pass.................  Pass.................  Pass................  Include.
45940.............................  Trenton, NJ...............  Pass.................  Pass.................  Pass................  Include.
46060.............................  Tucson, AZ................  Pass.................  Pass.................  Pass................  Include.
46140.............................  Tulsa, OK.................  Pass.................  Pass.................  Pass................  Include.
46220.............................  Tuscaloosa, AL............  Pass.................  Pass.................  Pass................  Include.
46340.............................  Tyler, TX.................  Pass.................  Pass.................  Pass................  Include.
46520.............................  Urban Honolulu, HI........  Pass.................  Pass.................  Pass................  Include.
46540.............................  Utica-Rome, NY............  Pass.................  Pass.................  Pass................  Include.
46660.............................  Valdosta, GA..............  Pass.................  Fail.................  Pass................  Exclude.
46700.............................  Vallejo-Fairfield, CA.....  Pass.................  Fail.................  Fail................  Exclude.
47020.............................  Victoria, TX..............  Pass.................  Pass.................  Pass................  Include.
47220.............................  Vineland-Bridgeton, NJ....  Pass.................  Fail.................  Pass................  Exclude.
47260.............................  Virginia Beach-Norfolk-     Pass.................  Pass.................  Fail................  Exclude.
                                     Newport News, VA-NC.
47300.............................  Visalia-Porterville, CA...  Pass.................  Pass.................  Pass................  Include.
47380.............................  Waco, TX..................  Pass.................  Pass.................  Pass................  Include.
47460.............................  Walla Walla, WA...........  Fail.................  Fail.................  Pass................  Exclude.
47580.............................  Warner Robins, GA.........  Pass.................  Pass.................  Pass................  Include.
47900.............................  Washington-Arlington-       Pass.................  Pass.................  Pass................  Include.
                                     Alexandria, DC-VA-MD-WV.
47940.............................  Waterloo-Cedar Falls, IA..  Pass.................  Pass.................  Pass................  Include.
48060.............................  Watertown-Fort Drum, NY...  Fail.................  Fail.................  Pass................  Exclude.
48140.............................  Wausau, WI................  Pass.................  Pass.................  Pass................  Include.
48260.............................  Weirton-Steubenville, WV-   Pass.................  Pass.................  Pass................  Include.
                                     OH.
48300.............................  Wenatchee, WA.............  Pass.................  Pass.................  Pass................  Include.
48540.............................  Wheeling, WV-OH...........  Pass.................  Pass.................  Pass................  Include.
48620.............................  Wichita, KS...............  Pass.................  Pass.................  Pass................  Include.
48660.............................  Wichita Falls, TX.........  Pass.................  Fail.................  Fail................  Exclude.
48700.............................  Williamsport, PA..........  Pass.................  Pass.................  Pass................  Include.
48900.............................  Wilmington, NC............  Pass.................  Pass.................  Pass................  Include.
49020.............................  Winchester, VA-WV.........  Pass.................  Pass.................  Pass................  Include.
49180.............................  Winston-Salem, NC.........  Pass.................  Pass.................  Pass................  Include.
49340.............................  Worcester, MA-CT..........  Pass.................  Pass.................  Pass................  Include.
49420.............................  Yakima, WA................  Pass.................  Pass.................  Pass................  Include.
49620.............................  York-Hanover, PA..........  Pass.................  Pass.................  Pass................  Include.
49660.............................  Youngstown-Warren-          Pass.................  Pass.................  Pass................  Include.
                                     Boardman, OH-PA.
49700.............................  Yuba City, CA.............  Pass.................  Pass.................  Pass................  Include.
49740.............................  Yuma, AZ..................  Pass.................  Pass.................  Pass................  Include.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.
    Comment: The issue of MSA exclusions was a subject raised by a 
variety of commenters. Commenters expressed concerns with the 
possibility of the same MSAs being selected for inclusion in both the 
cardiac EPMs and in the CJR model. Commenters stated that the 
introduction of 3 new required models simultaneously in MSAs where CJR 
is still in the early stages of implementation would divert 
participants' focus from being able to successfully implement CJR and 
would pose resource allocation challenges. Commenters stated that 
hospitals have a limited capacity to successfully take on new models 
and that hospitals could best achieve success when they are allowed to 
focus on specific projects. Commenters stated that adding too many 
required models will result in diluted resources given to each model 
and increased administrative costs to the hospital. One commenter 
expressed concern that implementing too many models can compromise both 
the success of the models and patient care. Commenters requested that 
CMS add an exclusion rule that removes the CJR MSAs from the 
possibility of selection as a cardiac EPM area.
    Response: We acknowledges the concern of CJR participant hospitals 
with respect to having the capacity and ability to take on the new 
cardiac and SHFFT episodes in addition to their current model 
participation. While recognizing the logistical and resource challenges 
of implementing multiple models simultaneously, CMS believes that there 
are commonalities between the models that would result in some 
efficiencies. For example, experiences in CJR with creating gainsharing 
approaches, analyzing claims feeds, and understanding reconciliation 
methodologies will be directly transferable to managing the cardiac 
episodes.
    CMS considered the exclusion of CJR MSAs from the possibility of 
selection as a cardiac EPM. The effect of removing the CJR MSAs was 
considered relative to a variety of other considerations including the 
impact of this removal on the remaining MSAs and whether it would 
create a biased pool due to the disproportionate removal of areas with 
high episode payments as well as areas with a larger population.
    In determining which areas were eligible for selection for CJR, 
MSAs were required to have at least 400 LEJRs in the reference year. In 
contrast, the equivalent exclusion rule for the cardiac EPMs requires 
at least 75 AMI episodes. These two different rules means that the pool 
of MSAs eligible for selection as a cardiac EPM contains many smaller 
MSAs who were not eligible for selection in CJR. Removing the CJR MSA 
would disproportionately remove larger cities from the selection pool 
and the pool would be artificially weighted towards MSAs with lower 
numbers of

[[Page 235]]

cases. The resulting random selection in this pool would similarly be 
over-weighted to select smaller areas with lower numbers of episodes.
    MSAs were selected for inclusion in CJR by dividing MSAs into 
quartiles based on the MSA average LEJR episode spending. The 
likelihood of being selected as a CJR area differed between the 
quartiles such that MSAs in the least expensive quartile had a 30% 
chance of selection and MSAs in the most expensive quartile had a 45% 
chance of selection. Thus, the removal of the CJR MSAs from the cardiac 
EPM selection pool would disproportionately leave relatively more 
efficient MSAs eligible for selection and remove relatively inefficient 
areas. In order to quantify the extent of this potential bias, the 
impact of removing the CJR areas was examined relative to the average 
MSA spending for AMI episodes. CJR MSAs represented just 12% of MSAs in 
the least expensive quartile (9 of 74) but represented 26% of the MSAs 
in the most expensive quartile (19 of 74).
    In summary, because the CJR MSAs were proportionately underweighted 
for more efficient MSAs, and over weighted for more expensive MSAs with 
higher LEJR episode payments, their removal resulted in introducing 
bias which would result in the selection of more small cities as well 
as more efficient cities. This bias to disproportionally select 
relatively more efficient MSAs is counter to the overall orientation 
that these models are most likely to result in cost savings in 
inefficient areas. Furthermore, CMS anticipates that an increase in the 
probability of selection in smaller cities may also be problematic to 
commenters, many of whom expressed concern with the ability of 
hospitals with few cases to succeed under the model.
    CMS further notes that a variety of models and efforts are 
currently underway with the goal of controlling health care costs. 
While this presents an operationally challenging situation, CMS hopes 
to be able to assess the extent to which these different models 
interact and complement (or compete with) one another. The evaluation 
of CJR and the EPMs will include a systematic look at hospital 
experiences in regard to model uptake given their range of prior 
experience, capabilities, and circumstances.
    Comment: One commenter recommended the exclusion of MSAs with less 
than 20 CABG episodes per quarter rather than basing the exclusionary 
criteria only on AMI volume episode volume.
    Response: We continue to have a strong interest in being able to 
observe how well EPMs operate in areas with a lower volume of episodes, 
and, in particular, the consequences of the model for AMI episodes 
where CABG is not commonly performed or where standard practice is to 
refer all CABGs outside of the MSA, and consequently, does not find it 
appropriate to exclude MSAs on the basis of CABG volume.
    Comment: One commenter suggested that MSAs with significant 
penetration of Medicare Advantage Plans and considerable ACO activity 
be excluded from the possibility of selection. They stated that the 
models should be implemented in markets with more limited alternative 
payment and/or managed care activity. They suggested that the selection 
of MSAs believed to be fully invested in care design efforts would make 
it challenging to evaluate whether improvements in efficiency were 
related to the EPMs or associated with these other efforts. The 
commenter stated that restricting to MSAs with minimal involvement with 
other APM would ease both administrative burden and allow for better 
results and more accurate reconciliation.
    Response: While including MSAs with experience in APMs may pose 
challenges to the evaluation in its effort to assess causation, CMS 
believes that the exclusion of MSAs who may be relatively more 
experienced in care redesign and thus more likely to be able to achieve 
success in the models would be undesirable. It would be considered a 
positive if participant hospitals are able to leverage the knowledge 
and experience of experts in their areas in order to successfully 
reduce episode spending in eligible patients. Experience with care 
management under managed care or within APMs might be one source of 
expertise from which participant hospitals may wish to draw. The 
evaluation of EPMs will include an examination of market 
characteristics and model activity, so as to explore how the 
overlapping nature of these two factors impacts performance.
    Comment: One commenter expressed the concern that some hospitals 
act as regional referral centers or may otherwise have a large 
proportion of the beneficiaries they treat who reside outside of the 
MSA where the hospital is located. They expressed concern that it would 
be difficult to manage care for these beneficiaries in the post 
hospital episode period due to this distance. They requested that MSAs 
with a significant percent of cases coming from out of the state be 
excluded from the possibility of selection.
    Response: We recognize that many hospitals treat patients from a 
wide catchment area and that this catchment area may possibly extend 
beyond the MSA. This situation is particularly relevant to the CABG 
EPM. The management of the beneficiary's recovery in the post hospital 
period may be a challenge for some providers. Multiple patient 
characteristics, including the physical distance between the 
beneficiary and the hospital, will influence both what type of care 
redesign approach will be most appropriate and the likelihood that the 
approach taken will result in improved efficiency and quality. While 
distance may pose a challenge to improving patient coordination, it is 
one that many providers have successfully undertaken. Many providers, 
including regional referral centers, have been able to form and 
maintain relationships with providers outside their communities.
    CMS holds that regional referral centers are a critical component 
of how CAGB episodes are treated and, as such, are an important part of 
the cardiac EPM and to gaining an understanding of the ability of such 
participants to manage patient episodes.
    Comment: Commenters expressed concern that low-volume hospitals are 
included in the models and requested that thresholds be added to remove 
low-volume providers from the model. Commenters stated that lower 
volume providers are subject to issues of random variation and that the 
cost and quality experiences observed in these hospitals may not be due 
to efficiencies and care coordination. They stated that smaller 
hospitals will be at a disadvantage due to the inability to achieve 
stability or predictability due to this variation.
    Finally, a commenter noted that they believed that minimum number 
of applicable cases is necessary for a hospitals to perform internal 
analyses to determine the appropriate strategies to use to successfully 
re-engineer care. They stated that having a minimum number of cases is 
a key factor in whether or not a facility can be ready for undertaking 
bundled payments. Minimal numbers are necessary for generating adequate 
levels of involvement in potential partners such as physicians and 
post-acute care providers. The commenter proposed that the definitions 
of minimal volume used in the payment methodology be used instead as 
minimal requirements for hospitals to be required to participate in the 
cardiac EPMs.
    Response: We acknowledge the fact that hospitals, particularly low-
volume hospitals, may have limited resources to fully engage in care 
re-design efforts and, due to the low volume, they are

[[Page 236]]

much more susceptible to wider episode cost fluctuations. We refer 
readers to the following sections of this final rule III.D.4.b.(9). of 
this final rule for a discussion of how target prices for hospitals 
with low volume are determined and to III.D.7.c.(1). of this final rule 
for a discussion of low volume hospital protections under the cardiac 
EPMs.
    The inclusion of low-volume hospitals in the EPMs 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, care redesign experience, market position, and other 
considerations, and circumstances. We are interested in evaluating the 
experience of these hospitals in the models as part of our overall 
desire to see the impact of an episode payment model in providers who 
would not otherwise choose to participate in a model. We would be 
concerned that setting a threshold for low volume could result in 
hospital gaming in order to be below that threshold and thus be 
excluded from the models.
    Similar to the CJR model, the design of the EPMs and the inclusion 
of low-volume providers within the models reflects our interest in 
testing and evaluating the impact of a bundled payment approach for 
these procedures in a variety of circumstances, especially among those 
hospitals that may not otherwise participate in such a test. The 
inclusion of these providers allows CMS to better appreciate and 
understand how the models operate as a general payment approach and its 
impact across a wide range of hospitals. The impact of EPMs on low-
volume hospitals is of great interest to the evaluation of these 
models.
    We acknowledge that providers with low volumes of AMI, CABG, or CJR 
cases may not find it advantageous to engage in an active way with the 
EPMs. We expect that low volume providers may decide that their 
resources are better targeted to other efforts because they do not find 
the financial incentive present in the EPMs sufficiently strong to 
cause them to shift their practice patterns. We believe this choice is 
similar in nature to that made as hospitals decide their overall 
business strategies and where to focus their attentions.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
exclude MSAs that fail one or more of the following rules:
    Exclusion Rule 1: Exclude MSAs with fewer than 75 AMI episodes 
(determined as discussed in section III.C. of this final rule).
    Exclusion Rule 2: Exclude MSAs with fewer than 75 non-BPCI AMI 
episodes in the MSA in the reference year.
    Exclusion Rule 3: Exclude MSAs if the number of non-BPCI AMI 
episodes calculated under Exclusion Rule 2 is less than 50 percent of 
the total number of AMI episodes calculated under Exclusion Rule 1.
    As discussed in section III.B.2. of this final rule, the Burlington 
Vermont MSA was found to no longer be eligible for possible selection 
because of the Vermont All-Payer ACO Model. Thus, 293 MSAs out of 384 
total MSAs are eligible for the possibility of selection as a cardiac 
EPM area.
b. Selection Approach
    We proposed the selection of 98 MSAs for the cardiac EPMs through 
the use of simple random selection from the 294 (now 293) eligible 
MSAs.
    Simple random selection is often considered to be an appropriate 
default approach to experimental design unless there is a compelling 
reason to depart from it. One common alternative approach is to perform 
random selection separately within subgroups. Selection within 
subgroups can be a useful approach to limiting differences between 
intervention and control groups to improve statistical power or for 
facilitating over or under sampling to allow the evaluation to examine 
effects of the intervention on particular types of MSAs or because 
those types of MSAs are of particular interest for policy reasons.
    In CJR, we used a stratified random assignment approach in which we 
organized MSAs into strata based on MSA population size and historic 
LEJR episode payments. Under the CJR model, we believed a stratified 
approach was appropriate due to wide regional variation in prices, 
primarily associated with the use of post-acute services. The 
stratified approach served as a means to oversample in higher-expense 
MSAs as these areas have both the most need for and the most 
opportunity under the CJR model.
    In assessing whether stratification would be proposed for the EPMs, 
we assessed a variety of factors described later in this section. 
Absent stratification, the rate at which a particular type of MSA will 
appear in the sample will be proportional to how often in appears among 
eligible MSAs. If a particular type of MSA is relatively common, it is 
likely to occur often enough that we do not need to deliberately over-
sample for it. In the end, our analyses did not provide sufficient 
evidence that it is necessary to create selection subgroups of MSAs to 
guide the selection approach. As a result, we are proposing to use 
simple random selection from the entire pool of eligible MSAs.
(1) Factors Considered but Not Used
    We considered a variety of possible MSA characteristics for 
possible use in classifying sub-groups. Though we did consider many of 
these variables important, we believe that a simple random selection, 
where warranted, is preferable.
    Some of the factors we considered that we are not proposing to use 
in the selection methodology include the following:
     Measures associated with AMI-episode and CABG episode 
wage-adjusted spending, respectively. In considering how to 
operationalize such measures, we considered a number of alternatives 
including average total episode spending payments in an MSA, average 
episode spending associated with the initial hospital stay(s) and 
average episode spending occurring in the period after discharge from 
the initial hospital.
     Measures associated with variation in practice patterns 
associated with AMI and CABG episodes. In considering how to 
operationalize this measure, we considered a number of alternatives 
including the extent to which both an AMI and a CABG episode are 
associated with having a transfer hospital stay at the beginning of the 
episode, and the extent to which CABG hospitalizations occur following 
a hospital transfer from either within or from outside the same MSA.
     Measures associated with relative market share of 
providers with respect to AMI and/or CABG episodes, including the 
presence or absence of regional referral centers and the number of 
providers with the capacity to perform CABGs or otherwise treat complex 
cardiac patients.
     Health care supply measures of providers in the MSA 
including acute or post-acute bed counts, and number of relevant 
physician specialties such as cardiologists and cardiothoracic 
surgeons.
     MSA-level demographic measures such as: (1) Average 
income; (2) distributions of population by age, gender or race; (3) 
percent dually eligible; and (4) percent with specific health 
conditions or other demographic composition measures.
     Measures associated with the degree to which a market 
might be more capable or ready to implement care-redesign activities. 
Examples of market-

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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.
    Though these measures were not proposed to be part of the selection 
process, we acknowledge that these and other market-level factors may 
be important to the proper understanding of the evaluation of the 
impact of EPMs. We intend to consider these and other measures in 
determining which MSAs are appropriate comparison markets for the 
evaluation and for possible subgroup analysis or risk-adjustment 
purposes. The evaluations will include beneficiary-, provider-, and 
market-level characteristics in how they will examine the performance 
of the proposed EPMs.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters expressed general support for the 
selection approach. Several commenters identified considerations that 
they believed would increase the likelihood of success in these models 
and believed that those factors should influence the likelihood of 
selection.
    One commenter believed that the selection methodology used should 
instead select MSAs where there is unwanted clinical or fiscal 
variation in care. They stated that the implementation of the cardiac 
EPMs in these MSAs would be most likely to target patients who would 
benefit from novel care delivery initiatives. In contrast, another 
commenter noted that the implementation of the cardiac EPMs in a 
variety of markets, including those who are relatively more efficient, 
could help with improving care management/coordination overall.
    One commenter mentioned that CMS did not incorporate any MSA-level 
demographic measures in its selection process, such as distributions of 
population by age, gender, or race; percent of population dually 
eligible for Medicare and Medicaid; percent of population with specific 
health conditions; and other demographic composition measures. They 
believed these factors vary not only between MSAs, but also by 
hospitals within an MSA, and could affect a hospital's chances of 
success in the proposed EPMs.
    Response: We appreciate the suggestions of alternative MSA 
selection criteria and note that we considered whether to 
disproportionately select higher cost areas. As discussed above, the 
range of average episode costs between MSAs was relatively narrow and 
even relatively efficient MSAs would have opportunity for care redesign 
and increased efficiency under these models. The examination of the 
distribution of expenses did not seem to indicate that there are 
substantial pattern of care differences between MSAs that needed to be 
recognized in the selection methodology.
    We acknowledge that demographic factors may indeed influence the 
ability of hospitals to succeed under the models. However, in creating 
the EPMs, we are seeking to understand how the models impact costs and 
quality under a variety of circumstances. We seek to understand if the 
models work in both more and less challenging circumstances in order to 
be able to gain an understanding of successes and failures of the 
episodic payment approach in all types of initiating participants. We 
did not choose to incorporate MSA level demographics in our selection 
methodology but instead we are relying on random selection to include 
MSAs with a variety of circumstances. We did not believe it was 
necessary to preemptively over-sample areas with a larger percent of 
vulnerable patients.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
select MSAs for inclusion in the cardiac EPMs by simple random 
selection.
(2) Sample-Size Calculations and the Number of Selected MSAs
    Our analyses of the necessary sample size led us to propose the 
selection of 98 MSAs, to participate in both the AMI and CABG EPMs. At 
the time of the proposed rule 294 MSAs were eligible for selection out 
of a total of 384 MSAs. In this section, we discuss the assumptions and 
modeling that went into our proposal to test these EPMs in 98 MSAs. The 
discussion of the method of selection of these 98 MSAs is addressed in 
the following section. In coming to the decision to target 98 MSAs, we 
are proposing an approach that limits the size of the intervention to 
the greatest degree possible, while still ensuring that we have 
sufficient statistical power to reliably evaluate the effects of the 
EPMs. Going below this threshold would jeopardize our ability to be 
confident in our results and to be able to generalize from the EPMs to 
the larger national context.
    In calculating the necessary size of the AMI and CABG EPMs, 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 both the AMI and the CABG EPMs 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 AMI and CABG episodes with admission dates from July 1, 
2012, through December 31, 2014. For the purposes of the sample-size 
calculation, we aim to be able to reliably identify between a 2-percent 
and 3-percent reduction in wage-adjusted episode spending after 1 year 
of experience. We chose this range because those numbers represent the 
anticipated amount of the discount proposed to apply under various 
conditions of the AMI and CABG EPMs' implementation.
    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 positives'' and 
``false negatives.'' A false positive occurs if a statistical test 
concludes that a model was successful (that is, saved money) when it in 
fact was not. A false negative occurs if a statistical test fails to 
find statistically-significant evidence that the model was successful, 
when it in fact was successful. In considering the minimum sample size 
needs of the AMI and CABG EPMs, 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 10-
percent chance of a false positive and no more than a 30-percent chance 
of a false negative in order to minimize reduce sample size 
requirements to the greatest degree possible.
    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. We proposed to base the sample size calculation at 
the MSA level. The proposed EPMs are an example of what is known as a 
``nested comparative study.'' Under a nested comparative study, 
assignment to an intervention or comparison arms of the study is based 
on membership in a pre-existing, identifiable group where the groups 
are

[[Page 238]]

not formed at random, but rather through some physical, social, 
geographic, or other connection among their members. Because these 
groups are not formed at random, individual members of each group are 
likely to share important commonalities. In the context of the proposed 
EPMs, spending and outcomes for patients cared for within a given MSA 
are relatively similar to one another due to such factors as the 
existence of common practice or referral patterns, the underlying 
health in the population, and the availability of providers in an area.
    In statistical terms, these commonalities create a positive 
correlation (called an intra-class correlation) among hospitals or 
beneficiaries in the same MSA. Due to that intra-class correlation, the 
variability of any aggregate statistic--such as the estimated 
difference in outcomes between the intervention and comparison arms of 
the study--has two components--(1) variability attributable to 
variation among hospitals or beneficiaries in a given MSA; and (2) 
variability attributable to differences between MSAs. An accurate power 
analysis must account for both components of variability.
    In determining the necessary sample size, we take into 
consideration the degree to which commonalities within MSAs exist and 
the number of independent beneficiaries and hospitals expected to be 
included in the EPMs within each MSA. As part of this process, we 
empirically examined the number of beneficiaries, the number of 
hospitals, and the number of MSAs, as well as the level of correlation 
in episode payments between each level. Based on this empirical 
examination, we determined that the correlation was high enough that 
the degree of variability would be primarily driven by the number of 
MSAs in the model, indicating that the MSA is the appropriate unit of 
analysis for the power calculations.
    Using the previously mentioned assumptions, a power calculation for 
AMI was run which indicated that at 98 MSAs we would be able to 
reliably detect a 3-percent reduction in wage-adjusted episode spending 
after 1 year with a false-positive rate of 10 percent and a false-
negative rate of between 20 percent and 40 percent. We are targeting a 
false-negative rate of 30 percent. The extent to which this rate can be 
lowered will depend on the ability of evaluation models to 
substantially reduce variation through risk adjustment and modeling. We 
believe it is prudent to choose a sample size where the targeted amount 
is in the middle of this expected band.
    We separately assessed the sample-size needs associated with CABG 
episodes. At 98 MSAs, we anticipate being able to detect a 2.25-percent 
reduction in wage-adjusted episode expenditures after 1 year with a 
false-positive rate of 10 percent and a false-negative rate of between 
20-40 percent. The effective number of MSAs where the CABG EPM will be 
tested will be reduced because approximately 6 percent of eligible MSAs 
had no CABG episodes in the reference year. However, our power 
calculations do not lead us to believe we need to increase the sample 
size based on this fact. The number of CABG MSAs can experience this 
reduction and maintain equivalent levels of power to the AMI episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter expressed the opinion that the models should 
be tested in 5 to 10 MSAs rather than be done as a large scale test.
    Response: As stated in the proposed rule, we believe that the 
evidence base related to episode payments is sufficient enough to 
justify a large scale test and we believe that it is appropriate to 
size the models so as to be able to generate statistically reliable 
estimates of the impact as well as to be able to understand how well 
the models operate in a variety of circumstances.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
select 98 MSAs to participate in the cardiac EPMs.
(3) Method of Selecting MSAs
    As previously discussed, we are sought to choose 98 MSAs from our 
pool of eligible MSAs through simple random selection. We proposed to 
make the selection in the proposed rule using SAS Enterprise Guide 7.1 
software to run a computer algorithm 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 will be generated using the birthdate of the person 
executing the program.\39\
---------------------------------------------------------------------------

    \39\ 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 sought comment on our proposal to implement the AMI and CABG 
models in the selected MSAs, some of which may overlap with MSAs where 
the CJR and SHFFT models also are being implemented.
    The following is a summary of the comments received and our 
responses.
    Comment: Comments were received from multiple sources that 
expressed that the list of selected MSAs be published as soon as 
possible to allow for better preparation for the start of the models. 
One commenter requested that the list of hospitals in the selected 
areas also be published and that hospitals be given 60 days to comment 
on its accuracy. Commenters expressed a preference that, in future rule 
making of a similar nature, the list of selected MSAs be displayed in 
the proposed rule rather than the final rule to allow for comment by 
the impacted MSAs and additional preparation time.
    Response: We appreciate the suggestion that MSAs and affected 
providers be published at the time of rulemaking, and will take it 
under advisement in any future rule. One of the reasons for not 
selecting MSAs at the time of the proposed rule was to encourage all 
potentially impacted providers to comment. In addition, we wished to be 
able to maintain flexibility that would allow for the creation of new 
exclusion rules to be suggested in the comment period without 
necessitating the need to re-select MSAs between the proposed and final 
rules. In order to accommodate the later announcement of impacted MSAs, 
we proposed a July 1, 2017 model start. This represents a similar 
amount of time between the CJR MSA announcement and the start of that 
model as for the announcement of the cardiac EPM MSAs and the 
finalization of the SHFFT MSAs and the start of those models.
    The list of MSAs selected for the cardiac EPM is included in TABLE 
2. The list of hospitals identified as in the MSAs selected for the 
cardiac EPMs can be found at https://innovation.cms.gov/initiatives/epm/. Hospitals believing that they have erroneously been identified as 
being in a selected area should send an email to [email protected] within 
45 days of the publication of the final rule. Hospitals should include 
identifying information including the hospital CCN. CMS will 
periodically review and revise the list of hospitals that meet the 
requirements for participation in the cardiac EPMs and

[[Page 239]]

will update this information on https://innovation.cms.gov/initiatives/epm/.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification. We 
selected the participating MSAs for the CABG and AMI EPMs through 
simple random selection. SAS for Windows Version 9.4 software was used 
to run a computer algorithm designed to randomly select MSAs. SAS for 
Windows Version 9.4 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. The random number seed utilized was 19730609.
    The MSAs selected for inclusion are shown in TABLE 2.

                            Table 2--MSAS Selected To Participate in the Cardiac EPMS
----------------------------------------------------------------------------------------------------------------
            CBSA_OMB                                   MSA name                           CJR  selected MSA?
----------------------------------------------------------------------------------------------------------------
10180..........................  Abilene, TX........................................
10420..........................  Akron, OH..........................................  yes.
10780..........................  Alexandria, LA.....................................
10900..........................  Allentown-Bethlehem-Easton, PA-NJ..................
11260..........................  Anchorage, AK......................................
12100..........................  Atlantic City-Hammonton, NJ........................
12220..........................  Auburn-Opelika, AL.................................
12420..........................  Austin-Round Rock, TX..............................  yes.
13380..........................  Bellingham, WA.....................................
13460..........................  Bend-Redmond, OR...................................
14020..........................  Bloomington, IN....................................
14260..........................  Boise City, ID.....................................
14460..........................  Boston-Cambridge-Newton, MA-NH.....................
15940..........................  Canton-Massillon, OH...............................
15980..........................  Cape Coral-Fort Myers, FL..........................
16020..........................  Cape Girardeau, MO-IL..............................  yes.
16300..........................  Cedar Rapids, IA...................................
16700..........................  Charleston-North Charleston, SC....................
16860..........................  Chattanooga, TN-GA.................................
16980..........................  Chicago-Naperville-Elgin, IL-IN-WI.................
17020..........................  Chico, CA..........................................
17660..........................  Coeur d'Alene, ID..................................
17860..........................  Columbia, MO.......................................  yes.
17900..........................  Columbia, SC.......................................
17980..........................  Columbus, GA-AL....................................
18880..........................  Crestview-Fort Walton Beach-Destin, FL.............
19100..........................  Dallas-Fort Worth-Arlington, TX....................
19300..........................  Daphne-Fairhope-Foley, AL..........................
19740..........................  Denver-Aurora-Lakewood, CO.........................  yes.
19780..........................  Des Moines-West Des Moines, IA.....................
20100..........................  Dover, DE..........................................
20500..........................  Durham-Chapel Hill, NC.............................  yes.
21060..........................  Elizabethtown-Fort Knox, KY........................
21500..........................  Erie, PA...........................................
21660..........................  Eugene, OR.........................................
22520..........................  Florence-Muscle Shoals, AL.........................
22660..........................  Fort Collins, CO...................................
23060..........................  Fort Wayne, IN.....................................
23580..........................  Gainesville, GA....................................  yes.
24300..........................  Grand Junction, CO.................................
24860..........................  Greenville-Anderson-Mauldin, SC....................
25940..........................  Hilton Head Island-Bluffton-Beaufort, SC...........
26580..........................  Huntington-Ashland, WV-KY-OH.......................
26820..........................  Idaho Falls, ID....................................
26900..........................  Indianapolis-Carmel-Anderson, IN...................  yes.
26980..........................  Iowa City, IA......................................
27620..........................  Jefferson City, MO.................................
27860..........................  Jonesboro, AR......................................
27900..........................  Joplin, MO.........................................
28020..........................  Kalamazoo-Portage, MI..............................
28140..........................  Kansas City, MO-KS.................................  yes.
28420..........................  Kennewick-Richland, WA.............................
29100..........................  La Crosse-Onalaska, WI-MN..........................
29420..........................  Lake Havasu City-Kingman, AZ.......................
29460..........................  Lakeland-Winter Haven, FL..........................
29620..........................  Lansing-East Lansing, MI...........................
30460..........................  Lexington-Fayette, KY..............................
30620..........................  Lima, OH...........................................
30780..........................  Little Rock-North Little Rock-Conway, AR...........

[[Page 240]]

 
31540..........................  Madison, WI........................................  yes.
31700..........................  Manchester-Nashua, NH..............................
32780..........................  Medford, OR........................................
32820..........................  Memphis, TN-MS-AR..................................  yes.
33340..........................  Milwaukee-Waukesha-West Allis, WI..................  yes.
33540..........................  Missoula, MT.......................................
34820..........................  Myrtle Beach-Conway-North Myrtle Beach, SC-NC......
34980..........................  Nashville-Davidson-Murfreesboro-Franklin, TN.......  yes.
35100..........................  New Bern, NC.......................................
35660..........................  Niles-Benton Harbor, MI............................
36420..........................  Oklahoma City, OK..................................  yes.
36540..........................  Omaha-Council Bluffs, NE-IA........................
39140..........................  Prescott, AZ.......................................
39380..........................  Pueblo, CO.........................................
39580..........................  Raleigh, NC........................................
39660..........................  Rapid City, SD.....................................
39740..........................  Reading, PA........................................  yes.
39900..........................  Reno, NV...........................................
40060..........................  Richmond, VA.......................................
40220..........................  Roanoke, VA........................................
41100..........................  St. George, UT.....................................
41140..........................  St. Joseph, MO-KS..................................
41420..........................  Salem, OR..........................................
41500..........................  Salinas, CA........................................
42340..........................  Savannah, GA.......................................
43300..........................  Sherman-Denison, TX................................
44060..........................  Spokane-Spokane Valley, WA.........................
44100..........................  Springfield, IL....................................
46060..........................  Tucson, AZ.........................................
46140..........................  Tulsa, OK..........................................
46220..........................  Tuscaloosa, AL.....................................  yes.
46540..........................  Utica-Rome, NY.....................................
47940..........................  Waterloo-Cedar Falls, IA...........................
48300..........................  Wenatchee, WA......................................
48620..........................  Wichita, KS........................................  yes.
48900..........................  Wilmington, NC.....................................
49180..........................  Winston-Salem, NC..................................
49660..........................  Youngstown-Warren-Boardman, OH-PA..................
49740..........................  Yuma, AZ...........................................
----------------------------------------------------------------------------------------------------------------

C. Episode Definition for the EPMs

1. Background
    Episode payment models incentivize improvement in the coordination 
and quality of care experienced by a Medicare beneficiary, as well as 
episode efficiency, by bundling payment for services furnished to the 
beneficiary for specific clinical conditions over a defined period of 
time. A key model design feature is the definition of the episodes 
included in the model. The definition of episodes has two significant 
dimensions--(1) a clinical dimension that describes which clinical 
conditions and associated services are included in the episode; and (2) 
a time dimension that describes the beginning, middle, and end of the 
episode.
2. Overview of Three Episode Payment Models
    We proposed three new EPMs--AMI, CABG, and SHFFT--that each begin 
with a hospitalization and extend 90 days after hospital discharge. The 
proposed AMI model includes beneficiaries discharged under an AMI MS-
DRG (280-282), representing admission to an IPPS hospital for AMI that 
is treated with medical management, or an IPPS admission for a PCI MS-
DRG (246-251) with an International Classification of Diseases (ICD)--
Clinical Modification (CM) AMI diagnosis code describing an initial AMI 
diagnosis in the principal or a secondary diagnosis code position.
    The proposed CABG model includes beneficiaries discharged under a 
CABG MS-DRG (231-236), representing an IPPS admission for this coronary 
revascularization procedure irrespective of AMI diagnosis.
    The proposed SHFFT model includes beneficiaries discharged under 
hip and femur procedures except major joint MS-DRG (480-482), 
representing an IPPS admission for a hip fixation procedure in the 
setting of a hip fracture.
    One reason these particular episodes were chosen for the proposed 
EPMs is that the initiation of treatment for each of the three clinical 
conditions included in an episode occurs almost exclusively during a 
hospitalization, which we believe would minimize the possibility of 
shifting beneficiaries in or out of the EPM based on the site-of-
service where treatment is initiated. The majority of evaluation and 
treatment for AMI is performed in the inpatient hospital setting, 
commonly beginning when beneficiaries present with symptoms to the 
emergency department of a hospital. Patients experiencing an AMI are 
almost uniformly admitted to the hospital for further evaluation and 
management.\40\ Although PCIs can be performed and

[[Page 241]]

may be paid by Medicare in the hospital outpatient setting in addition 
to being performed during a hospitalization, the majority of patients 
experiencing an AMI who are candidates for procedural revascularization 
receive PCI procedures during the initial hospitalization for AMI where 
evaluation also occurs.\41\ CABG procedures are furnished exclusively 
in the inpatient hospital setting. We note that all of the Current 
Procedural Terminology (CPT) codes that physicians report for CABG are 
listed on the hospital Outpatient Prospective Payment System (OPPS) 
inpatient-only list in Addendum E of the 2017 OPPS final rule with 
comment period that is posted on the CMS Web site.\42\ The hip fixation 
procedures performed in the SHFFT model also are predominantly 
furnished in the inpatient hospital setting, and we further note that 
almost all of the CPT codes that describe these procedures also are on 
the OPPS inpatient-only list.
---------------------------------------------------------------------------

    \40\ Amsterdam et al. 2014 AHA/ACC Guideline for the Management 
of Patients with Non-ST-Elevation Acute Coronary Syndromes. 
Circulation. 2014; 130:e344-e426.
    \41\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in the proposed rule, 
that end in CY 2014.
    \42\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1656-FC.html.
---------------------------------------------------------------------------

    Hospitals' ability to identify EPM beneficiaries during the 
hospitalization that begins the episode (hereinafter the anchor 
hospitalization) also is an important consideration in developing 
episode payment models that, like the CJR model, rely upon MS-DRG 
assignment for IPPS claims following their submission in order to 
identify beneficiaries for model inclusion. This is especially 
important for medical management of conditions for which the 
predictability of the ultimate MS-DRG for the hospitalization is less 
certain than for surgical or procedural MS-DRGs. AMI represents a 
relative exception among medical conditions as it is associated with 
specific clinical and laboratory features that enable hospitals to 
identify beneficiaries with AMI during the anchor hospitalization whom 
would likely be included in an AMI episode through their ultimate 
discharge under an AMI MS-DRG. We note that ICD-CM coding rules allow 
AMI diagnosis codes in both the primary and secondary position to map 
to AMI MS-DRGs.\43\ In the case of procedural episodes such as CABG, 
SHFFT, and AMI episodes for beneficiaries treated with PCI, the MS-DRG 
for the procedure performed would determine the ultimate MS-DRG 
assignment for the hospitalization unless additional surgeries higher 
in the MS-DRG hierarchy also are reported.\44\ Therefore, we proposed 
these three EPMs for clinical conditions where MS-DRG assignment is 
likely to be certain and known during the anchor hospitalization, even 
though treatment for AMI may involve only medical management. We 
believe hospitals participating in the proposed EPMs would be able to 
identify beneficiaries in EPM episodes through their AMI, CABG, and 
SHFFT episode MS-DRGs during the anchor hospitalization, allowing 
active coordination of EPM beneficiary care during and after 
hospitalization.
---------------------------------------------------------------------------

    \43\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015). https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html.
    \44\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015). https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html.
---------------------------------------------------------------------------

3. Clinical Dimensions of AMI, CABG, and SHFFT Episodes
    As we stated in the CJR Final Rule, we believe that a 
straightforward approach for hospitals and other providers to identify 
Medicare beneficiaries in these episode payment models would be 
important for the care redesign that is required for EPM success, as 
well as for operationalization of the proposed payment and other EPM 
policies (80 FR 73299). Therefore, as in the CJR model, we proposed 
that an EPM episode would be initiated by an admission to an acute care 
hospital for an anchor hospitalization paid under EPM-specific MS-DRGs 
under the IPPS (80 FR 73300).
    The following is a summary of the comments received and our 
responses:
    Comment: Many commenters expressed support for CMS' proposal to use 
many of the BPCI Model 2 and CJR episode parameters to define EPM 
episodes because of the provider experience to date with these design 
features and their applicability to the clinical conditions that are 
the basis of the EPMs. Several commenters specifically recommended that 
CMS begin EPM episodes with emergency department care because including 
beneficiaries with emergency department care and observation status 
would include all beneficiaries with the clinical conditions that were 
included in the proposed EPMs. While the commenters acknowledged that 
many beneficiaries with the clinical conditions in the EPMs would be 
admitted to the hospital, they believe there is a subset of 
beneficiaries for whom care could solely be furnished through emergency 
department and observation care. Other commenters requested 
clarification on how a beneficiary treated in observation status and 
then transferred to another hospital would be handled under the EPMs 
because the beneficiary would never be assigned to an MS-DRG at the 
initial treating hospital. The commenters believe that a hospital could 
use this strategy to avoid including high-cost beneficiaries in the 
EPMs. The commenters stated that patient stabilization is critical and 
the resources needed to care for the beneficiary should not dictate 
observation status versus inpatient status due to a hospital 
participation in an EPM. Several commenters encouraged CMS to provide 
additional guidance on instances when the beneficiary is never admitted 
at the initial hospital, but rather transferred from the emergency 
department or observation status to another hospital for AMI or CABG.
    One commenter recommended that CMS modify the Episode Grouper for 
Medicare (EGM) which, to date, has only been considered for resource-
use measurement, to implement advanced APMs designed around EPMs to 
correct problems the commenter believes would be present in the 
proposed EPMs that would rely on MS-DRGs, including limited severity 
adjustment, the limits on who can bear risk, and the inadequate 
incentives against complications. The commenter claimed that an acute 
care bundle in the hospital setting is important, but so is managing 
chronic conditions in an outpatient setting (which often lead to acute 
inpatient episodes). While contracting for condition episodes and 
procedure episodes separately is feasible and creates a different level 
of accountability, the commenter stated that it is even more desirable 
to consider contracting for the whole patient; that is, procedure 
episodes should be considered downstream events deeply tied to the 
effective management of condition episodes. The commenter stated that 
the nested construction logic of the EGM was designed with this in 
mind.
    A commenter contended that the proposed structure for the new EPM 
episodes would continue to reward providers for complications. Payments 
would be based on the beneficiary's assigned MS-DRG, so a complication 
of care could move a low risk patient from a lower paying MS-DRG to a 
higher paying MS-DRG that could result in a

[[Page 242]]

significant increase in revenue. The commenter believes the problem is 
further compounded because it penalizes providers who invest in quality 
improvement. Providers that invest time and resources into care 
redesign that successfully reduces complications that influence MS-DRG 
assignment do not share in the savings that they generate through their 
efforts. The commenter stated that the MS-DRG payment categorization 
creates a substantial financial incentive to avoid quality improvement 
in favor of focusing on improving the management of adverse events 
after they occur. The commenters stated that the benefit of using MS-
DRG assignment in the EPMs could be preserved without the perverse 
incentive if the payment group for the episode were assigned based on 
an MS-DRG assignment that depended only on diagnosis codes that were 
present on admission.
    Another commenter claimed that MS-DRGs do not map well to care 
delivered in post-acute care settings, especially for chronically ill 
beneficiaries. MS-DRGs, in identifying diagnoses and procedures 
delivered in the acute care hospital setting, often do not relate to 
the skilled nursing needs, functional limitations, or therapy/
rehabilitation focused on in post-acute care settings after hospital 
discharge. Additionally, the commenter pointed out that MS-DRGs do not 
take into account a patient's functional status, which is an important 
indicator for determining a patient's post-acute care needs. The 
commenter recommended CMS to develop a more robust risk adjustment 
methodology under the EPMs, because MS-DRGs alone are not sufficient 
for medically complex patients. For those providers caring for the 
sickest beneficiaries, the commenter recommended that CMS create 
separate bundled payments for seriously ill beneficiaries, as defined 
by something other than MS-DRG.
    Response: We appreciate the support that many commenters expressed 
for our proposal to identify Medicare beneficiaries included in the 
proposed EPMs by their admission to an acute care hospital for a 
hospitalization paid under EPM-specific MS-DRGs under the IPPS. We and 
many stakeholders have gained substantial experience with bundled 
payment models of a similar design under BPCI Model 2 and the CJR 
model. We agree with the many commenters who stressed the importance of 
EPM participants being able to identify EPM beneficiaries on a timely 
basis as early as possible during the episodes in order to maximize the 
opportunities for care redesign to improve EPM episode quality and 
reduce costs. As we discussed in the proposed rule (81 FR 50813), we 
believe that a straightforward approach to EPM model design that would 
allow hospitals and other providers to identify Medicare beneficiaries 
in these episode payment models would be important for the care 
redesign that is required for EPM success, as well as for 
operationalization of the proposed payment and other EPM policies, and 
agree with many commenters that our proposed design of the EPMs meets 
these objectives.
    While we acknowledge the perspective of some commenters that a 
small number of beneficiaries with clinical conditions that are the 
focus of the EPMs, especially AMI, may be appropriately treated in the 
emergency department with observation status without hospital 
admission, we believe it is infeasible to include these beneficiaries 
in the EPMs due to complex operational challenges for CMS and EPM 
participants and model design parameters, such as appropriate pricing 
in the context of varied hospital cardiac care capabilities. We refer 
to section III.C.4.a.(1) of this final rule for further discussion of 
comments on outpatient treatment scenarios and our responses. We refer 
to section III.C.4.a.(5) of this final rule for discussion of 
outpatient-to-inpatient (o-i) transfer scenarios for beneficiaries with 
AMI, including when AMI episodes would begin and to which hospital the 
episode would be attributed. We agree with the commenters that patient 
stabilization of serious conditions such as AMI in the emergency 
department of a hospital is critical and the resources needed to care 
for the beneficiary should not dictate observation status versus 
inpatient status due to a hospital participation in an EPM. We believe 
our final EPM policies, including our AMI model transfer policies, 
reflect our commitment to ensuring that the initial care of 
beneficiaries with urgent conditions such as those targeted by the EPMs 
is not influenced by hospital participation in an EPM. We also refer to 
sections III.G.4. through 6. of this final rule for discussion of our 
monitoring plans to detect changing patterns of care under the EPMs, 
including practices that could indicate that medically complex 
beneficiaries who otherwise would be expected to be in high-cost EPM 
episodes do not initiate EPM episodes.
    While we have an interest in future condition-specific episode 
payment models and sought public comment on this topic in the proposed 
rule (81 FR 50810 through 50811), we have not identified long-term 
management of beneficiaries with chronic disease as the focus of these 
EPMs, which are proposed to extend 90 days post-hospital discharge from 
an anchor hospitalization for beneficiaries who have cardiac or 
orthopedic surgery or a cardiac event.
    As one commenter pointed out, MS-DRGs currently provide higher 
payments for beneficiaries who experience complications during the 
inpatient hospitalization and we appreciate the interest of the 
commenter in EPMs that encourage improvement in quality of care during 
the anchor hospitalization for which hospitals would be rewarded. 
However, given the operational challenges that EPMs that require 
participation present for EPM participants and CMS, it would be 
infeasible in models like the EPMs to regroup beneficiaries to 
different MS-DRGs for setting EPM episode prices based only on their 
diagnoses that were present on admission to address underlying payment 
incentives under the IPPS. Instead, the EPMs focus EPM participants on 
care redesign to improve the quality of care for EPM beneficiaries that 
may achieve internal hospital cost savings for the anchor 
hospitalization and/or savings to Medicare in the post-hospital 
discharge period. We expect that some of those care redesign strategies 
that improve care coordination for EPM beneficiaries may have spill-
over effects that result in reduced in-hospital complications as well.
    Finally, we refer to section III.D.4.b.(2) of this final rule for a 
discussion of risk adjustment under the EPMs. Because all EPM 
participants care for some seriously ill beneficiaries, some hospitals 
may disproportionately care for such beneficiaries due to their service 
area, referral patterns, and/or specialized hospital capacity. We 
believe appropriate risk adjustment of EPM episode prices, particularly 
by performance year 3 when the pricing blend shifts to reflect 
predominantly regional pricing, addresses the commenter's concern that 
led them to recommend that CMS create separate bundled payments for 
seriously ill beneficiaries as defined by something other than MS-DRG 
for those providers caring for the sickest patients. While we agree 
with the commenter that MS-DRGs only reflect the resources for the 
anchor hospitalization and, therefore, do not necessarily reflect the 
post-acute care resources required by a beneficiary, we note that the 
IPPS payment for the anchor hospitalization is included in the EPM 
episode and constitutes, on average, a significant percentage of the 
EPM episode spending, specifically 33

[[Page 243]]

percent of AMI episode spending for episodes anchored by AMI MS-DRGs; 
58 percent of AMI episode spending for episodes anchored by PCI MS-
DRGs; 63 percent of CABG episode spending; and 27 percent of SHFFT 
episode spending.\45\ Thus, we do not believe it is necessary or 
appropriate to create separate bundled payments for seriously ill 
beneficiaries defined by a grouping other than MS-DRG, because the 
specific MS-DRG of the anchor hospitalization determines a significant 
percentage of spending for the episode for EPM beneficiaries, including 
seriously ill beneficiaries.
---------------------------------------------------------------------------

    \45\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that began in CYs 2012-2014.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concern about EPM 
participants' ability to identify EPM beneficiaries on a timely basis. 
The commenters explained that the final MS-DRGs assigned to the 
beneficiary's hospitalization is not generated until several days post-
discharge, thus impacting the EPM participant's ability to predict 
whether a beneficiary is in or out of an EPM episode at the time the 
beneficiary is in the hospital. One commenter added that because the 
MS-DRG is assigned to a patient's case upon discharge, it may not be 
predictable during a patient's treatment prior to discharge, making it 
difficult for providers to implement care redesign targeted to a 
patient population identified by MS-DRGs. This commenter believes that 
the MS-DRGs assigned to a patient's stay are often inaccurate or 
otherwise inappropriate for the patient's diagnosis, making the 
classification an inappropriate basis for episode triggers, budgets, 
quality measurement and adjusting for underlying patient illnesses. 
Another commenter reported on their BPCI Model 2 experience where 70 
percent of model beneficiaries were elective admissions, and 30 percent 
presented to the hospital through the emergency department. Given that 
the proposed EPMs would be more similar to the commenter's experience 
with emergency department admissions, the commenter expressed concern 
that the EPMs would limit an EPM participant's ability to intervene 
with the beneficiary prior to admission and skepticism that the 
participant could even identify the beneficiary as being eligible for 
the EPM prior to hospital discharge. The commenter added that with very 
sick patients, hospitals often must wait for the appropriate coding to 
confirm which MS-DRG the patient ultimately is assigned to prior to 
billing.
    Several commenters further stated that precedence rules among 
different models and programs can touch the same beneficiary, and 
stated that hospital case managers, nurses, and administrators cannot 
know at admission or even before discharge which model the beneficiary 
may already be enrolled in or attributed to based on prior utilization.
    Response: We appreciate the interest of the commenters in the 
timely identification of EPM beneficiaries that would allow EPM 
participants the most significant opportunity to influence the care of 
these beneficiaries to improve the quality and reduce the cost of EPM 
episodes. While we appreciate that many EPM beneficiaries would be 
admitted to the hospital on an emergency basis for treatment of hip 
fracture, AMI, or CABG surgery under circumstances that would not allow 
EPM participants to engage these beneficiaries prior to hospital 
admission, we believe that our proposals for the clinical conditions in 
the EPMs make identification of most EPM beneficiaries unambiguous 
while they are still in the hospital, without a need for hospitals to 
wait for coding following discharge to confirm which MS-DRG the patient 
ultimately is assigned to for the hospitalization.
    As we stated in the proposed rule (81 FR 50829), we agree with the 
commenters that hospitals' ability to identify EPM beneficiaries during 
the anchor hospitalization is an important consideration in developing 
episode payment models that rely upon MS-DRG assignment for IPPS claims 
following their submission in order to identify beneficiaries for model 
inclusion. We believe the identification of SHFFT and CABG model 
beneficiaries should be straightforward for EPM participants because 
the relevant MS-DRG assignments directly result from the surgical 
procedure performed during the hospitalization and would, therefore, be 
accurate. However, identification of beneficiaries for a model focused 
on medical management of conditions may be more challenging because the 
predictability of the ultimate MS-DRG for the hospitalization is less 
certain than for surgical or procedural MS-DRGs. We believe that AMI 
represents a relative exception among medical conditions as it is 
associated with specific clinical and laboratory features that should 
enable hospitals to identify beneficiaries with AMI during the anchor 
hospitalization who are treated medically or with PCI and who would 
likely be included in an AMI episode through their ultimate discharge 
under an AMI MS-DRG. Therefore, we proposed these three EPMs for 
clinical conditions where MS-DRG assignment is likely to be certain and 
known during the anchor hospitalization, even though treatment for AMI 
may involve only medical management. We believe hospitals participating 
in the proposed EPMs would generally be able to identify beneficiaries 
in EPM episodes through their AMI, CABG, and SHFFT episode MS-DRGs 
during the anchor hospitalization, allowing active coordination of EPM 
beneficiary care during and after hospitalization.
    We refer to section III.D.6.c. of this final rule for discussion of 
issues related to beneficiaries whose care could be included in the 
EPMs as well as other CMS models and programs.
    Comment: One commenter expressed appreciation for CMS' intent to 
not have overlap between the same care for a beneficiary in episodes 
under more than one EPM. The commenter sought clarification about how 
CMS would attribute episodes that originate with one EPM and then cross 
over into another EPM. The commenter provided an example of a 
beneficiary with a surgical hip fracture who has an AMI during the 
hospitalization that is coded in a secondary position, yet the 
precipitating event for the hip fracture was through syncope and a 
fall.
    Response: When an IPPS claim is submitted to Medicare for payment 
of a beneficiary's hospitalization, the claim is grouped to an MS-DRG 
using the MS-DRG grouper, a software that uses ICD-10-CM diagnosis and 
procedures codes submitted on the hospital claim to assign an acute 
hospital stay to a particular MS-DRG. Claims are assigned to an MS-DRG 
using the grouper effective for the discharge date of the claim. Under 
the EPMs, regardless of the chronology and causality of events that led 
to the diagnoses and treatment during the hospitalization, we would 
rely upon the MS-DRG (and the presence of an ICD-10-CM AMI diagnosis 
code on the claim in the case of a PCI MS-DRG) assigned to the claim 
following hospital discharge to initiate an EPM episode and define the 
EPM to which the beneficiary's care would be attributed. In the 
commenter's example in which a patient is admitted to a hospital for 
surgical hip fracture fixation and has an AMI during the 
hospitalization, the MS-DRG grouper would assign a SHFFT MS-DRG to that 
hospitalization. Therefore, the beneficiary would initiate a SHFFT 
episode if the hospital is a SHFFT model participant. Regardless of

[[Page 244]]

whether or not the hospital is an AMI model participant, no AMI episode 
would be initiated.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to initiate EPM episodes by an 
admission to an acute care hospital for an anchor hospitalization paid 
under EPM-specific MS-DRGs under the IPPS, without modification. We 
refer to section III.D.4.a.(5) of this final rule for a discussion of 
outpatient-to-inpatient and inpatient-to-inpatient transfers between 
hospitals under the AMI model. We refer to section III.D.6.c of this 
final rule for further discussion of issues related to overlap of 
beneficiaries in other Innovation Center models and CMS programs.
a. Definition of the Clinical Conditions Included in AMI, CABG, and 
SHFFT Episodes
(1) AMI (Medical Management and PCI) Model
    We proposed the AMI model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated for AMI with either medical management or 
coronary artery revascularization with PCI. We proposed to define 
beneficiary inclusion in the AMI model by discharge under an AMI MS-DRG 
(280-282), representing those individuals admitted with AMI who receive 
medical therapy but no revascularization, and discharge under a PCI MS-
DRG (246-251) with an ICD-10-CM diagnosis code of AMI on the IPPS claim 
for the anchor hospitalization in the principal or secondary diagnosis 
code position. We note that we would use AMI International 
Classification of Diseases, 9th revision clinical modification (ICD-9-
CM) diagnosis codes to identify historical episodes for setting AMI 
model-episode benchmark prices in the early performance years of the 
AMI model. The Uniform Hospital Discharge Data Set (UHDDS) defines the 
principal diagnosis for hospitalization as ``that condition established 
after study to be chiefly responsible for occasioning the admission of 
the patient to the hospital for care'' and other (secondary) diagnoses 
as ``all conditions that coexist at the time of admission, that develop 
subsequently, or that affect the treatment received and/or the length 
of stay. Diagnoses that relate to an earlier episode which have no 
bearing on the current hospital stay are to be excluded.'' \46\ We 
proposed to include those beneficiaries discharged under PCI MS-DRGs 
with an AMI ICD-10-CM diagnosis code in the principal or secondary 
diagnosis code position to ensure that beneficiaries with an AMI that 
is not chiefly responsible for occasioning the hospitalization are 
included in the AMI model because the AMI itself is likely to 
substantially influence the hospitalization and post-discharge recovery 
(and be responsible for leading to the PCI) even if an AMI ICD-10-CM 
diagnosis code is reported in a secondary diagnosis code position. For 
example, a beneficiary receiving a PCI with an ICD-10-CM diagnosis code 
of pneumonia in the principal position and an AMI ICD-10-CM diagnosis 
code in a secondary position would be included in the AMI model, which 
would be appropriate because the course of the beneficiary's recovery 
and management during the AMI episode would be primarily associated 
with the AMI and PCI. While pneumonia is typically an acute illness 
that may sometimes result in hospitalization, underlying chronic 
conditions may increase the likelihood that a beneficiary would be 
hospitalized for pneumonia, a condition that is more commonly treated 
on an outpatient basis. AMI in association with a hospitalization for 
pneumonia would represent a sentinel event for the beneficiary 
resulting from underlying CAD that signals a need for a heightened 
focus on medical management of CAD and other beneficiary risk factors 
for future cardiac events that may themselves have increased the 
beneficiary's risk for pneumonia. Thus, care coordination and 
management in the 90 days post-hospital discharge for these 
beneficiaries would be focused on managing CAD and the beneficiary's 
cardiac function after the AMI.
---------------------------------------------------------------------------

    \46\ http://www.cdc.gov/nchs/data/icd/icd10cm_guidelines_2014.pdf.
---------------------------------------------------------------------------

    In the proposed rule (81 FR 50830), we acknowledged that this 
proposal to identify beneficiaries included in the AMI model through a 
combination of MS-DRGs and AMI ICD-CM diagnosis codes represented a 
modification of the CJR episode definition methodology. The CJR model 
defined episodes based on MS-DRGs alone, specifically MS-DRG 469 (Major 
joint replacement or reattachment of lower extremity with Major 
Complications or Comorbidities (MCC)) and MS-DRG 470 (Major joint 
replacement or reattachment of lower extremity without MCC), because 
the anchor hospitalization for the CJR model was defined by admission 
for a surgical procedure alone (80 FR 73280). However, the proposed AMI 
episodes would be defined by admission for a medical condition that 
includes a range of treatment options, including medical treatment and 
PCI. Therefore, to identify beneficiaries admitted for AMI and treated 
with PCI requires ICD-CM diagnosis codes paired with MS-DRGs to 
identify the subset of PCI MS-DRG cases associated with AMI that would 
otherwise be excluded from an AMI model based solely on AMI MS-DRGs.
    For the purposes of defining historical AMI episodes, we proposed 
to exclude beneficiaries discharged under PCI MS-DRGs with an AMI ICD-
9-CM diagnosis code in the principal or secondary position if there was 
an intracardiac ICD-9-CM procedure code in any procedure code field. 
Intracardiac procedure codes do not represent PCI procedures indicated 
for the treatment of the coronary artery obstruction that results in 
AMI, but instead represent a group of procedures indicated for treating 
congenital cardiac malformations, cardiac valve disease, and cardiac 
arrhythmias. These intracardiac procedures are performed within the 
heart chambers rather than PCI procedures for AMI that are performed 
within the coronary blood vessels. To reflect this clinical 
distinction, the FY 2016 IPPS update removed intracardiac procedures 
from MS-DRGs 246-251 and assigned them to new MS-DRGs 273 and 274 (80 
FR 49367). Therefore, to be consistent with our proposed definition of 
AMI episodes that initiate with PCI MS-DRGs 246-251 (not with MS-DRGs 
273 and 274) and an AMI ICD-9-CM diagnosis code in the principal or 
secondary position, we proposed to define historical AMI episodes for 
beneficiaries discharged under PCI MS-DRGS 246-251 as those that do not 
include the ICD-9-CM procedure codes in Table 3. These codes were also 
posted on the CMS Web site at https://innovation.cms.gov/initiatives/epm.

[[Page 245]]



 Table 3--Proposed ICD-9-CM Procedure Codes in any Position on the IPPS
    Claim for PCI MS-DRGS (246-251) That Do Not Define Historical AMI
                                Episodes
------------------------------------------------------------------------
      ICD-9-CM procedure code        ICD-9-CM procedure code description
------------------------------------------------------------------------
35.52.............................  Repair of atrial septal defect with
                                     prosthesis, closed technique.
35.96.............................  Percutaneous balloon valvuloplasty.
35.97.............................  Percutaneous mitral valve repair
                                     with implant.
37.26.............................  Catheter based invasive
                                     electrophysiologic testing.
37.27.............................  Cardiac mapping.
37.34.............................  Excision or destruction of other
                                     lesion or tissue of heart,
                                     endovascular approach.
37.36.............................  Excision, destruction, or exclusion
                                     of left atrial appendage.
37.90.............................  Insertion of left atrial appendage
                                     device.
------------------------------------------------------------------------

    In FY 2014, there were approximately 395,000 beneficiaries 
discharged from a short-term acute care hospitalization (excluding 
Maryland) with an AMI ICD-9-CM diagnosis code in the principal or 
secondary position on the IPPS claim. Of these beneficiaries, 58 
percent were discharged under MS-DRGs that would initiate an AMI 
episode, specifically an AMI MS-DRG (33 percent) and PCI MS-DRG (25 
percent). Five percent of beneficiaries were discharged from CABG MS-
DRGs and 3 percent were discharged from AMI MS-DRGs representing death 
during the hospitalization. The remaining 34 percent of beneficiaries 
with an AMI ICD-CM diagnosis code in the principal or secondary 
position were distributed across over approximately 300 other MS-DRGs, 
with the septicemia MS-DRGs accounting for 8 percent and the remainder 
accounting for 3 percent or less of beneficiaries with an AMI ICD-CM 
diagnosis code on the IPPS claim.\47\ We note that the AMI ICD-9-CM 
diagnosis code was most commonly in a secondary position for discharges 
from these other MS-DRGs, likely representing beneficiaries 
hospitalized for another condition who experienced an AMI during that 
hospitalization. We further note that CMS' AMI quality measures used in 
the Hospital Inpatient Quality Reporting (HIQR) Program are based on 
all beneficiaries discharged under any MS-DRG who have an AMI ICD-CM 
diagnosis code only in the principal position, reflecting the measures' 
focus on the most homogeneous beneficiary population with AMI as the 
condition responsible for occasioning the hospital admission. This is 
in contrast with our proposed use of an AMI ICD-10-CM diagnosis code in 
the principal or a secondary position for the AMI model in order to 
identify those beneficiaries receiving a PCI whose hospitalization and 
post-discharge recovery and management would primarily be associated 
with the PCI and AMI.
---------------------------------------------------------------------------

    \47\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013--September 2014 
Inpatient Claims File located in the Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    The proposed specifications for AMI episodes, including ICD-9-CM 
AMI diagnosis codes for historical episodes used to set the initial AMI 
model-episode benchmark prices and ICD-10-CM AMI diagnosis codes for 
the performance years of the model, are displayed in Table 5. The 
proposed ICD-9-CM intracardiac procedure codes used to exclude 
inpatient claims with PCI MS-DRGs 246-251 from anchoring AMI model 
historical episodes used to set initial AMI model-episode benchmark 
prices are displayed in Table 3.
    Based on Medicare claims data for historical AMI episodes ending in 
CYs 2012-2014, the annual number of potentially eligible beneficiary 
discharges for the AMI model nationally was approximately 168,000.\48\ 
This number was less than the approximately 229,000 discharges for 
beneficiaries with AMI discharged from AMI MS-DRGs 280-282 and PCI MS-
DRGs 246-251 that could be expected to be included in the AMI model for 
several reasons. Discharges did not result in historical episodes when 
a beneficiary did not meet the beneficiary care inclusion criteria 
discussed in section III.C.4.a.(1) of the proposed rule (81 FR 50834); 
was not discharged alive from PCI MS-DRGs 246-251; was discharged from 
a transfer hospital during a chained anchor hospitalization; or was 
discharged from a readmission during an AMI episode that did not 
initiate new model episodes.
---------------------------------------------------------------------------

    \48\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in the proposed rule 
that began in CYs 2012-2014.
---------------------------------------------------------------------------

    The list of ICD-9-CM and ICD-10-CM AMI diagnosis codes used to 
identify beneficiaries discharged under a PCI MS-DRG (MS-DRGs 246-251) 
in historical episodes and during the performance years of the model 
that would be included in the AMI episodes were discussed in section 
III.C.4.a.(2) of the proposed rule (81 FR 50834 through 50835). To make 
changes to this list as necessary based on annual ICD-10-CM coding 
changes or to address issues raised by the public throughout the EPM 
performance years, we proposed implementing the following sub-
regulatory process, which mirrors the sub-regulatory process as 
described in the CJR Final Rule for updating hip fracture ICD-9-CM and 
ICD-10-CM diagnosis codes (80 FR 73340) and for updating the exclusion 
list (80 FR 73305 and 73315). We proposed to use this process on an 
annual, or more frequent, basis to update the AMI ICD-10-CM diagnosis 
code list and to address issues raised by the public. As part of this 
process, we proposed the following standard when revising the list of 
ICD-10-CM diagnosis codes representing AMI: The ICD-10-CM diagnosis 
code is sufficiently specific that it represents an AMI. We proposed to 
then post a list of potential AMI ICD-10-CM diagnosis codes to the CMS 
Web site at https://innovation.cms.gov/initiatives/epm to allow for 
public input on our planned application of these standards, and then 
adopt the AMI ICD-10-CM diagnosis code list with posting to the CMS Web 
site of the final AMI ICD-CM diagnosis code list after our 
consideration of the public input. We would provide sufficient time for 
public input based on the complexity of potential revisions under 
consideration, typically at least 30 days, and, while we would not 
respond to individual comments as would be required in a regulatory 
process, we could discuss the reasons for our decisions about changes 
in response to public input with interested stakeholders.
    The proposals for identifying the beneficiaries included in the AMI 
model and the sub-regulatory process for updating the AMI ICD-10-CM 
diagnosis code list were included in proposed Sec.  512.100(c)(1) and 
(d), respectively. We sought comment on our proposals to identify 
beneficiaries included in the AMI model and the sub-regulatory process 
for updating the AMI ICD-10-

[[Page 246]]

CM diagnosis code list. The proposal to exclude inpatient claims with 
PCI MS-DRGS 246-251 from anchoring AMI model historical episodes used 
to set initial AMI model-episode benchmark prices when there was an 
ICD-9-CM intracardiac procedure code on the claim was included in 
proposed Sec.  512.100(d)(4). We sought comment on our proposal to 
exclude inpatient claims with PCI MS-DRGS 246-251 from anchoring AMI 
model historical episodes used to set initial AMI model-episode 
benchmark prices when there was an ICD-9-CM intracardiac procedure code 
on the claim.
    We received no comments on the proposed sub-regulatory process for 
updating the AMI ICD-10-CM diagnosis code list. The following is a 
summary of the comments received on the other AMI model proposals to 
define the included clinical conditions and our responses.
    Comment: Several commenters expressed concern that the AMI model 
would be so heavily reliant upon coding that creates an artificial 
clinical population which is so heterogeneous as to make clinical care 
redesign efforts nonspecific and likely ineffective. They contended 
that while EPMs based on surgical MS-DRGs streamline patient 
identification and inclusion, the AMI model would depend on multiple 
levels of coding, both ICD-10-CM and MS-DRGs. One commenter explained 
that an important distinction between medical diagnosis and procedural-
based episode-of-care models is that medical diagnosis models tend to 
involve a patient population of greater complexity, often with life-
threating conditions. The commenter believes that, where appropriate, 
this awareness should be reflected in the design of the EPMs. The 
commenters were concerned that the proposed AMI model would put a 
greater emphasis on coding methodologies and increase the chance of 
disparities between cases identified by each responsible hospital for 
inclusion in the AMI model versus cases identified by CMS from 
historical claims data upon which quality-adjusted target prices would 
be based. The commenters stressed the need for CMS to establish 
clinical homogeneity in the AMI model, limiting ambiguity as much as 
possible.
    Several commenters recommended CMS to use ICD-10-CM coding 
strategies to limit inclusion of AMI model beneficiaries to the most 
clinically similar subset of beneficiaries in order to allow for 
meaningful comparisons and ultimately provide CMS the opportunity to 
clearly evaluate the impact of the AMI model on patient care and 
outcomes. The commenters stated that with the move from ICD-9-CM to 
ICD-10-CM, the coding stages associated with AMI have changed, 
warranting additional considerations. Specifically, a number of 
commenters recommended that CMS limit the AMI model to beneficiaries 
with ST-elevation myocardial infarction (STEMI) discharged under AMI 
MS-DRGs and PCI MS-DRGs with an AMI ICD-10-CM code only in the 
principal diagnosis code position on the inpatient claim. The 
commenters claimed that while STEMIs occur due to an acute coronary 
artery occlusion, many non-ST elevation (NSTEMI) beneficiaries with AMI 
experience open coronary arteries but there is an imbalance between the 
oxygen demands of the heart and the coronary arteries' ability to meet 
them. The commenters added that due to these substantial differences in 
the underlying pathophysiology of STEMI and NSTEMI AMI patients that 
lead to more variation in clinical presentation in NSTEMI patients, in 
addition to the different approaches to their evaluation and 
management, the AMI model should only include STEMI beneficiaries 
which, when risk adjustment is applied, represent a more homogenous 
population compared to NSTEMI patients.
    These commenters presented the most current consensus driven 
definition of AMI, the third universal definition, as: ``Evidence of 
myocardial necrosis consistent with acute myocardial ischemia. Under 
these conditions, any one of the following criteria meets the diagnosis 
for MI:
     Detection of a rise and/or fall of cardiac biomarker 
values, preferably cardiac troponin with at least one value above the 
99th percentile upper reference limit; and at least one of the 
following:
     Symptoms of new ischemia;
     New or presumed new significant ST-segment-T wave (ST-T) 
changes or new left bundled branch block (LBBB);
     Development of pathological Q waves in the ECG;
     Imaging evidence of new loss of viable myocardium or new 
regional wall motion abnormality; and
     Identification of an intracoronary thrombus by angiography 
or autopsy.'' \49\
---------------------------------------------------------------------------

    \49\ Thygesen K., Alpert J.S., Jaffe A.S., et al and the Writing 
Group on behalf of the Joint ESC/ACCF/AHA/WHF Task Force for the 
Universal Definition of Myocardial Infarction. Circulation. 
2012;126:2020-2035.
---------------------------------------------------------------------------

    The commenters recommended CMS to clearly define AMI for the EPM 
because they claimed that currently what is coded as AMI often only 
meets this definition in part and may be limited to abnormal biomarkers 
that can be detected without an acute occlusion of a coronary artery. 
Aligning coding with clinical reality is necessary for establishing 
clinical homogeneity in the AMI model. The commenters believe that 
including in the AMI model beneficiaries not only with a principal but 
a secondary diagnosis of AMI would make it difficult to establish a 
clearly defined clinically homogeneous population for the following 
reasons:
     Critically ill patients often receive a secondary 
diagnosis of AMI for what is more correctly characterized as supply-
demand ischemia due to the routine and inaccurate coding of any 
troponin leak or elevation as an AMI, despite the absence of a clinical 
event suggestive of infarction. The commenters provided examples such 
as a beneficiary with metastatic breast cancer and internal bleeding 
who exhibits a slight cardiac troponin leak or a beneficiary with 
multi-organ failure, stating that the root cause of small elevation of 
troponin in these cases would be the underlying condition, not CAD. 
They also claimed that elderly patients with heart failure or rapid 
atrial fibrillation may have a secondary AMI ICD-CM diagnosis, yet the 
heart failure or atrial fibrillation would drive decisions about care, 
not the AMI.
     Outcomes and cost-of-care for critically ill patients with 
a secondary AMI diagnosis are likely driven more by the primary 
condition than by AMI resulting from possible CAD.
     Patterns of care are very different for patients with a 
secondary, as compared to a principal, diagnosis of AMI; and
     Including patients with a secondary diagnosis of AMI 
increases the variability within the AMI model, limiting opportunity to 
draw clear conclusions when testing the model.
    One commenter requested that CMS account for beneficiaries with AMI 
who do not have a traditional AMI but coding results in discharge under 
an AMI MS-DRG by specifying a concrete list of ICD-10-CM codes that, if 
included on a claim for a beneficiary discharged under an AMI MS-DRG 
from an AMI model participant, would exclude the beneficiary from the 
AMI model.
    Response: We appreciate the suggestions of the commenters that we 
include a more homogeneous group of beneficiaries in the AMI model by 
limiting the model to those beneficiaries with a STEMI ICD-CM diagnosis 
code in the principal position on the claim for the anchor 
hospitalization. Under our proposal to include all beneficiaries

[[Page 247]]

in the AMI model discharged from AMI MS-DRGs and beneficiaries 
discharged from PCI MS-DRGs with an AMI ICD-CM diagnosis code listed in 
Table 3 (the codes we are finalizing are listed in Table 4) in the 
principal or a secondary position on the inpatient claim for the anchor 
hospitalization, all of the diagnosis codes except 410.71 
(Subendocardial infarction, initial episode of care) in ICD-9-CM and 
121.4 (Non-ST elevation (NSTEMI) myocardial infarction) and 122.2 
(Subsequent non-ST elevation (NSTEMI) myocardial infarction) are for 
STEMI diagnoses. We analyzed historical AMI episodes from 2012-2014 and 
found that about 78 percent of episodes were for NSTEMI, while 22 
percent were for STEMI.\50\ There are well-established clinical 
guidelines for the management of beneficiaries with both NSTEMI and 
STEMI, and the clinical care pathways generally differ for these 
beneficiaries.51 52 However, to limit the AMI model to 
beneficiaries with STEMI only, the minority of beneficiaries with AMI 
whose care is less varied, and exclude beneficiaries with NSTEMI, the 
majority of beneficiaries with AMI whose care is more varied and highly 
dependent on the beneficiary's risk factors for adverse outcomes, would 
miss a substantial opportunity to test an EPM for a large proportion of 
Medicare beneficiaries with AMI. We believe there are substantial 
opportunities for care redesign under the AMI model to improve the 
quality and efficiency of episode care for both NSTEMI and STEMI 
patients so we will not limit the model to one subgroup of 
beneficiaries hospitalized for treatment of AMI. In response to the 
commenters who were concerned that including beneficiaries with NSTEMI 
and STEMI in the AMI model could interfere with CMS' ability to 
evaluate the impact of the AMI model on patient care and outcomes, we 
note that as discussed in section IV. of this final rule, we will 
examine the impact of the AMI model on subgroups of beneficiaries to 
better understand variations in payments and outcomes within and 
between hospitals. The identification of subgroups to be examined will 
include a variety of key clinical and demographic factors.
---------------------------------------------------------------------------

    \50\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule that 
began in CYs 2012-2014.
    \51\ Amsterdam EA, Wenger NK, Brindis RG, Casey DE Jr, Ganiats 
TG, Holmes DR Jr, Jaffe AS, Jneid H, Kelly RF, Kontos MC, Levine GN, 
Liebson PR, Mukherjee D, Peterson ED, Sabatine MS, Smalling RW, 
Zieman SJ. 2014 ACC/AHA guideline for the management of patients 
with non-ST-elevation acute coronary syndromes: a report of the 
American College of Cardiology/American Heart Association Task Force 
on Practice Guidelines. Circulation. 2014;130:e344-e426.
    \52\ O'Gara PT, Kushner FG, Ascheim DD, Casey DE Jr, Chung MK, 
de Lemos JA, Ettinger SM, Fang JC, Fesmire FM, Franklin BA, Granger 
CB, Krumholz HM, Linderbaum JA, Morrow DA, Newby LK, Ornato JP, Ou 
N, Radford MJ, Tamis-Holland JE, Tommaso CL, Tracy CM, Woo YJ, Zhao 
DX. 2013 ACCF/AHA guideline for the management of ST-elevation 
myocardial infarction: a report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines. Circulation. 2013;127.
---------------------------------------------------------------------------

    We also analyzed the distribution of AMI ICD-9-CM diagnosis codes 
for FY 2014 discharges from AMI and PCI MS-DRGs (ICD-10-CM was not in 
use in that year) in the principal versus secondary position for 
beneficiaries who would be included in the AMI model under our proposal 
because of their assignment to an AMI MS-DRG or to a PCI MS-DRG.\53\ We 
found that 94 percent of historical episodes assigned to PCI MS-DRGs 
had an AMI ICD-9-CM diagnosis code in the principal position. Of those 
episodes with an AMI ICD-9-CM diagnosis code in the secondary position, 
the most common principal diagnoses were 996.72 (Other complications 
due to other cardiac device, implant, and graft) and 414.01 (Coronary 
atherosclerosis of native coronary artery), which constituted 53 
percent of cases with an AMI ICD-9-CM diagnosis code only in a 
secondary position, while the remaining episodes had one of over 200 
different ICD-9-CM diagnoses codes in the principal position. In 
addition, we found that 86 percent of episodes assigned to AMI MS-DRGs 
had an AMI ICD-9-CM diagnosis code in the principal position. Of those 
cases with an AMI ICD-9-CM diagnosis code in the secondary position, 
the most common principal diagnoses in descending order of frequency 
were 428.23 (Acute on chronic systolic heart failure); 427.31 (Atrial 
fibrillation); 428.33 (Acute on chronic diastolic heart failure); 
428.43 (Acute on chronic combined systolic and diastolic heart 
failure); 428.0 (Congestive heart failure, unspecified); and 428.21 
(Acute systolic heart failure). These diagnoses constituted 62 percent 
of cases with an AMI ICD-9-CM code only in a secondary position, while 
the remaining episodes had one of over 200 different, but primarily 
cardiac, ICD-9-CM diagnoses codes in the principal position. We note 
that the diagnosis code patterns we observed did not confirm the views 
of some commenters that beneficiaries with underlying non-cardiac 
disease and a troponin leak, such as a metastatic breast cancer with 
internal bleeding, would be included in the AMI model based on our 
proposal. However, the AMI model would include some beneficiaries 
discharged from AMI MS-DRGs with significant underlying cardiac 
conditions such as heart failure and atrial fibrillation in the 
principal diagnosis code position, another example provided by some 
commenters.
---------------------------------------------------------------------------

    \53\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013-September 2014 Inpatient 
Claims File located in the Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    ICD-CM diagnosis coding does not rely on clinical definitions; it 
is the physician who is responsible for documenting the patient's 
diagnosis. In other words, coders cannot determine if a patient 
suffered an AMI based on cardiac biomarkers. If the physician documents 
an AMI, then the coder is required to report the ICD-10-CM code 
describing the type of AMI. The coder does not interpret the troponin 
levels of a beneficiary.
    Based on our analysis of historical claims and the established 
rules for medical coding, we believe that it is appropriate to include 
the small percentage of beneficiaries with an ICD-CM AMI diagnosis code 
only in the secondary position upon discharge from AMI and PCI MS-DRGs 
in the AMI model because the principal diagnoses on these claims 
generally represent beneficiaries with coronary obstruction. The 
secondary AMI diagnosis on the claim would have resulted from a 
physician diagnosis of AMI which, as the commenters stated, should be 
represented by changes in cardiac biomarker values and at least one 
other characteristic of a specified list. In addition to representing a 
reasonably homogeneous population, we believe this approach provides an 
unambiguous definition for AMI model participants to use to identify 
beneficiaries discharged from PCI MS-DRGs who would be in the AMI 
model. Because the model is focused on a condition, AMI, rather than a 
procedure, and some beneficiaries admitted for PCI will not have an 
AMI, it is necessary for PCI MS-DRGs to pair ICD-CM diagnosis codes 
with the MS-DRG to identify AMI model beneficiaries.
    While we observed that 14 percent of beneficiaries assigned to AMI 
MS-DRGs only had an AMI ICD-9-CM diagnosis code in the secondary 
position and most commonly another cardiac diagnosis in the principal 
position, this group is a small minority of beneficiaries discharged 
from AMI MS-DRGs. We do not believe that it is necessary to exclude 
these beneficiaries from the AMI model for purposes of clinical 
homogeneity because the beneficiaries should have had an AMI documented 
by a physician for an AMI diagnosis

[[Page 248]]

code to be included in a secondary position on the hospital claim. We 
further observed from our analysis of FY 2014 claims for discharges 
from AMI MS-DRGs that those beneficiaries with an AMI ICD-9-CM code in 
the principal position commonly had similar cardiac diagnoses (for 
example, atrial fibrillation and heart failure) as those beneficiaries 
where the order of diagnosis coding was reversed.\54\ Care coordination 
and management of other cardiac conditions which would be included in 
the AMI episode definition as discussed in section III.C.3.b. of this 
final rule would be common for beneficiaries discharged from AMI MS-
DRGs, regardless of whether AMI is the principal or a secondary 
diagnosis on the hospital claim that led to the beneficiary's discharge 
from an AMI MS-DRG. Therefore, limiting the AMI model beneficiaries 
only to those assigned to AMI MS-DRGs based on a principal diagnosis 
code of AMI would not significantly increase clinical homogeneity of 
those AMI model beneficiaries discharged after medical treatment for 
AMI. Moreover, to exclude beneficiaries discharged from AMI MS-DRGs 
with an AMI ICD-9-CM diagnosis code only in a secondary position on the 
hospital claim from the model could substantially complicate timely EPM 
participant identification of the beneficiaries in the model by 
including only a subset of beneficiaries assigned to AMI MS-DRGs upon 
discharge. Thus, we do not believe it is necessary for AMI MS-DRGs to 
pair AMI ICD-CM diagnosis codes with the MS-DRG to identify AMI model 
beneficiaries.
---------------------------------------------------------------------------

    \54\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013-September 2014 Inpatient 
Claims File located in the Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    Comment: In addition to the commenters who recommended that CMS 
apply specific coding strategies to increase clinical homogeneity of 
beneficiaries in AMI episodes, other commenters recommended that CMS 
exclude a variety of beneficiaries who would otherwise meet the 
proposed AMI model criteria for inclusion. Some commenters further 
recommended CMS to make a pricing adjustment for AMI episodes for these 
beneficiaries if CMS does not exclude them from the model altogether. 
Suggestions included excluding beneficiaries who are in the following 
clinical scenarios:
     Cardiogenic shock or, at a minimum, the subset of 
beneficiaries with cardiogenic shock who are transferred from an AMI 
model participant or who are transferred to an AMI model participant, 
as the impact of the AMI model on transfer decisions could delay access 
to life-saving therapies at specialized centers.
     Sepsis who do not have clinically traditional AMI and 
would not be expected to follow a typical clinical pathway for AMI.
     Experiencing a second or greater AMI, who are more likely 
to have complex cardiac needs beyond immediate management of the AMI.
     Undergoing organ transplantation or ventricular assist 
device (VAD) implantation during the episode, because regional pricing 
could limit access to life-saving therapies only available at those few 
centers capable of caring for advanced heart failure patients and organ 
transplant candidates.
     Receiving outpatient inotropes for advanced heart failure 
during AMI episodes, because these therapies allow beneficiaries to 
avoid a surgical bridge to transplant with VAD implantation but are 
used in a group of beneficiaries who might otherwise receive a VAD. The 
commenters believes this would be consistent with excluding 
beneficiaries who receive VAD during AMI episodes from the AMI model.
     Undergoing CABG or other cardiac surgery within 90 days 
following discharge from the hospitalization for AMI because they must 
be medically optimized prior to surgery to ensure safe outcomes. This 
percentage of beneficiaries is higher for certain hospitals with 
complex patient populations, and the proposed payment methodology would 
not adequately account for these high-cost cases.
    Response: We appreciate the recommendations of the commenters 
regarding the exclusion of certain complex, potentially high-cost 
beneficiaries from the AMI model. We do not believe it would be 
appropriate to exclude beneficiaries experiencing cardiogenic shock or 
a second or subsequent AMI from the AMI model because there are 
significant opportunities for improving the quality and efficiency of 
care for these beneficiaries during episodes, despite their greater 
complexity and medical needs, and we believe it is important to include 
these beneficiaries in the test of the AMI model. In response to the 
commenters who recommended that we exclude beneficiaries with sepsis 
and atypical AMI from the AMI model, based on our proposed definition 
of the beneficiaries to be included in the AMI model and the ICD-CM 
diagnosis code analysis discussed in the response to the previous 
comment, we do not believe that beneficiaries with sepsis and 
clinically atypical AMI would generally be included in the AMI model 
because they would not be assigned to AMI or PCI MS-DRGs.
    While readmission for cardiac transplantation or VAD implantation 
would be excluded from AMI episodes based on our proposed AMI model 
exclusion list, these beneficiaries would otherwise initiate and remain 
in AMI episodes throughout the 90-day post-discharge period both before 
and following cardiac transplantation or VAD implantation that occurs 
during the 90-day period. Other readmissions and Part B services 
furnished to these beneficiaries would be included in the episodes 
based on the proposed exclusion list. We believe it is important to 
include in the AMI model these beneficiaries with complex care needs 
following hospitalization for AMI, including those receiving outpatient 
inotropes during AMI episodes, because there are opportunities to 
improve the quality and efficiency of their care, despite their 
experiencing severe sequelae following AMI.
    Finally, we note that we also do not believe it would be 
appropriate to exclude from the AMI model those beneficiaries receiving 
CABG or other cardiac surgery during AMI episodes after a period of 
medical optimization following discharge from the anchor 
hospitalization. As discussed in section III.D.4.b.(2)(c) of this final 
rule, we are providing a pricing adjustment for AMI episodes with a 
CABG readmission for beneficiaries who follow this medically 
appropriate clinical pathway. We refer to section III.D.4.b.(2) of this 
final rule for further discussion of risk adjustment in the context of 
the AMI model's implementation of downside risk and progression to 
regional pricing for AMI episodes.
    Comment: Several commenters supported excluding intracardiac 
valvular and ablation procedures from historical AMI episodes for 
clinical consistency between historical AMI episodes and those during 
the AMI model performance years. They explained that intracardiac 
valvular and ablation procedures are typically unrelated to management 
of an AMI but would historically have substantially impacted the total 
spending in historical AMI episodes for beneficiaries discharged from 
MS-DRGs 246 through 251 in centers that performed those procedures.
    Response: We appreciate the support from the commenters. We 
continue to believe it is appropriate to define historical AMI episodes 
for beneficiaries discharged under PCI MS-DRGS 246-251 as those that do 
not include the ICD-9-CM procedure codes in Table 4.

[[Page 249]]

    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.100(c)(1) to 
include the care of beneficiaries in the AMI model who meet the general 
beneficiary care inclusion criteria as discussed in section 
III.C.4.a.(1) of this final rule and who are discharged under an AMI 
MS-DRG (280-282), representing those individuals admitted with AMI who 
receive medical therapy but no revascularization, or discharged under a 
PCI MS-DRG (246-251) with an ICD-10-CM diagnosis code of AMI as 
displayed in Table 6 on the IPPS claim for the anchor hospitalization 
in the principal or secondary diagnosis code position, without 
modification.
    We are also finalizing the proposals in Sec.  512.100(d)(4) to 
define historical AMI episodes for beneficiaries discharged under PCI 
MS-DRGS 246-251 as those that do not include the ICD-9-CM procedure 
codes in Table 4, without modification.

   Table 4--Final ICD-9-CM Procedure Codes in any Position on the IPPS
    Claim for PCI MS-DRGS (246-251) That Do Not Define Historical AMI
                                Episodes
------------------------------------------------------------------------
      ICD-9-CM procedure code        ICD-9-CM procedure code description
------------------------------------------------------------------------
35.52.............................  Repair of atrial septal defect with
                                     prosthesis, closed technique.
35.96.............................  Percutaneous balloon valvuloplasty.
35.97.............................  Percutaneous mitral valve repair
                                     with implant.
37.26.............................  Catheter based invasive
                                     electrophysiologic testing.
37.27.............................  Cardiac mapping.
37.34.............................  Excision or destruction of other
                                     lesion or tissue of heart,
                                     endovascular approach.
37.36.............................  Excision, destruction, or exclusion
                                     of left atrial appendage.
37.90.............................  Insertion of left atrial appendage
                                     device.
------------------------------------------------------------------------

    Finally, we are finalizing the proposals in Sec.  512.100(d)(1)-(3) 
for the sub-regulatory process to be used on an annual, or more 
frequent, basis to update the AMI ICD-10-CM diagnosis code list and to 
address issues related to AMI diagnosis codes raised by the public, 
without modification. As part of this process, we will use the 
following standard when revising the list of ICD-10-CM diagnosis codes 
representing AMI: The ICD-10-CM diagnosis code is sufficiently specific 
that it represents an AMI. We will post a list of potential AMI ICD-10-
CM diagnosis codes to the CMS Web site at https://innovation.cms.gov/initiatives/epm to allow for public input on our planned application of 
the standard, and then adopt the AMI ICD-10-CM diagnosis code list with 
posting to the CMS Web site of the final AMI ICD-CM diagnosis code list 
after our consideration of the public input. We will provide sufficient 
time for public input based on the complexity of potential revisions 
under consideration, typically at least 30 days, and, while we will not 
respond to individual comments as would be required in a regulatory 
process, we can discuss the reasons for our decisions about changes in 
response to public input with interested stakeholders.
    We note that we reviewed the FY 2017 ICD-10-CM diagnosis code 
changes that became available after publication of the EPM proposed 
rule in the Federal Register on August 2, 2016. There are no changes or 
additions to the ICD-10-CM diagnosis codes reporting AMI for FY 2017 so 
we are not suggesting modifications for FY 2017 to the final list 
displayed in Table 6 of ICD-10-CM AMI diagnosis codes in the principal 
or secondary position on the IPPS claim for PCI MS-DRGs (246-251) that 
initiate AMI episodes. Thus, we are not initiating a sub-regulatory 
update process for FY 2017 AMI ICD-10-CM diagnosis code updates at this 
time.
(2) CABG Model
    We proposed the CABG model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated with CABG irrespective of AMI during the CABG 
hospitalization, thereby including beneficiaries undergoing elective 
CABG in the CABG model as well as beneficiaries with AMI who have a 
CABG during their initial AMI treatment. The CABG model would be 
similar to the CJR model in that the anchor hospitalization would be 
defined by admission for a surgical procedure, which would be defined 
by the MS-DRGs for that procedure alone (80 FR 73280). All CABG 
procedures are performed in the inpatient hospital setting. Thus, we 
proposed to include beneficiaries admitted and discharged from an 
anchor hospitalization paid under CABG MS-DRGs (231-236) under the IPPS 
in the CABG model. Based on Medicare claims data for historical CABG 
episodes beginning in CYs 2012-2014, the annual number of potentially 
eligible beneficiary discharges for the CABG model nationally was 
approximately 48,000.\55\
---------------------------------------------------------------------------

    \55\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in the proposed rule, 
that began in CYs 2012-2014.
---------------------------------------------------------------------------

    The proposal for identifying beneficiaries included in the CABG 
model was included in proposed Sec.  512.100(c)(2). We sought comment 
on our proposal to identify beneficiaries included in the CABG model.
    The following is a summary of the comments received and our 
responses.
    Comment: Similar to the suggestions of commenters recommending that 
CMS exclude certain beneficiaries discharged from AMI MS-DRGs or PCI 
MS-DRGs with an AMI ICD-10-CM diagnosis code from the AMI model, 
several commenters recommended that CMS exclude a variety of 
beneficiaries from the CABG model who would otherwise meet the proposed 
CABG model criteria for inclusion. Recommendations include excluding 
beneficiaries who are in the following clinical scenarios:
     Cardiogenic shock or, at a minimum, the subset of 
beneficiaries with cardiogenic shock who are transferred from a model 
participant or who are transferred to a model participant, as the 
impact of the CABG model on transfer decisions could delay access to 
life-saving therapies at specialized centers;
     Undergoing organ transplantation or VAD implantation 
during the CABG episode, as regional pricing could limit access to 
life-saving therapies only available at those few centers capable of 
caring for advanced heart failure patients and organ transplant 
candidates.
     Receiving outpatient inotropes for advanced heart failure 
during CABG episodes, because these therapies allow beneficiaries to 
avoid a surgical bridge to transplant with ventricular assist device 
(VAD) implantation but are used in a group of beneficiaries who might 
otherwise receive a VAD. The

[[Page 250]]

commenters state that this would be consistent with excluding 
beneficiaries who receive VAD during CABG episodes from the CABG model.
     Undergoing a second or greater CABG, given the increase in 
complexity and comorbidities associated with this population.
     Undergoing a salvage CABG due to a failed or aborted PCI, 
either during a single admission or a readmission, due to the 
clinically frail beneficiaries that result in high-cost episodes.
    Response: We appreciate the recommendations of the commenters 
regarding the exclusion of certain complex, potentially high-cost 
beneficiaries from the CABG model, and note that in some cases 
recommendations for exclusion were the same as for the AMI model. We do 
not believe it would be appropriate to exclude beneficiaries 
experiencing cardiogenic shock, undergoing a second or subsequent CABG, 
or undergoing salvage CABG from the CABG model because there are 
significant opportunities for improving the quality and efficiency of 
care for these beneficiaries during episodes, despite their greater 
complexity and medical needs, and we believe it is important to include 
these beneficiaries in the test of the CABG model.
    While readmission for cardiac transplantation or VAD implantation 
would be excluded from CABG episodes based on our proposed CABG model 
exclusion list, these beneficiaries would otherwise initiate and remain 
in CABG episodes throughout the 90-day post-discharge period both 
before and following cardiac transplantation or VAD implantation that 
occurs during the 90-day period. Other readmissions and Part B services 
furnished to these beneficiaries would be included in the episodes 
based on the proposed exclusion list. We believe it is important to 
include in the CABG model these beneficiaries with complex care needs 
following CABG surgery, including those receiving outpatient inotropes 
during CABG episodes, because there are opportunities to improve the 
quality and efficiency of their care, despite their experiencing severe 
sequelae following CABG. We refer to section III.D.4.b.(2) of this 
final rule for further discussion of risk adjustment in the context of 
the CABG model's implementation of downside risk and progression to 
regional pricing for CABG episodes.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.100(c)(2) to 
include the care of beneficiaries in the CABG model who meet the 
general beneficiary care inclusion criteria as discussed in section 
III.C.4.a.(1) of this final rule and are discharged under a CABG MS-DRG 
(231-236) paid under the IPPS, without modification.
(3) SHFFT (Excludes Lower Extremity Joint Replacement) Model
    We proposed the SHFFT model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated surgically for hip and femur fractures, other 
than hip arthroplasty. Together, the CJR and SHFFT models would cover 
all surgical treatment options (that is, hip arthroplasty and fixation) 
for Medicare beneficiaries with hip fracture.
    The SHFFT model would be similar to the CJR model in that the 
anchor hospitalization would be defined by admission for a surgical 
procedure, which would be defined by the MS-DRGs for that procedure 
alone (80 FR 73280). Additionally, most SHFFT procedures are furnished 
in the inpatient hospital setting, consisting primarily of hip fixation 
procedures, with or without reduction of the fracture, as well as open 
and closed surgical approaches. Thus, we proposed to include 
beneficiaries admitted and discharged from an anchor hospitalization 
paid under SHFFT MS-DRGs (480-482) under the IPPS in the SHFFT model. 
Based on Medicare claims data for historical SHFFT episodes beginning 
in CYs 2012-2014, the annual number of potentially eligible beneficiary 
discharges for the SHFFT model nationally was approximately 
109,000.\56\
---------------------------------------------------------------------------

    \56\ Episodes for SHFFT beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in the proposed rule, 
that began in CYs 2012-2014.
---------------------------------------------------------------------------

    The proposal for identifying beneficiaries included in the SHFFT 
model was included in proposed Sec.  512.100(c)(3). We sought comment 
on our proposal to identify beneficiaries included in the SHFFT model.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters expressed support for the proposal 
to define the clinical conditions included in the SHFFT model as 
beneficiaries who are admitted and discharged under SHFFT MS-DRGs. 
Other commenters recommended that CMS apply additional episode-specific 
criteria to exclude beneficiaries from the SHFFT model who would be 
discharged from the SHFFT MS-DRGs. Recommendations of beneficiaries 
from some commenters to be excluded include:
     Beneficiaries with fracture due to falls or trauma in 
association with acute myocardial infarction; cardiac arrhythmia; 
syncope; cerebrovascular accident; seizure; head injury; or polytrauma 
to reduce the large risk of increases in patient transfers from EPM 
participants seeking to reduce their financial responsibility for high-
cost beneficiaries;
     Beneficiaries with dementia or Alzheimer's disease due to 
ethical issues around withholding surgery that could arise in the case 
of EPM participants attempting to reduce their financial risk;
     Beneficiaries already residing in a SNF at the time of 
fracture, who would necessitate an unavoidable SNF stay after discharge 
from the anchor hospitalization that would increase the episode cost 
attributable to the EPM participant;
     Beneficiaries with fractures related to cancer, who would 
be expected to be high-cost cases;
     Beneficiaries with a history of previous hip fracture; 
previous surgery in the region; retained hardware; open fracture; 
periprosthetic fractures; and congenital deformities who would be 
expected to have atypical and potentially costly hip fracture care 
pathways; and
     Beneficiaries who smoke or have diabetes, which are risk 
factors for fracture nonunion and infection, respectively, because 
these behaviorally mediated risk factors for costly care cannot be 
managed prior to hip surgery, unless the SHFFT model adjusts prices for 
the higher financial risk attributable to these beneficiaries.
    Response: We appreciate the recommendations of the commenters to 
exclude certain beneficiaries receiving SHFFT from the SHFFT model due 
their personal circumstances, other clinical conditions, or 
circumstances that led to the hip fracture. We agree with the 
commenters that beneficiaries in this group may be more likely to 
require complex care during the anchor hospitalization and significant, 
intensive health services during the 90 day post-hospital discharge 
period, which could result in high-cost SHFFT episodes. However, we do 
not believe it would be appropriate to exclude beneficiaries with 
complex social or clinical circumstances from the SHFFT model because 
there are significant opportunities for improving the quality and 
efficiency of care for these beneficiaries during episodes, despite 
their greater complexity and medical needs, and we believe it is 
important to

[[Page 251]]

include these beneficiaries in the test of the SHFFT model. As 
discussed in section III.G.4. of this final rule, we will be monitoring 
for issues related to access to care. We expect that all Medicare 
beneficiaries with hip fracture are offered clinically appropriate 
treatments for their fracture and that all transfers of beneficiaries 
with hip fracture to other hospitals are medically necessary and not 
determined by the SHFFT model participant's assessment of the 
beneficiary's risk of a high-cost SHFFT episode. We also refer to 
section III.D.4.b.(2) of this final rule for further discussion of risk 
adjustment in the context of the SHFFT model's implementation of 
downside risk and progression to regional pricing for SHFFT episodes.
    Comment: Some commenters stated that there is a sizeable minority 
of beneficiaries with hip fracture who should not and do not get 
hospitalized or if hospitalized are not treated with surgery for 
fracture so would not be included in the SHFFT or CJR models. These 
commenters observed that these beneficiaries were not discussed in the 
proposed rule and, therefore, no discussion was included about the 
decisions related to the appropriate treatment of hip fracture in the 
case of serious disability, frailty, and concurrent illness. The 
commenters contended that EPM participants that have historically 
served a substantial frail population could be seriously disadvantaged 
under the SHFFT model due to the significant care needs for these 
beneficiaries following hip fracture surgery and might seek to reduce 
their traditional commitment to this population in various ways, which 
were contrary to the interests of this highly vulnerable population. 
Some commenters further speculated that beneficiaries with hip fracture 
could be shifted to no surgery or to joint replacement if SHFFT model 
participants seek to reduce high-cost cases that present the most 
financial risk under the SHFFT model. The commenters further stated 
that the SHFFT model may drive SHFFT model participants to provide more 
expensive hip replacement to beneficiaries due to their desire to avoid 
SNF admission because of the longer need for protected weight-bearing 
post-internal fixation after SHFFT in comparison with total joint 
replacement where immediate weight-bearing may be possible.
    Response: While we agree with the commenters that surgical fracture 
repair may not be appropriate for some beneficiaries with hip fracture, 
the proposed SHFFT model was designed to include only those 
beneficiaries with surgical fracture repair other than joint 
replacement and not those for which surgical fracture repair was not 
performed. We believe the decision about fracture treatment should 
remain that of the beneficiary in consultation with any caregivers and 
his or her treating physicians. We did not propose to define the SHFFT 
model by hip fracture alone because we believe the primary 
opportunities for care redesign under an EPM that seeks to improve 
episode quality and efficiency are in the surgical treatment of hip 
fracture, rather than in the primary non-surgical management of hip 
fracture for beneficiaries who may or may not be hospitalized.
    We do not believe that EPM participants would direct Medicare 
beneficiaries to other treatments that would result in their not being 
included in the SHFFT model simply on the basis of the beneficiary's 
potential for being a high-cost hip fracture surgical episode. We refer 
to section III.D.4.b.(2) for discussion of risk adjustment for complex 
beneficiaries under the SHFFT model. In addition, we note that 
beneficiaries with hip fracture who are treated with joint replacement, 
a care pattern that some commenters believe could result from SHFFT 
model participants' efforts to avoid of high-cost cases under the SHFFT 
model, would be included in the CJR model for most SHFFT model 
participants who are also CJR participant hospitals as discussed in 
section III.B.3. of this final rule. Thus, it is unlikely that a shift 
from a SHFFT procedure to joint replacement would financially benefit 
the SHFFT model participant. As discussed in sections III.G.4. through 
6. of this final rule, we will be closely monitoring for access to 
care, quality of care, and delayed care under the SHFFT model.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.100(c)(3) to 
include the care of beneficiaries in the SHFFT model who meet the 
general beneficiary care inclusion criteria as discussed in section 
III.C.4.a.(1) of this final rule and are discharged under a SHFFT MS-
DRG (480-482) under the IPPS, without modification.
b. Definition of the Related Services Included in EPM Episodes
    The general principles for the definition of related services are 
the same for the AMI, CABG, and SHFFT models, so we address them in a 
single discussion in this section. Like the CJR model, we are 
interested in testing inclusive AMI, CABG, and SHFFT episodes to 
incentivize comprehensive, coordinated, patient-centered care for the 
beneficiary throughout the episode (80 FR 73303). Therefore, we 
proposed to exclude Medicare items and services furnished during the 
EPM episodes only when unrelated to the EPM episode diagnosis and 
procedures based on clinical rationale that would result in standard 
exclusions from all of the episodes in a single EPM. Thus, we proposed 
to include all items and services paid under Medicare Part A and Part B 
unless they fall under an exclusion because they are unrelated to the 
EPM episodes.
    Also like the CJR model, we proposed that the items and services 
ultimately included in the EPM episodes after the exclusions are 
applied are called related items and services, and that Medicare 
spending for related items and services be included in the historical 
data used to set EPM-episode benchmark prices and in the calculation of 
actual EPM episode payments that would be compared against the quality-
adjusted target price to assess the performance of EPM participants (80 
FR 73303 and 73315). Additionally, we proposed that Medicare spending 
for unrelated items and services (excluded from the EPMs' episode 
definitions) would not be included in the historical data used to set 
EPM-episode benchmark prices or in the calculation of actual EPM 
episode payments. We proposed that related items and services for EPM 
episodes would include the following items and services paid under 
Medicare Part A and Part B, after the EPM-specific exclusions are 
applied:
     Physicians' services.
     Inpatient hospital services.
     Inpatient psychiatric facility (IPF) services.
     Long-Term Care Hospital (LTCH) services.
     Inpatient Rehabilitation Facility (IRF) services.
     Skilled Nursing Facility (SNF) services.
     Home Health Agency (HHA) services.
     Hospital outpatient services.
     Independent outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment.
     Part B drugs.
     Hospice.
    We note that inpatient hospital services would include services 
paid through IPPS operating and capital payments. The AMI, CABG, and 
SHFFT episodes also could include certain per-member-per-month model 
payments as discussed in section III.D.6.d. of the proposed rule (81 FR 
50871 through 50872). These items and services for the

[[Page 252]]

EPMs are the same items and services included in CJR episodes (80 FR 
73303 and 73315).
    Similar to the CJR model and for the reasons explained in the CJR 
Final Rule, we proposed to exclude drugs that are paid outside of the 
MS-DRGs included in the EPM episode definitions, specifically 
hemophilia clotting factors, identified by CPT code, diagnosis code, 
and revenue center on IPPS claims, from the EPM episodes (80 FR 73303 
and 73315). Hemophilia clotting factors, in contrast to other drugs 
that are administered during a hospitalization and paid through the MS-
DRG, are paid separately by Medicare in recognition that clotting 
factors are costly and essential to appropriate care of certain 
beneficiaries. Therefore, we believe there are no EPM episode 
efficiencies to be gained in the variable use of these high cost drugs.
    We also proposed to exclude IPPS new technology add-on payments for 
drugs, technologies, and services from these EPM episodes, excluding 
them from both the actual historical episode data used to set EPM-
episode benchmark prices and from actual EPM episode payments that are 
reconciled to the quality-adjusted target prices like the CJR model (80 
FR 73303-73304 and 73315). This would apply to both the anchor 
hospitalization and any related readmissions during the EPM episodes. 
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 under the MS-DRG 
system. We believe it would not be appropriate for the EPM to 
potentially diminish beneficiaries' access to new technologies or to 
burden hospitals who choose to use these new drugs, technologies, or 
services with concern about these payments counting toward EPM 
participants' actual EPM episode payment. Additionally, new drugs, 
technologies, or services approved for the add-on payments vary 
unpredictably over time in their application to specific clinical 
conditions.
    Finally, we proposed to exclude OPPS transitional pass-through 
payments for medical devices as defined in Sec.  419.66 from the EPM 
episodes because, through the established OPPS review process, we have 
determined that these technologies have a substantial cost but also 
lead to substantial clinical improvement for Medicare beneficiaries. 
This proposal also is consistent with the CJR model final exclusions 
policy (80 FR 73308 and 73315).
    We proposed to follow the same general principles in determining 
other proposed excluded Part A and Part B services from the EPM 
episodes that we use in the CJR model in order to promote coordinated, 
high-quality, patient-centered care (80 FR 73304). These include 
identifying excluded (unrelated) services rather than included 
(related) services based on clinical review. We would operationalize 
these principles for the new EPMs, as we do for the CJR model, by 
excluding unrelated inpatient hospital admissions during the EPM 
episode by identifying MS-DRGs for exclusion on an EPM-specific basis 
(80 FR 73304 through 73312 and 73315). We would further exclude 
unrelated Part B services during the EPM episode based on the diagnosis 
code on the claim by identifying categories of ICD-CM codes for 
exclusion (identified by code ranges) on an EPM-specific basis. ICD-9-
CM diagnosis code exclusions would apply to historical episodes used to 
construct EPM-episode benchmark prices, while ICD-10-CM diagnosis code 
exclusions would apply to EPM episodes during the EPMs' performance 
years. We proposed to identify unrelated Part B services and 
readmissions based on the BPCI Model 2 Part B exclusion lists that 
apply to the anchor MS-DRG that initiates the EPM episode, or to the 
price MS-DRG if it is different than the anchor MS-DRG as described 
further in section III.D.4.b.(2)(a) of this final rule. This proposal 
is consistent with our use of the BPCI Model 2 LEJR ICD-9-CM, ICD-10-
CM, and MS-DRG exclusion lists in the CJR model (80 FR 73304 and 
73315).
    The BPCI episode-specific exclusion lists were initially developed 
more than 3 years ago for the BPCI initiative through a collaborative 
effort of CMS staff, including physicians from medical and surgical 
specialties, coding experts, claims processing experts, and health 
services researchers. The lists have been shared with thousands of 
entities and individuals participating in episodes in one or more 
phases of the BPCI initiative, and have undergone refinement in 
response to stakeholder input about specific diagnoses for exclusion, 
resulting in only minimal changes over the last 3 years. Thus, the BPCI 
exclusion lists have 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 proposed their use in the AMI, CABG, and SHFFT models based 
on our confidence related to our several years of experience that these 
definitions are reasonable and workable for AMI, CABG, and SHFFT 
episodes, for both providers and CMS, and based on our rulemaking for 
the CJR model. We note that the BPCI Model 2 exclusion lists for the 48 
clinical conditions being tested in the BPCI models include lists that 
apply to every MS-DRG that could be an anchor MS-DRG (or price MS-DRG, 
if applicable) for the AMI, CABG, and SHFFT episodes.
    Similar to the CJR model, we proposed to include in EPM episodes 
all Part A services furnished post-hospital discharge during the EPM 
episode, as these services are typically intended to be comprehensive 
in nature (80 FR 73304 and 73315). We specifically proposed to exclude 
unrelated hospital readmissions for MS-DRGs that group to the following 
categories of diagnoses: Oncology, trauma medical admissions, surgery 
for chronic conditions unrelated to a condition likely to have been 
affected by care furnished during the EPM episode, and surgery for 
acute conditions unrelated to a condition resulting from or likely to 
have been affected by care during the EPM episode. The rationale for 
these exclusions is the same as the rationale for their exclusion in 
the CJR model (80 FR 73304).
    Specifically with respect to Part B services, similar to the CJR 
model, we proposed to exclude acute disease diagnoses unrelated to a 
condition resulting from or likely to have been affected by care during 
the EPM episode, and 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 care during the EPM 
episode or whether substantial services were likely to be provided for 
the chronic condition during the EPM episode (80 FR 73305 and 73315). 
Thus, we would include all Part B services with principal diagnosis 
codes on the associated Part B claims that are directly related 
(clinically and per coding conventions) to EPM episodes, claims for 
diagnoses that are related to the quality and safety of care furnished 
during EPM episodes, and claims for services for diagnoses that are 
related to preexisting chronic conditions such as diabetes, which may 
be affected by care furnished during EPM episodes.
    In general, the anchor MS-DRG that initiates the AMI, CABG, or 
SHFFT episode would determine the exclusion list that applies to the 
EPM episode. For example, AMI episodes may have different exclusion 
lists applied based on whether the AMI episode is initiated by 
admission to the participant hospital

[[Page 253]]

that results in discharge from an AMI anchor MS-DRG or a PCI anchor MS-
DRG with AMI ICD-10-CM diagnosis code. If a price MS-DRG applies to the 
AMI episode that includes a chained anchor hospitalization as described 
in section III.D.4.b.(2)(a) of this final rule, the exclusion list that 
applies to the price MS-DRG would apply to the AMI episode. Complete 
lists of excluded MS-DRGs for readmissions and excluded ICD-CM codes 
for Part B services furnished during EPM episodes after EPM beneficiary 
discharge from an anchor or chained anchor hospitalization in the AMI, 
CABG, and SHFFT models are posted on the CMS Web site at https://innovation.cms.gov/initiatives/epm.
    Like the CJR model policy, we proposed that these exclusion lists 
would be updated by sub-regulatory guidance on an annual basis, at a 
minimum, to reflect annual changes to ICD-10-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 throughout the course of the 
EPMs' performance period (80 FR 73304 through 73305 and 73315). The 
standards for this updating process reflect the previously discussed 
general principles for determining excluded services. That is, we 
proposed to not exclude any items or services that are directly related 
to the EPM episode diagnosis or procedure (for example, a subsequent 
admission for heart failure or repeat revascularization) or the quality 
or safety of care (for example, sternal wound infection following 
CABG); or to chronic conditions that may be affected by the EPM 
diagnosis or procedure and the post-discharge care (for example, 
diabetes). We proposed to exclude items and services for chronic 
conditions that are generally not affected by the EPM diagnosis or 
procedure and the post-discharge care (for example, prostate removal 
for cancer), and for acute clinical conditions not arising from 
existing EPM episode-related chronic clinical conditions or 
complications from the EPM episode (for example, appendectomy).
    Similar to the CJR model, we proposed that the potential revised 
exclusions, which could include additions to or deletions from the 
exclusion lists, would be posted to the CMS Web site to allow for 
public input (80 FR 73305 and 73315). Through the process for public 
input on potential revised exclusions and then posting of the final 
revised exclusions, we proposed to provide information to the public 
about when the revisions would take effect and to which episodes they 
would apply.
    The proposal for included services for an EPM was included in 
proposed Sec.  512.210(a). The proposal for excluded services from the 
EPM episode was included in proposed Sec.  512.210(b). The proposal for 
updating the lists of excluded services for EPMs was included in 
proposed Sec.  512.210(c). We sought comment on our proposals for 
included and excluded services for the AMI, CABG, and SHFFT models and 
updating the lists of excluded services.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters expressed general support for CMS' 
proposed episode definition strategy that would include Part A and Part 
B items and services and exclude certain unrelated readmissions based 
on a list of MS-DRGs, as well as certain unrelated Part B services 
based on the principal diagnosis on the claim, consistent with the 
episode definition approach for LEJR under the CJR model and the 
approach used in the BPCI initiative for several years for BPCI, SHFFT, 
AMI, PCI, and CABG episodes. The commenters acknowledged that most 
items and services would be included in the episode definition under 
the proposal, thus creating broadly defined SHFFT, AMI, and CABG 
episodes. In some cases, while commenters agreed with the proposed 
general strategy for identifying EPM episode exclusions, they made 
specific recommendations for additional exclusions based on a different 
exclusions standard, and these commenters are summarized later in this 
section, where responses are also provided. In other cases, commenters 
who agreed with the strategy for identifying EPM episode exclusions 
stated that if CMS finalizes broad EPM episode definitions, risk 
adjustment would be necessary in order to ensure fair payment to EPM 
participants.
    Several commenters recommended CMS to provide greater clarity about 
the services included in and excluded from EPM episodes. One commenter 
stated that it is hard to differentiate included versus excluded 
services, and further added that people are ``irreducible bundles'' and 
someone needs to be responsible for all of the issues for people when 
they are very sick. The commenter recommended that the longer-term 
value of patient-centered medical homes, comprehensive ACOs, and 
primary care geriatricians should be considered for beneficiaries 
completing EPM episodes and recommended that moving people with complex 
illness into such arrangements should be a feature of all CMS 
innovations as part of moving fee-for-service payment toward quality 
and value. A few commenters recommended that CMS provide a clear 
definition and methodology for the term ``related services'' which 
would be applied consistently throughout various payment models so 
providers could verify how their services would be identified and paid. 
Finally, several commenters requested that CMS utilize an inclusions 
list rather than an exclusion list to avoid including inappropriate 
services by default. One commenter presented analysis that showed AMI 
model readmission for seizures and other for organic disturbance and 
mental retardation would be included in AMI episodes, and the commenter 
believes that neurological and mental health conditions are not related 
to cardiac care for AMI.
    Response: We appreciate the support of many commenters for our 
proposed general approach to identifying excluded items and services 
for the EPMs. As we stated in the proposed rule (81 FR 50832), we are 
interested in testing inclusive AMI, CABG, and SHFFT episodes to 
incentivize comprehensive, coordinated, patient-centered care for the 
beneficiary throughout the episode. We agree with the commenter that it 
can be hard to distinguish included versus excluded services because 
sick people have many complex and interrelated clinical conditions and 
corresponding health care needs. The proposed EPM episode definitions 
are broad in part for this reason. Additionally, while we also agree 
with the commenter that the ongoing and acute health care needs of 
medically complex beneficiaries may be addressed through a patient-
centered medical home or ACO, many of these vulnerable beneficiaries 
currently are not included in such models or programs. In the case of 
other beneficiaries who are included in medical home or ACO models or 
programs, they may have specific, new care management needs arising 
from an acute cardiac event, CABG, or hip fracture surgery that may be 
best managed by the EPM participant that has substantial expertise in 
coordinating and managing care throughout AMI, CABG, or SHFFT episodes 
because of its participation in the EPM, while the ACO or patient-
centered medical home may have less specific expertise in managing 
beneficiaries recovering from major orthopedic or cardiac surgery or an 
AMI. We expect that EPM participants, accountable for EPM episode 
quality and cost performance

[[Page 254]]

under the EPMs, will work closely with all providers and other 
organizations with which a model beneficiary has established 
relationships, toward the mutual goal of high quality, well-coordinated 
care that maximizes the rate of a beneficiary's return of function and 
improvements in health following surgery or AMI. We further expect that 
the medical management and care coordination during EPM episodes will 
continue to be provided as beneficiaries' transition out of EPM 
episodes, potentially into a primary care medical home or other model 
or program with accountability for population health, such as an ACO.
    Because our proposed inclusive approach to EPM episode definitions 
results in many more items and services that are included in EPM 
episodes than excluded, we believe it is most efficient to identify 
excluded items and services as we proposed. With regard to the 
commenters who were concerned that an exclusion list could include 
inappropriate services by default, we note that we posted to the CMS 
Web site the proposed exclusion lists for the AMI, CABG, and SHFFT 
models for comment in association with the proposed rule and are 
finalizing the initial exclusion lists through this rulemaking where we 
have considered and responded to all the comments we received on our 
proposed exclusions. Thus, no items and services would be included in 
EPM episodes by default because the exclusion lists have been 
established through notice and comment rulemaking. In addition, as 
discussed later in this section, we proposed a sub-regulatory process 
for updating the exclusion lists to reflect ICD-10-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 throughout the course of the 
EPMs' performance periods. The standards for the process reflect the 
proposed general principles for excluded services and the process 
itself allows opportunity for public input. Thus, we believe that all 
items and services included in EPM episodes are intentionally included, 
after consideration of public input, rather than included by default.
    We note that in the example raised by the commenter of ``default 
inclusion,'' we disagree with the commenter that readmissions for 
neurological and mental health conditions are unrelated to cardiac care 
for AMI. For example, an AHRQ Evidence Report on post-myocardial 
infarction found that the evidence is consistent that in patients with 
AMI, depression is common at the time of the hospitalization and 
persists for at least several months after hospital discharge without 
treatment.\57\ Further, the report found that depression is associated 
with a significantly increased risk of subsequent death, and of cardiac 
readmission and poor quality of life during the first year. Thus, we 
would not exclude readmission for treatment of depression from AMI 
episodes because we believe that depression would generally be a 
chronic condition that was likely to have been affected care during the 
AMI model episode. Under our proposal, readmissions for neurological 
and mental health conditions would not be excluded from AMI episodes 
because they are not MS-DRGs that we proposed to exclude from the AMI 
episodes, specifically oncology; trauma medical; chronic disease 
surgical unrelated to a condition likely to have been affected by care 
during the EPM episode; or acute disease surgical unrelated to a 
condition resulting from or likely to have been affected by care during 
the AMI episode. Thus, we consider those readmissions related to AMI 
episodes as they are medical MS-DRGs for conditions that are likely to 
have resulted from or been affected by care during the AMI anchor 
hospitalization or during the 90 days post-hospital discharge.
---------------------------------------------------------------------------

    \57\ Bush DE, Ziegelstein RC, Patel UV, et al. Post-Myocardial 
Infarction Depression. Rockville (MD): Agency for Healthcare 
Research and Quality (US); 2005 May. (Evidence Reports/Technology 
Assessments, No. 123.) Available from: https://www.ncbi.nlm.nih.gov/books/NBK37817/.
---------------------------------------------------------------------------

    By posting to the CMS Web site the lists of excluded services for 
the EPMS, we believe we are providing the clarity and detail needed for 
any provider to understand whether his or her services furnished to a 
beneficiary in an EPM episode are included in the EPM episode 
definition because they are related to the episode or excluded from the 
EPM episode because they are unrelated. To date, we have applied the 
same general approach to identifying exclusions in the BPCI initiative, 
the CJR model, and the proposed EPMs, which should facilitate provider 
understanding about exclusions under these different episode payment 
models. We note, however, that the exclusion list differs based on the 
clinical condition that is the focus of the episode so a provider that 
is paid under Part B or a hospital would not be able to have a uniform 
determination of whether services furnished were included or excluded 
from an episode without knowledge of the beneficiary's specific episode 
in an episode payment model as well as the clinical condition for which 
the provider furnished services. All of the Innovation Center episode 
payment models except Model 4 of BPCI use retrospective payment, so all 
providers would be paid according to the usual fee-for-service systems 
that apply, regardless of whether the items or services furnished by 
the provider are included in or excluded from a beneficiary's episode.
    Comment: While some commenters expressed full support for CMS' 
proposed definition of related services, other commenters recommended 
CMS to exclude specific additional groups of services from EPM 
episodes. The commenters requested that CMS further exclude:
     Readmissions that were already planned for the beneficiary 
prior to the anchor hospitalization because their occurrence would be 
unrelated to episode care;
     Readmissions that were part of the planned post-discharge 
care for the beneficiary after the anchor hospitalization, because 
these provide no opportunity for efficiency yet could lead to high-cost 
episodes:
     Medical readmissions for unrelated acute and chronic 
conditions;
     Part B services that are not directly related to the 
episode;
     Cardiac rehabilitation, intensive cardiac rehabilitation, 
and chronic care management services where appropriate utilization 
under the EPMs in the context of historical low utilization would lead 
to increased episode costs during the EPM performance period;
     Behavioral and substance abuse services because these are 
not always integral or of strong relevance to the clinical definitions 
of the EPMs, and CMS does not provide claims data to model participants 
for these services so no participants can predict, model, or calculate 
episode spending; and
     Outpatient chemotherapy, psychiatric readmissions, and 
high cost intravenous therapy administered through DME that are 
unrelated to the episode and could lead to increased episode costs.
    Response: We believe that it is not necessary to exclude from EPM 
episodes planned readmissions and outpatient services, regardless of 
whether those plans were made prior to the anchor hospitalization or 
during the anchor hospitalization but prior to discharge, solely 
because the readmissions or outpatient services are planned in advance. 
While we understand that certain other CMS programs account differently 
for planned readmissions by excluding them from readmission 
calculations, such as the HRRP which reduces payments to hospitals with 
excess readmissions, we do not believe that planned readmissions should 
be

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excluded from EPM episodes, where the goals of the EPMs are to improve 
the quality and efficiency of episode care and where we do not make a 
specific assessment about excess readmissions. Just like unplanned 
readmissions, we believe that planned readmissions should be excluded 
from EPM episodes only if they are unrelated to the EPM episodes based 
on the proposed standards for exclusion of inpatient readmissions that 
group to the following categories of diagnoses: Oncology; trauma 
medical; chronic disease surgical unrelated to a condition likely to 
have been affected by care during the EPM episode; and acute disease 
surgical unrelated to a condition resulting from or likely to have been 
affected by care during the EPM episode. We continue to believe these 
standards are appropriate to identify excluded readmissions from EPM 
episodes given our design of the EPMs to test comprehensive, 
coordinated patient-centered care for the beneficiary throughout 
broadly defined EPM episodes. Unless a readmission is excluded from the 
EPM episode based on these standards, any readmission, whether planned 
or unplanned, would be related to the EPM episode and be affected by 
the clinical condition that is the basis for that episode. We 
appreciate the concerns of the commenters about ensuring appropriate 
EPM episode prices in the case of planned readmissions. While we are 
not adopting any specific methodologies for identifying and making 
episode payment adjustments for such planned, related readmissions now 
except in the case of a CABG readmission during an AMI episode as 
discussed in section III.D.4.b.(2)(c), we will study this issue in more 
detail especially as it relates to the cardiac models. Should we 
determine a change to our policies regarding planned, related 
readmission could be appropriate, we will make proposals through future 
rulemaking.
    To the extent that planned readmissions reflect certain clinically 
appropriate care patterns for beneficiaries in EPM episodes based on 
plans made during the anchor hospitalization, we expect that such 
readmissions would be included in the historical EPM episodes used to 
establish EPM-episode payments and thus hospitals would be 
appropriately paid, on average, for EPM episode care. To the extent 
that efficiencies in EPM episode care are possible and medically 
appropriate, reducing planned readmissions may provide an opportunity 
for increased EPM episode efficiencies. However, we would not expect 
EPM participants to reduce EPM-episode spending by shifting the 
utilization of medically necessary services, such as planned 
readmissions, until after the EPM episode ends. We refer to section 
III.D.4.b.(2)(c) of this final rule for discussion of the pricing 
adjustment for CABG readmissions during AMI episodes due to this 
costly, clinically-appropriate care pattern of delayed CABG for some 
beneficiaries with AMI.
    Furthermore, while we expect that certain elective admissions 
considered related under the EPMs may be planned prior to the anchor 
hospitalization for the EPM episode and could, therefore, occur during 
the 90-day post-discharge period, we believe that such actual 
readmissions after CABG, SHFFT or AMI treatment are uncommon during the 
post-surgical recovery or post-AMI recovery period for EPM 
beneficiaries that extends 90 days following discharge from the anchor 
hospitalization. If such readmissions were planned, they would often be 
canceled due to the intervening surgery or AMI until the beneficiary 
has fully recovered. We will not exclude them all as unrelated because 
any readmission not on the EPM exclusion list may be related care 
furnished during the post-surgical or post-AMI recovery period. Our 
exclusion methodology does not allow us to identify those readmissions 
that are truly elective; that is, the condition was present and the 
readmission was planned prior to the hospitalization that anchored the 
EPM episode and scheduled during the 90-day post-hospital discharge 
period.
    For readmissions to medical MS-DRGs, the selection of the principal 
diagnosis code is not clear-cut so we believe they should all be 
included in the EPM episode definition so providers focus on 
comprehensive care to beneficiaries in episodes. We believe that 
readmissions to medical MS-DRGs are generally linked to the 
hospitalization or event as a complication of the illness that led to 
the procedure or event, 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. Therefore, we believe it is infeasible 
under the EPMs to identify medical readmissions for unrelated acute and 
chronic medical conditions, other than our proposal to exclude 
readmissions for oncology and trauma medical diagnoses.
    Similarly, our proposal identified those Part B services unrelated 
to the episode as acute disease diagnoses unrelated to a condition 
resulting from or likely to have been affected by care during the EPM 
episode and certain chronic disease diagnoses depending on whether the 
condition was likely to have been affected by care during the EPM 
episode or whether substantial services were likely to be provided for 
the chronic condition during the EPM episode. We do not believe that 
requiring a direct relationship between the diagnosis for the Part B 
services and the clinical condition that is the basis for the EPM 
episode is appropriate under the broadly defined episodes of the EPMs. 
Most medical conditions are likely to be affected by care during the 
EPM episode, yet they may not have a direct relationship to the 
clinical condition that is the reason for the anchor hospitalization.
    We also do not believe that it would be appropriate to exclude 
other specific Part B services that are related to the clinical 
conditions that are the basis for EPM episodes, such as cardiac 
rehabilitation, intensive cardiac rehabilitation, and chronic care 
management services, just because they are underrepresented in the 
baseline period upon which benchmark episode prices are set. As 
discussed in section III.D.4.b.(3) of this final rule, to the extent 
that care redesign under the EPMs increases utilization of these 
services to improve episode quality and efficiency, periodic updates to 
the 3 years of historical data used to establish EPM-episode benchmark 
prices would result in greater representation of these services that 
reflect more recent care patterns.
    Additionally, we do not believe that it would be appropriate to 
exclude behavioral health and substance abuse services, including 
psychiatric readmissions, from EPM episodes because these services are 
for conditions that are likely to affect EPM episode care. We note that 
these services are not common in episodes and, while we acknowledge 
that the episode claims data provided to EPM participants will not 
include these data, our proposal to exclude this information but 
include the costs of the services in EPM episodes is consistent with 
our usual treatment of these services in other similar CMS programs and 
models where providers must take on risk in managing the care of their 
beneficiaries, such as the Shared Savings Program and BPCI initiative. 
Based on our experience to date with bundled payment models and the 
Shared Savings Program, this policy has not been a significant 
impediment to the operations of these efforts. For example, in the most 
recent episodes in BPCI Models 2 and 3, the claims for behavioral 
health and substance abuse services included in episodes that we

[[Page 256]]

did not share with BPCI participants accounted for less than 0.1 
percent of total episode spending. We refer to section III.K. of this 
final rule for further discussion of issues related to sharing 
beneficiary-identifiable data for behavioral health and substance abuse 
services with EPM participants.
    With regard to the commenters requesting that we exclude outpatient 
chemotherapy services from the EPM episode definitions, we agree that 
these should be excluded from EPM episodes in accordance with our 
proposal that excludes services based on ICD-9-CM and ICD-10-CM cancer 
diagnosis codes on the proposed EPM exclusion lists from historical and 
actual EPM episodes. In the case of high-cost intravenous therapy 
administered through DME, we would only exclude such treatments if the 
claims reported ICD-10-CM diagnosis codes that would identify these 
services as unrelated to the EPM episodes. Otherwise, despite the cost 
of this therapy, these services would be included in EPM episodes 
because they are related.
    Comment: Several commenters recommended CMS to exclude readmissions 
for PCI from AMI episodes, stating that current STEMI clinical 
guidelines for the culprit artery lesion in addition to other multi-
vessel stenosis states, ``Approximately 50% of patients with STEMI have 
multivessel disease. PCI options for patients with STEMI and 
multivessel disease include: (1) Culprit artery-only primary PCI, with 
PCI of non-culprit arteries only for spontaneous ischemia or 
intermediate or high-risk findings on pre-discharge noninvasive 
testing; (2) multi-vessel PCI at the time of primary PCI; or (3) 
culprit artery-only primary PCI followed by staged PCI of non-culprit 
arteries.'' \58\ Another commenter quoted on the topic from the most 
recent update to the guidelines published in 2016, ``Although several 
observational studies and a network meta-analysis have suggested that 
multivessel staged PCI may be associated with better outcome than 
multivessel primary PCI, there are insufficient observational data and 
no randomized data at this time to inform a recommendation with regard 
to the optimal timing of nonculprit vessel PCI.''
---------------------------------------------------------------------------

    \58\ Levine GN, Bates ER, Blankenship JC, et al. 2015 ACC/AHA/
SCAI Focused Update on Primary Percutaneous Coronary Intervention 
for Patients With ST-Elevation Myocardial Infarction: An Update of 
the 2011 ACCF/AHA/SCAI Guideline for Percutaneous Coronary 
Intervention and the 2013 ACCF/AHA Guideline for the Management of 
ST-Elevation Myocardial Infarction. J Am Coll Cardiol. 
2016;67(10):1235-1250. doi:10.1016/j.jacc.2015.10.005.
---------------------------------------------------------------------------

    The commenters recommended CMS to exclude planned readmissions for 
PCI from the AMI episode definition because the AMI model as proposed 
would discourage the recommended course of care of a secondary PCI 
procedure for AMI patients with multivessel disease. The commenters 
believe that the AMI episode definition could encourage the treatment 
of secondary lesions during the initial angioplasty and in other cases 
could provide an incentive to delay treatment of the secondary lesions 
until after the 90-day post-hospital discharge duration of the AMI 
episode has concluded. The commenters added that another strategy of 
EPM participants to deal with limited AMI episode payments might be to 
inappropriately refer multivessel disease patients into the separate 
CABG model.
    Alternatively if CMS does not excluded planned PCI readmissions, 
the commenters recommended CMS to exclude STEMI beneficiaries with 
multivessel disease from the AMI model and/or make accommodations in 
the pricing methodology for the extra cost of treating such 
beneficiaries appropriately. As another alternative, the commenters 
requested that CMS shorten the AMI episode duration to 30 days post-
discharge so that secondary PCI could be performed for multivessel 
disease without the financial constraints of an ongoing AMI episode. 
Finally, the commenters recommended that if the AMI episodes cannot be 
revised to avoid these potentially harmful incentives, CMS should 
monitor and evaluate whether these shifts in pattern of care are 
occurring and whether they have affected patient outcomes.
    Response: While we appreciate the concerns of the commenters, as we 
stated in the proposed rule (81 FR 50852), fewer than 3 percent of 
those AMI model beneficiaries who receive inpatient or outpatient PCIs 
during AMI episodes receive the PCIs between 2 and 90 days post-
discharge from an anchor or chained anchor hospitalization. Since a PCI 
for an AMI typically is provided during the anchor hospitalization and 
most PCIs later in an episode occur in the context of a beneficiary 
presenting through the emergency department, we believe that in most 
cases of PCI following discharge from the anchor hospitalization, the 
beneficiary likely has experienced a complication of care resulting in 
a PCI that may potentially be avoided through care management during 
the AMI episode. This PCI would clearly be related to the AMI episode 
and should not be excluded from the AMI episode.
    It would also be inappropriate to exclude beneficiaries with STEMI 
and multivessel disease from the AMI model simply because their plan of 
care could include a secondary PCI procedure as these beneficiaries 
would represent nearly 50 percent of STEMI patients, who themselves 
make up a significant percent of beneficiaries in the AMI model. While 
we expect that few beneficiaries would follow this care pattern based 
on our analysis of historical AMI episodes, in this scenario the PCI 
would clearly be related to the AMI and, therefore, be appropriately 
included in the AMI episode definition. Given that our intention is to 
offer appropriate incentives for care quality and efficiency by holding 
AMI model participants accountable for readmissions that could be 
related to the quality of care provided prior to the readmission, we 
believe that a pricing adjustment for a PCI readmission or outpatient 
PCI would not be appropriate.
    We note that the recently updated treatment guidelines cited by the 
commenters state there is insufficient observation data and no 
randomized data to inform a recommendation regarding the optimal timing 
of non-culprit vessel PCI. The guidelines contain no specific 
recommendation for the timing of delayed treatment of secondary 
lesions, while specifically stating that the ``recommendation with 
regard to multivessel primary PCI in hemodynamically stable patients 
with STEMI has been upgraded and modified . . . to include 
consideration of multivessel PCI, either at the time of primary PCI or 
as a planned, staged procedure.'' Given that there is no specific 
recommendation regarding the routine performance of multivessel PCI for 
patients with STEMI and multivessel disease, nor a recommendation on 
the timing for multivessel PCI if it is performed, we do not believe 
the AMI model definition discourages patterns of care that are 
recommended for AMI patients with multivessel disease. We also do not 
see any reason why the care patterns related to performing PCI for 
multivessel disease following STEMI should lead us to shorten the AMI 
episode duration from 90 days post-discharge to 30 days or to make a 
pricing adjustment for AMI episodes that include this pattern of care. 
We refer to section III.C.4.c.(2) of this final rule for further 
discussion of the AMI episode duration.
    As recommended by the commenters, we will evaluate care patterns 
under the AMI model for secondary PCI following an initial PCI for 
treatment of AMI to determine whether shifts in care are

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occurring and whether changes in beneficiary outcomes are observed. We 
refer to section IV. of this final rule for further discussion of our 
plans for evaluation of the AMI model.
    Comment: One commenter requested confirmation of their 
understanding of CMS' proposal to exclude MS-DRGs for inpatient 
hospital readmissions that group to the ``Trauma medical'' category of 
diagnoses. The commenter interpreted this provision as trauma diagnoses 
unrelated to the initial MS-DRG triggering an episode.
    Response: By trauma medical diagnoses, we mean that those MS-DRGs 
that represent a readmission for medical treatment of trauma during an 
EPM episode are excluded. For example, we would exclude MS-DRGs 082-087 
in the Traumatic Stupor & Coma series and MS-DRGs 088-090 in the 
Concussion series.
    Comment: Several commenters recommended CMS to exclude hospice 
services from the EPM episode definition as they generally would be 
unrelated to the EPM episodes. The commenters stated that including 
hospice services in EPM episodes could result in incentives for 
underutilization of the hospice benefit. They encouraged CMS to exclude 
all hospice services in order to ensure timely access to hospice for 
EPM beneficiaries. One commenter pointed out that exclusion of hospice 
services from the EPM episode definitions would be consistent with 
their exclusion from BPCI episodes.
    Response: We appreciate the interest of the commenters in ensuring 
continued beneficiary access to hospice services under the EPMs. We 
note that although we exclude hospice services from BPCI episodes, we 
include them in LEJR episodes in the CJR model (80 FR 73307). We 
understand that EPM beneficiaries could receive hospice services during 
an episode under several different types of clinical circumstances. For 
example, the beneficiary could be enrolled in hospice prior to a SHFFT 
episode, experience a pathologic hip fracture, and require a SHFFT 
procedure to stabilize his or her hip. Alternatively, the beneficiary 
could have a CABG and enter into hospice at some point during the 
episode in the 90 days following discharge from the anchor 
hospitalization, either after experiencing a surgical complication 
leading to a terminal prognosis, progressive severe heart failure 
despite the CABG, or based on a new diagnosis of a terminal stage of an 
illness.
    As we explained in the CJR Final Rule (80 FR 73307), Medicare 
hospice care is palliative care for individuals with a prognosis of 
living 6 months or less if the terminal illness runs its normal course. 
As referenced in Sec.  418.22(b)(1), to be eligible for Medicare 
hospice services, the patient's attending physician (if any) and the 
hospice medical director must certify that the individual is 
``terminally ill,'' as defined in section 1861(dd)(3)(A) of the Act and 
our regulations at Sec.  418.3; that is, the individual's prognosis is 
for a life expectancy of 6 months or less if the terminal illness runs 
its normal course. When an individual is terminally ill, many health 
problems are brought on by underlying condition(s), as bodily systems 
are interdependent. Section 1861(dd)(1) of the Act establishes the 
services that are to be rendered by a Medicare certified hospice 
program and those services include: Nursing care; physical therapy; 
occupational therapy; speech-language pathology therapy; medical social 
services; home health aide services (now called hospice aide services); 
physician services; homemaker services; medical supplies (including 
drugs and biologics); medical appliances; counseling services 
(including dietary counseling); short-term inpatient care (including 
both respite care and care necessary for pain control and acute or 
chronic symptom management) in a hospital, nursing facility, or hospice 
inpatient facility; continuous home care during periods of crisis and 
only as necessary to maintain the terminally ill individual at home; 
and any other item or service which is specified in the plan of care 
and for which payment may otherwise be made under Medicare, in 
accordance with Title XVIII of the Act. The services offered under the 
Medicare hospice benefit must be available, as needed, to beneficiaries 
24 hours a day, 7 days a week (section 1861(dd)(2)(A)(i)of the Act).
    The regulations at Sec.  418.54(c) stipulate that the comprehensive 
hospice assessment must identify the patient's physical, psychosocial, 
emotional, and spiritual needs related to the terminal illness and 
related conditions, and address those needs in order to promote the 
hospice patient's well-being, comfort, and dignity. The comprehensive 
assessment must take into consideration the following factors: The 
nature and condition causing admission (including the presence or lack 
of objective data and subjective complaints); complications and risk 
factors that affect care planning; functional status; imminence of 
death; and severity of symptoms (Sec.  418.54(c)). Additionally, the 
hospice Conditions of Participation (CoPs) at Sec.  418.56(c) require 
that the hospice must provide all reasonable and necessary services for 
the palliation and management of the terminal illness, related 
conditions and interventions to manage pain and symptoms. Therapy and 
interventions must be assessed and managed in terms of providing 
palliation and comfort without undue symptom burden for the hospice 
patient or family. In the December 16, 1983, Hospice final rule (48 FR 
56010 through 56011), regarding what is related versus unrelated to the 
terminal illness, we stated: ``We believe that the unique physical 
condition of each terminally ill individual makes it necessary for 
these decisions to be made on a case-by-case basis. It is our general 
view that hospices are required to provide virtually all the care that 
is needed by terminally ill patients.''
    Thus, we believe that hospice services furnished to EPM 
beneficiaries should be included in the episode definition for the 
EPMs, regardless of the specific diagnosis of the beneficiary, because 
hospices are to provide virtually all care that is needed by terminally 
ill patients. This is consistent with our conclusion when we considered 
hospice services in the LEJR episode definition under the CJR model (80 
FR 73307). If an EPM beneficiary was receiving hospice services during 
an episode, either because the beneficiary was enrolled in hospice 
prior to surgery or a cardiac event and continued in hospice following 
surgery or the cardiac event or the beneficiary enrolled in hospice 
following the surgery or cardiac event that initiated the EPM episode, 
we believe that hospice services would encompass care related to the 
EPM episode and should, therefore, be included in the episode 
definition. As previously noted, given the comprehensive nature of the 
hospice benefit and the fact that body systems are interdependent at 
end of life, virtually all care needed by the terminally-ill individual 
would be related to the terminal prognosis and thus the responsibility 
of the hospice.
    As previously noted, hospices are required, per the Hospice CoPs at 
Sec.  418.56(c), to provide all reasonable and necessary services for 
the palliation and management of the terminal illness, related 
conditions, and interventions to manage pain and symptoms. For patients 
that underwent surgery or cardiac care under the EPMs that have also 
elected the Medicare hospice benefit, hospice services would need to 
respond to the care needs of the EPM beneficiary following surgery or 
hospitalization for cardiac care. As in the case of other medically 
necessary services that would improve a beneficiary's quality of care 
and quality

[[Page 258]]

of life, we expect that EPM beneficiaries will receive clinically 
appropriate referrals to hospice in a timely manner. Furthermore, we 
also believe hospice services could contribute to episode efficiency 
through improved comprehensive care coordination and management for EPM 
beneficiaries that have a terminal prognosis. As previously stated, 
hospices are required to provide comprehensive care coordination and 
management per the hospice CoPs at 418.56. As discussed in sections 
III.G.4. through 6. of this final rule, we will be monitoring for 
access to care, quality of care, and delayed care and will take actions 
as described if problems are found.
    Comment: One commenter recommended that CMS exclude Inpatient 
Psychiatric Facility (IPF) services from the EPM episode definition as 
not being related to or resulting from the EPM clinical condition, 
consistent with their treatment in BPCI episodes.
    Response: We are clarifying that under the BPCI models, IPF 
services furnished following discharge from the episode anchor 
hospitalizations but during the episode are included in the episode 
definition, unless they fall into one of the excluded MS-DRGs for the 
episode. Thus, we include inpatient psychiatric services whether paid 
under the IPPS or the IPF PPS in all episodes under the BPCI initiative 
according to the same policy that would exclude readmissions paid under 
either payment system based on the same exclusion list. As we concluded 
for the CJR model (80 FR 73306), we see no reason for the EPMs not to 
apply the standards we proposed to define related and unrelated Part A 
and Part B services with respect to IPF services furnished during EPM 
episodes. Therefore, we believe the list of excluded MS-DRGs applicable 
to the EPM episode identifies those IPF admissions during the episode 
that would be clinically unrelated to the episode so we exclude them 
from the EPM episode definition, whereas IPF services any time during 
an EPM episode that result in discharge from an MS-DRG that is not 
excluded would be related and included in the EPM episode definition. 
We disagree with the commenter that all IPF services furnished 
following discharge from the anchor hospitalization that initiates the 
EPM episode after surgery are unlikely to be related to or resulting 
from the EPM clinical condition or its treatment. Thus, we believe the 
MS-DRG exclusions for the EPM episodes identify those circumstances 
when IPF services are unrelated to the episode.
    Comment: Several commenters recommended that CMS exclude post-acute 
care services from EPM episodes if the beneficiary chooses a facility 
not recommended by the EPM participant or treating physician. Other 
commenters recommended that CMS exclude post-acute care services 
following excluded readmissions due to how little is known about the 
causal relationship between an unrelated hospital readmission and 
subsequent post-acute care services.
    Response: As discussed in section III.G.2. of this final rule, the 
proposed EPMs would not limit an EPM beneficiary's ability to choose 
among Medicare providers or the range of services that would be 
available to them. Beneficiaries would continue to choose any Medicare 
participating provider, or any provider that has opted out of Medicare, 
with the same costs, copayments, and responsibilities as they have with 
other Medicare services. Therefore, it would not be appropriate to 
exclude post-acute care services from the EPM episode definition if the 
beneficiary chooses a post-acute care facility that is not recommended 
by the EPM participant or the beneficiary's treating physician.
    With regard to requests that we exclude post-acute services from 
EPM episodes following excluded readmissions, as Part A services are 
generally intended to be comprehensive in nature and because the 
beneficiary in an EPM episode would still be in the recovery period for 
the 90 days following surgery or an AMI, we believe any post-acute care 
services provided during the EPM episode would be related to the SHFFT, 
CABG, or AMI. Regardless of the reason for the hospitalization 
immediately preceding the initiation of post-acute care services during 
an EPM episode, the post-acute care provider would need to address the 
beneficiary's post-surgical or post-AMI recovery, even if the post-
acute care services followed an unrelated admission to the hospital.
    Comment: Several commenters identified additional MS-DRGs or 
conditions resulting in hospitalization that they recommended be 
excluded from the cardiac episodes. The commenters requested that 
clinical conditions that group to the following MS-DRGs be excluded 
from the AMI and CABG model episode definitions, generally on the basis 
that these readmissions are not integral to the management of 
beneficiaries in the 90 days following discharge from the AMI or CABG 
anchor hospitalization:
     222 (Cardiac Defibrillator Implant with Cardiac 
Catheterization with AMI/HF/Shock with MCC).
     223 (Cardiac Defibrillator Implant with Cardiac 
Catheterization with AMI/HF/Shock without MCC).
     224 (Cardiac Defibrillator Implant with Cardiac 
Catheterization without AMI/HF/Shock with MCC).
     225 (Cardiac Defibrillator Implant with Cardiac 
Catheterization without AMI/HF/Shock without MCC).
     226 (Cardiac Defibrillator Implant without Cardiac 
Catheterization with MCC).
     227 (Cardiac Defibrillator Implant without Cardiac 
Catheterization without MCC).
     266 (Endovascular Cardiac Replacement with MCC).
     267 (Endovascular Cardiac Replacement without MCC).
     273 (Percutaneous Intracardiac Procedures with MCC).
     274 (Percutaneous Intracardiac Procedures without MCC).
    Another commenter claimed that CMS' proposal to include nearly all 
surgical MS-DRGs within Major Diagnostic Category (MDC) 5 (Diseases and 
Disorders of the Circulatory System) in the AMI and CABG episode 
definition, rather than also requiring an acute care ICD-CM diagnosis 
code on the claim for the MS-DRG in MDC 5 to be included in the 
episode, especially within the 31 to 90 days following discharge from 
the anchor hospitalization, could penalize hospitals for providing 
necessary care within the timeframe for AMI and CABG episodes. Examples 
provided by the commenter included abdominal aortic aneurysm; 
peripheral bypass surgical and endovascular procedures; surgical valve 
repair or replacement; planned inpatient or outpatient 
electrophysiology admissions to replace cardiac defibrillators or 
pacemakers; and staged outpatient revascularization procedures several 
months after an initial intervention for AMI.
    One commenter recommended that readmissions for extracorporeal 
membrane circulation (ECMO) that would group to MS-DRG 003 (ECMO or 
Tracheostomy with MV > 96 hours or PDX Except Face, Mouth and Neck with 
Major O.R. Procedure) be excluded from the CABG episode definition. 
Another commenter recommended the addition of 241 MS-DRGs to CMS' the 
readmissions exclusion list for CABG episodes, in addition to the 370 
MS-DRGs proposed by CMS on the list, on the basis that these MS-DRGs 
did not have any clinical relevance to CABG. These additional MS-DRGs 
would result in the exclusion of 611 MS-DRGs out of a total of 
approximately 760 MS-DRGs from CABG episodes.

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    Finally, the commenter who favored CMS' adopting a more robust 
methodology for differentiating planned from unplanned use of inpatient 
and outpatient services within the 90-day post-discharge period, 
similar to the methodology used in the HRRP for AMI and CABG, requested 
that should CMS continue with the MS-DRG exclusion list that CMS 
revisit the proposed exclusion lists for AMI and CABG episodes. The 
commenter claimed there were some inconsistencies in the treatment of 
AMI MS-DRG-anchored AMI episodes and CABG episodes compared with PCI 
MS-DRG-anchored AMI episodes. The commenter identified MS-DRGs 326 
(Stomach, Esophageal, and Duodenal Procedures with MCC); 327 (Stomach, 
Esophageal, and Duodenal Procedures with CC); 328 (Stomach, Esophageal, 
and Duodenal Procedures without CC/MCC); 266 (Endovascular Cardiac 
Valve Replacement with MCC); and 267 (Endovascular Cardiac Valve 
Replacement without MCC) as on the PCI MS-DRG-anchored AMI exclusion 
list but not on the AMI MS-DRG-anchored AMI and CABG MS-DRG exclusion 
list, and was unclear about the rationale for these differences.
    Response: We appreciate the requests by the commenters to add 
certain MS-DRGs to the exclusion list for one or both of the cardiac 
care models. CMS clinicians and coding staff reviewed the three 
different proposed exclusion lists for AMI MS-DRG-anchored AMI 
episodes, PCI MS-DRG-anchored AMI episodes, and CABG episodes for the 
inconsistencies identified by one of the commenters against the 
proposed standards for excluding readmissions during EPM episodes. We 
proposed to exclude MS-DRGs 326-328 from PCI-anchored AMI episodes and 
CABG episodes but not from AMI MS-DRG-anchored episodes. Based on 
clinical review, we determined that admissions to these MS-DRGs would 
be for acute disease surgical diagnoses unrelated to a condition 
resulting from or likely to have been affected by care during the AMI 
or CABG episode so these MS-DRGs meet the proposed standards for 
exclusion from AMI MS-DRG-anchored AMI episodes. Therefore, we are 
adding MS-DRGs 326-328 to the AMI MS-DRG-anchored AMI exclusion list. 
MS-DRGs 266-267 are on the exclusion list for PCI MS-DRG-anchored AMI 
episodes, but not on the exclusion list for AMI MS-DRG-anchored AMI 
episodes or CABG episodes. Based on clinical review, we determined that 
admissions to these MS-DRGs would be for chronic disease surgical 
diagnoses unrelated to a condition likely to have been affected by care 
during the AMI or CABG episode so these MS-DRGs meet the proposed 
standards for exclusion from both AMI MS-DRG-anchored AMI episodes and 
CABG episodes. Therefore, we are adding MS-DRGs 266-267 to the AMI MS-
DRG-anchored AMI exclusion list and the CABG exclusion list.
    We note that MS-DRGs 222-227 and 273-274 requested for exclusion 
from AMI and CABG episodes by several commenters are surgical MS-DRGs 
in MDC 5. As another commenter pointed out, some of these may represent 
planned readmissions following discharge from the anchor 
hospitalization during the 90-day post-discharge period. However, based 
on our proposed readmission exclusion methodology that identifies 
excluded MS-DRGs without examining the diagnosis coding on hospital 
claims to determine the reason for the readmission, as discussed in our 
response to comments earlier in this section, we will not exclude 
planned readmissions from the AMI and CABG episode definitions. Thus, 
we proposed that MS-DRGs 222 through 227 and 273 through 274 not be 
excluded from AMI (regardless of PCI or AMI MS-DRG-anchor) and CABG 
episodes, and we are continuing to include these MS-DRGs in those 
episodes, as well as the other surgical MS-DRGs in MDC 5 that we did 
not propose to exclude from all AMI and CABG episodes. Based on 
clinical review, we determined that these readmissions for circulatory 
system procedures are related services in AMI and CABG episodes, based 
on our proposed standards for excluding surgical MS-DRGs from the EPMs: 
Chronic disease surgical diagnoses unrelated to a condition likely to 
have been affected by care during the EPM episode; and acute disease 
surgical diagnoses unrelated to a condition resulting from or likely to 
have been affected by care during the EPM episode. While some 
commenters stated that these readmissions were not integral to AMI and 
CABG episodes, that is not the standard we used for determining related 
readmissions because we are adopting broad episode definitions for the 
EPMs. While we are not adopting any specific methodologies for 
identifying and making episode payment adjustments for such planned, 
related readmissions now except in the case of a CABG readmission 
during an AMI episode as discussed in section III.D.4.b.(2).(c). of 
this final rule, we will study this issue in more detail especially as 
it relates to the cardiac models. Should we determine a change to our 
policies regarding planned, related readmission could be appropriate, 
we will make proposals through future rulemaking.
    Finally, we carried out a clinical review of the 241 MS-DRGs 
recommended by a commenter for addition to the CABG exclusion list, as 
well as MS-DRG 003 that was recommended for exclusion by another 
commenter. About three-quarters of the MS-DRGs recommended for 
exclusion were medical MS-DRGs that did not meet our proposed standards 
for excluding readmissions based on medical diagnoses, specifically 
oncology or trauma medical diagnoses. As we first discussed in the CJR 
Final Rule (80 FR 73304) and in the EPM proposed rule (81 FR 50833), we 
believe all other readmissions for medical MS-DRGs should be included 
in EPM episodes because these are generally linked to the condition 
that was the focus of the anchor hospitalization as a complication of 
that illness, a complication of treatment or interactions with the 
health care system, or a chronic illness that may have been affected by 
the course of episode care. The inclusion of most MS-DRGs in EPM 
episodes should encourage providers to focus on comprehensive care for 
beneficiaries during episodes. More than half of the surgical MS-DRGs 
recommended for CABG episode exclusion were in MDC 5 and, with the 
exception of MS-DRGs 266-267 discussed previously, we will not exclude 
them from CABG episodes based on the reasons discussed earlier in this 
response. Of the remaining surgical MS-DRGs spread across 7 MDCs 
representing different body systems, we will also not exclude any of 
these MS-DRGs because they do not meet our standards for excluding MS-
DRGs from CABG episodes, namely that the readmissions are for chronic 
disease surgical diagnoses unrelated to a condition likely to have been 
affected by care during the CABG episode or acute disease surgical 
diagnoses unrelated to a condition resulting from or likely to have 
been affected by care during the CABG episode. We believe that our 
determinations may be different than the commenters' recommendations 
because our standard for exclusion in broadly defined CABG episodes is 
much more stringent than the commenters' review of MS-DRGs based on 
their clinical relevance to CABG.
    Comment: Several commenters requested that CMS add MS-DRGs 469 and 
470 for major joint replacement of the lower extremity to the exclusion 
list for SHFFT episodes, unless the joint replacement was for the joint 
that

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underwent a SHFFT procedure that initiated the SHFFT episode. The 
application of the exclusion in this way would exclude elective LEJR 
readmissions from SHFFT episodes. The commenters claimed this approach 
would avoid outliers and penalizing the orthopedic surgeon for 
identification and treatment of unmet medical needs while treating a 
beneficiary following a hip fracture. One commenter stated that these 
circumstances would be highly variable, particularly in hospitals with 
small patient volume. They recommended excluding MS-DRGs 469 and 470 
from SHFFT episodes so as not to penalize low-volume hospitals who 
performed costly elective LEJR during SHFFT episodes on an occasional 
basis.
    Response: Based on our proposed methodology to identify excluded 
readmissions by a list of MS-DRGs, we would have to substantially 
increase the complexity of our exclusions methodology to identify only 
a subset of MS-DRG 469 and 470 readmissions for exclusion because they 
were not related to the joint surgery that initiated the SHFFT episode. 
We do not believe this additional complexity is necessary because we 
expect that LEJR replacement of another joint, whether elective or for 
fracture, would be rare during SHFFT episodes. Most LEJR is elective, 
rather than for fracture, and given the prolonged partial weight-
bearing commonly required for recovery from SHFFT procedures and the 
general complexity and frailty of many beneficiaries who would be 
included in SHFFT episodes, we believe that elective LEJR of a joint 
other than that involved in the initial SHFFT surgery during the 90 
days post-discharge from the SHFFT model anchor hospitalization would 
be exceedingly rare. We would expect that most LEJR procedures during 
SHFFT episodes would be related because they would involve the joint 
that had an initial SHFFT procedure.
    Comment: One commenter recommended that CMS exclude Part B services 
from CABG episodes based on individual ICD-9-CM and ICD-10-CM diagnosis 
codes, rather than categories as CMS proposed. The commenter claimed 
that CMS' proposed process would result in over 22,000 ICD-10-CM 
diagnosis codes that would be classified as included in the CABG 
episode, thereby resulting in those services being considered as 
related items and services. The commenter believes that this 
methodology would result in many of the included services having no 
clinical relevance to a CABG. The commenter recommended CMS to specify 
Part B episode exclusions at the ICD-CM code level to ensure that only 
services that are clinically related to a CABG are included in the 
episode. The commenter recommended 4,960 specific ICD-9-CM and 18,859 
specific ICD-10-CM diagnosis codes be added to the CABG exclusion list.
    Another commenter recommended that CMS exclude the following ICD-
10-CM diagnosis code categories from AMI episodes as they are not 
integral to AMI treatment: I47 (Paroxysmal tachycardia); I48 (Atrial 
fibrillation and flutter); and I49 (Other cardiac arrhythmias). The 
same commenter recommended that CMS exclude ICD-9-CM diagnosis code 
category 427 (Cardiac dysrhythmias) from AMI episodes.
    Response: We appreciate the recommendations from the commenter 
about additional ICD-9-CM and ICD-10-CM diagnosis code categories to be 
excluded from AMI episodes. However, with respect to their requested 
additions to the AMI Part B exclusion list, we believe the four 
categories of ICD-CM codes recommended for exclusion do not meet our 
proposed Part B exclusions standards, specifically those services that 
are for acute disease diagnoses unrelated to a condition resulting from 
or likely to have been affected by care during the EPM episode or for 
certain chronic disease diagnoses, depending on whether the condition 
was likely to have been affected by care during the EPM episode or 
whether substantial services were likely to be provided for the chronic 
condition during the EPM episode. The ICD-CM diagnosis code categories 
describe different types of cardiac arrhythmias, which can result from 
an AMI, where the arrhythmia would be an acute condition related to the 
AMI episode, or can be a chronic condition where the management of the 
arrhythmia would be affected by the AMI treatment. Thus, we do not 
agree with the commenter that these ICD-CM diagnosis code categories 
should be excluded from AMI episodes.
    With respect to CABG episodes, another commenter recommended almost 
19,000 ICD-10-CM diagnosis codes be added to the CABG exclusion list. 
The commenter submitted individual codes in 750 ICD-10-CM categories 
for exclusion, of which there were 563 categories (75%) in which they 
requested excluding all codes. We note that there are about 71,000 
billable ICD-10-CM codes in 1,910 categories, compared to about 15,000 
ICD-9-CM codes in 1,042 categories. Due to the large number of 
diagnosis codes, we believe it would be operationally infeasible and 
unnecessarily complex to determine excluded Part B services at the 
individual diagnosis code level. We further believe that the ICD-CM 
diagnosis code categories are sufficiently narrow and descriptive that 
they can be appropriately used to determine Part B exclusions without 
substantial risk of misidentifying services that are unrelated to CABG 
episodes according to our proposed Part B exclusions standards. We have 
several years of experience with 48 different BPCI clinical episodes in 
Model 2, including CABG, which has a similar design to the proposed 
CABG model. We have encountered no significant concerns from BPCI 
Awardees or other stakeholders about our BPCI methodology which 
excludes Part B services based on ICD-CM diagnosis code categories, 
just as we use in the CJR model and proposed for the CABG model. 
Therefore, we are continuing to consider changes to the Part B 
exclusion list for the EPMs based on ICD-CM categories.
    We did not perform another clinical review of the 187 categories 
where the commenter only requested that we exclude some of the 
individual ICD-10-CM diagnosis codes in the category, because we will 
continue to exclude ICD-10-CM codes at the category level. CMS 
clinicians and coding staff reviewed all of the 563 ICD-10-CM diagnosis 
code categories where the commenter recommended that we exclude all the 
diagnosis codes in order to make a determination about additional 
exclusions at the category level. While the commenters claimed that 
diagnosis codes in these categories had no clinical relevance to CABG, 
we do not agree that the additional categories where the commenter 
recommended 100 percent of the ICD-10-CM diagnosis codes for exclusion 
meet our proposed standards for exclusion. For example, the commenter 
requested that we exclude the categories K20 (Esophagitis) and I12 
(Hypertensive chronic kidney disease) for Part B services from the CABG 
model episode definition. However, these two ICD-10-CM diagnosis code 
categories do not meet our proposed standards for the exclusion of Part 
B services because they include acute disease diagnoses for a condition 
arising from or likely to have been affected by care during the CABG 
episode in the case of Esophagitis and chronic disease diagnoses likely 
to have been affected by care during the CABG episode in the case of 
Hypertensive chronic kidney disease. The commenter's recommendations 
were prepared based on a standard of ``clinical relevance'' to CABG 
which we believe is too narrow to define related

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Part B services for the proposed CABG model which was designed to test 
comprehensive, coordinated patient-centered care for the beneficiary 
throughout broadly defined EPM episodes. In our clinical review based 
on the proposed standards for Part B exclusions, we determined that the 
563 ICD-10-CM diagnosis code categories where the commenter recommended 
that we exclude 100 percent of the diagnosis codes do not meet the 
standards for exclusion from CABG episodes. Therefore, we are making no 
changes to the CABG episode ICD-10-CM Part B exclusion list.
    The same commenter who made recommendations about additional ICD-
10-CM diagnosis code exclusions also recommended ICD-9-CM diagnosis 
codes in 436 ICD-9-CM categories for exclusion, and of those, the 
commenter recommended that all codes be excluded in 336 (77 percent) of 
the categories. We did not perform an additional clinical review of the 
categories where the commenter only requested that we exclude some of 
the individual ICD-9-CM diagnosis codes in the category, as we will 
continue to exclude ICD-9-CM codes at the category level. CMS 
clinicians and coding staff reviewed all of the 100 ICD-9-CM diagnosis 
categories where the commenter recommended that we exclude all the 
diagnosis codes in order to make a determination about additional 
exclusions at the category level. Similar to our findings from our 
review of the ICD-10-CM diagnosis code categories where all codes were 
recommended for exclusion, the ICD-9-CM categories with all codes 
recommended by the commenter for CABG episode exclusion do not meet our 
proposed exclusion standards for Part B services. For example, the 
commenter recommended that we exclude all codes in ICD-9-CM diagnosis 
code category 584 (Acute kidney failure) and 250 (Diabetes mellitus) 
from CABG episodes. However, these two ICD-9-CM diagnosis code 
categories do not meet our proposed standards for the exclusion of Part 
B services because they include acute disease diagnoses for a condition 
arising from or likely to have been affected by care during the CABG 
episode in the case of Acute kidney failure and chronic disease 
diagnoses likely to have been affected by care during the CABG episode 
in the case of Diabetes mellitus. In our clinical review, we found that 
none of the 100 ICD-9-CM categories where the commenter recommended 
that we exclude 100 percent of the diagnosis codes meet our proposed 
standards for excluding Part B services from CABG episodes, so we are 
making no changes to the CABG episode ICD-9-CM Part B exclusion list.
    Comment: One commenter stated that their understanding was that 
emergency transportation of beneficiaries with AMI would be included in 
AMI episodes. The commenter pointed out that this cost could vary 
substantially based on the transport mileage and the mode of transport, 
with air transport being substantially more costly than ground 
transport. The commenter claimed that the EPM participant where the 
episode would be initiated has little or no input on the transport 
method used but would be held accountable for the transportation cost 
in the AMI episode. The commenter requested that transport of the 
beneficiary to the AMI model participant where the AMI episode is 
initiated be excluded because the AMI model participant would have 
little or no control of that cost.
    Response: We proposed to include all Part A and Part B items and 
services in AMI episodes beginning with the admission of the 
beneficiary for the anchor hospitalization and extending through anchor 
hospitalization discharge, whereupon the AMI model exclusion list would 
be applied to Part A and Part B items and services during the 90 days 
post-discharge to make a determination about their inclusion in the AMI 
episode definition. With respect to the inclusion of Part B ambulance 
claims for air or ground transport in the AMI episode definition, we 
would exclude those services that occurred prior to the hospital 
admission. If the ambulance transport occurs on the day of initial 
admission for the anchor hospitalization and has place-of-service code 
for ambulance on the claim, the claim would not be included in the AMI 
episode definition, an approach which would be consistent with the 
specific request of the commenter.
    However, if ambulance transport occurs any other time during the 
anchor hospitalization, the transportation would be included in the AMI 
episode definition as we include all Part B services without regard to 
the Part B exclusion list, except DME to which we apply the Part B 
exclusion list during the anchor hospitalization as well. Following 
discharge from the anchor hospitalization, the inclusion or exclusion 
of ambulance transport in the AMI episode during the 90 day post-
discharge would be determined by our proposed methodology for 
determining exclusion of any Part B items and services based on the 
principal diagnosis code on the claim and whether that diagnosis code 
is on the AMI model exclusion list.
    We note that medically appropriate air ambulance transportation is 
a Medicare-covered service regardless of the state or region in which 
it is rendered. However, contractors approve claims only if the 
beneficiary's medical condition is such that transportation by either 
basic or advanced life support ground ambulance is not appropriate. 
Medical reasonableness is only established when the beneficiary's 
condition is such that the time needed to transport a beneficiary by 
ground, or the instability of transportation by ground, poses a threat 
to the beneficiary's survival or seriously endangers the beneficiary's 
health.\59\ Thus, the circumstances of covered air transport are 
limited and, once the AMI episode is initiated, the AMI model 
participant would have an ongoing role in beneficiary care that would 
result in the participant's input into the mode of transport should 
transport be required.
---------------------------------------------------------------------------

    \59\ Medicare Benefit Policy Manual, Chapter 10--Ambulance 
Services, 10.4 and 10.4.2.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS include the costs of 
pre-operative home visits in EPM episodes, including services to 
discuss goals of care and advance care planning services. Another 
commenter requested that CMS account for preventive services in the 
EPMs, although they acknowledged the associated challenges in 
benchmarking target prices based on historical claims data. One 
commenter suggested that CMS include the proposed HCPCS G-codes for the 
Collaborative Care model such that screening and follow-up would be 
included in the payment structure for each EPM, while another commenter 
recommended CMS to make resources for care coordination strategies 
available to support advancing care coordination through appropriate 
pre-discharge planning and post-discharge follow up. The commenter 
observed that the majority of opportunities to advance care 
coordination and improve patient outcomes are in decreasing hospital 
length of stay to only what is necessary for appropriate treatment, 
preventing unnecessary readmissions, and controlling post-acute care 
costs. The commenter stated that opportunities to improve care 
coordination include strong pre-discharge planning activities; 
prevention of unnecessary patient visits to the emergency department 
through early recognition of decompensation; increasing appropriate 
referral to cardiac rehabilitation services; and

[[Page 262]]

effective patient and family education. The commenter claimed that 
ensuring the social and environmental components are in place prior to 
discharge is critical and that communication of the most appropriate 
post-acute care facilities to not only the patients, but to their 
families and caregivers, can be essential to a patient's recovery.
    Response: The only items and services that are included in EPM 
episode definitions are those that are separately paid by Medicare 
under Part A or Part B. We established EPM episode definitions in order 
to add Medicare payments for items and services included in the EPM 
episode definitions into EPM-episode benchmark prices based on 
historical EPM episodes and into the calculation of actual EPM-episode 
spending. In addition, we proposed that EPM episodes begin with the 
anchor hospitalization. Therefore, for the same reasons as discussed in 
the CJR Final Rule (81 FR 73316 through 73317) regarding LEJR episodes, 
we would not include any pre-operative home visits that could be 
separately paid by Medicare in the EPM episode definitions because they 
would precede the initiation of the episode which begins with admission 
to the hospital and discharge from an MS-DRG that is included in the 
EPM.
    In terms of including preventive services and potential new HCPCS 
G-codes for Part B services in the Collaborative Care model in the EPM 
episode definitions, we note that according to our standard methodology 
for identifying excluded Part B services under the EPMs, specific Part 
B services would be included in both historical EPM episodes and actual 
EPM episodes to the extent that the ICD-9-CM or ICD-10-CM diagnosis 
code on the claim for the preventive service or HCPCS G-code for Part B 
services in the Collaborative Care model is related to the EPM episode 
and, therefore, not on the EPM episode exclusion list. With regard to 
CMS making specific financial resources available to EPM participants 
for pre-discharge planning, post-discharge follow-up, or other care 
coordination activities, EPM participants would need to develop their 
own strategies and use their own resources for these activities, as 
well as engage with EPM collaborators, to redesign care to achieve good 
quality and cost performance under the EPMs. CMS will not provide 
additional payments under the EPMs specifically for these types of 
planning and follow-up activities. However, EPM participants who 
achieve acceptable episode quality or better and reduce actual EPM-
episode spending below the quality-adjusted price are eligible for 
payment of the difference through a reconciliation payment, which can 
support the resources used by EPM participants and collaborators in 
redesigning care to achieve model success.
    Comment: Several commenters commended CMS for proposing to exclude 
IPPS new technology add-on payments for drugs, technologies, and 
services from EPM episodes, as well as OPPS transitional pass-through 
payments for medical devices. They believe that these proposals would 
ensure EPM beneficiaries/access to valuable new drugs, technologies, 
services, and devices. The commenters recommended CMS to go further and 
exclude additional innovative technologies from EPM episodes by 
establishing a review process to determine whether their costs should 
be excluded from EPM-episode benchmark prices and actual EPM-episode 
spending. The commenters reasoned that this new review process would 
allow manufacturers to identify high-cost breakthrough technologies and 
treatments that offer clinical improvements for all or certain types of 
patients or offer significant therapeutic advances for new populations 
or conditions. The commenters recommended that CMS utilize the same 
processes as those used to determine eligibility for IPPS new 
technology add-on payments but without regard to the statutory or 
regulatory policies that apply only to new technology approvals. They 
further suggested that CMS also allow individual EPM participants to 
request an EPM payment adjustment if they adopt breakthrough treatment 
in advance of other hospitals, as well as manufacturers and developers 
to request the adjustment.
    One commenter recommended CMS to consider other innovative capital 
investments for an EPM episode payment adjustment and to provide 
payment for new technologies at 100 percent of their cost, not 50 
percent as under current CMS programs for payment of new technologies. 
Finally, another commenter suggested that CMS should provide a 
financial incentive to EPM participants to use technologies that are 
shown to improve patient outcomes and reduce cost within 12 to 24 
months.
    Response: We appreciate the support of the commenters for our 
proposals regarding the exclusion of new technology payments from EPM 
episodes and agree that EPM beneficiaries should have access to 
beneficial new technologies while they are in EPM episodes. We do not 
believe it would be appropriate for the EPMs to potentially hamper 
beneficiaries' access to new technologies that are receiving IPPS new 
technology add-on payments or OPPS transitional pass-through payments 
or to burden EPM participants who choose to use these new drugs, 
technologies, services, or devices with concerns about these payments 
counting toward actual EPM-episode spending.
    However, for the same reasons that were discussed previously in the 
CJR Final Rule (80 FR 73308) regarding LEJR episodes, we will not 
establish a new process to review innovative technologies or different 
technologies that would be ineligible for a payment adjustment under 
the Medicare program and make individual determinations regarding their 
exclusion from the EPM episode definitions, as recommended by some 
commenters. Because the EPMs are retrospective reconciliation models 
that pay all providers and suppliers under the regular Medicare program 
throughout the episode of care, we believe it is more appropriate to 
rely on the existing processes under the Medicare program to make 
determinations about separate payment for new technology items and 
services. If those existing processes identify new technologies that 
would qualify for add-on payments under the IPPS or transitional pass-
through payments under the OPPS, we will exclude them from the EPM 
episode definitions as we proposed, to ensure that beneficiaries' 
access to new technology items and services is not influenced by their 
care being included in the EPMs. Similarly, under these retrospective 
EPMs, we will not provide additional payments for new technologies 
beyond those that are paid under the Medicare program.
    Finally, we do not believe it would be appropriate under the EPMs 
to provide financial incentives to EPM participants to use specific 
technologies that improve beneficiary outcomes and reduce cost over any 
specific period of time. We understand that because the EPMs would 
extend 90 days post-discharge from the anchor hospitalization, the EPMs 
specifically incentivize the use of technologies and provision of 
services that improve quality and reduce cost within the limited 
episode timeframe for which the EPM participant is responsible for 
episode quality and cost performance. However, we believe that EPM 
participants, treating physicians, and other EPM collaborators are best 
positioned to select technologies and furnish services that improve the 
quality of care and reduce cost for EPM beneficiaries and expect that 
their

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decisions factor in the long-term interests of beneficiaries as well.
    Comment: One commenter stated that there was significant evidence 
demonstrating that the use of more expensive drug-eluting stents (DES) 
results in better long-term outcomes in many patients and fewer repeat 
procedures for in-stent restenosis. The commenter added that long-term 
benefit for patients (avoiding the risk, inconvenience and cost of 
secondary procedures) and to Medicare (via fewer repeat procedures in 
the long term) would not be fully captured in an episode extending 90 
days post hospital discharge, but the full additional costs of DESs 
would be. The commenter recommended CMS take steps to ensure that the 
financial models used for the EPMs do not discourage the appropriate 
use of DES. The commenter claimed that if the AMI model results in 
fewer beneficiaries receiving DES, long-term outcomes may deteriorate 
and overall costs may grow.
    Response: As discussed in section III.C.4.a.(2) of this final rule, 
we would initiate AMI episodes from PCI MS-DRGs (246-251) with an AMI 
ICD-CM diagnosis code in the principal or a secondary position on the 
claim for the anchor hospitalization. Medicare payment for coronary 
stents, whether bare metal or DES, used during a PCI performed during a 
hospitalization are included in the IPPS payment for the inpatient 
hospitalization. While they are not paid separately by Medicare, 
payment for the required resources would be included in AMI episodes 
because the IPPS services for the anchor hospitalization are included 
in the episodes. We proposed to risk-stratify EPM-episode prices based 
on MS-DRG as discussed in section III.D.4.b.(1) of this final rule and 
there are separate MS-DRGs for PCIs that use DES (246 and 247) and non-
DES (248 and 249) for which there would be separate AMI episode prices. 
Therefore, we do not believe that the financial incentives under the 
AMI model encourage the use of any specific coronary stent because the 
episode prices take into consideration the IPPS payment for the 
specific MS-DRG that applies to the AMI model beneficiary. We do not 
expect the AMI model to discourage the appropriate use of DES.
    Comment: Several commenters pointed out that Arkansas and Tennessee 
have bundled payment programs that include CABG episodes, and their 
efforts to implement bundled payments include state Medicaid and 
commercial health plans. The commenters stated that in Arkansas, the 
episode definition is consistent, specifically naming the duration, 
responsible entity, and the included services and conditions, across 
all participating payers. If MSAs from Arkansas or Tennessee are 
selected for the AMI and CABG models, the commenters recommended that 
CMS should align the CABG episode definition with that of the state 
Medicaid plan. The commenters stated that this approach to episode 
definition would decrease the complexity and cost to providers in those 
states and reduce overlapping, independent efforts at care redesign 
that both hospitals and cardiac surgery groups would be simultaneously 
undertaking, potentially independently. The commenters added that this 
would also allow CMS to experiment with different episode definitions 
than those under the BPCI initiative and CJR model and proposed for the 
EPMs.
    Response: We appreciate the commenters drawing our attention to the 
states that are currently engaged in testing bundled payment models. We 
are encouraged that several states have identified clinical conditions 
that overlap with those proposed in the EPMs for testing bundled 
payment models, specifically CABG and PCI in the context of acute AMI 
(acute PCI). The choice of these states to test bundled payment models 
for some of the same clinical conditions that are included the EPMs 
provides additional support for the opportunities under our proposal of 
these models for Medicare beneficiaries. Specifically, Arkansas and 
Tennessee are testing CABG bundled payment models which are similar to 
the CMS CABG model, while Ohio and Tennessee are testing acute PCI 
bundled payment models that are similar to the subset of beneficiaries 
in the CMS AMI model discharged from PCI MS-DRGs with an AMI ICD-CM 
diagnosis code on the hospital claim. As displayed in section III.B.5 
of this final rule, MSAs in Arkansas, Tennessee, and Ohio have been 
selected for participation in the CMS AMI and CABG models.
    The state and CMS models for acute PCI and CABG episodes have 
similar design features. First, the responsible entity for CABG 
episodes is the hospital in Tennessee (the physician in Arkansas) like 
the CMS model and for acute PCI episodes in both states it is the 
facility where the PCI is performed, which would most commonly be the 
hospital for an acute procedure as in the CMS model where the hospital 
is responsible. Second, both the state and CMS models begin with the 
inpatient hospitalization (or with performance of the procedure), 
although the state model episodes extend 30 days following discharge, 
whereas the CMS model episodes extend 90 days. We note that for CMS 
CABG episodes, 92 percent of episode spending occurs during the anchor 
hospitalization and the 30 days post-discharge, while 84 percent of 
acute PCI episode spending occurs during that same period of time.\60\ 
Thus, despite the differences in episode duration between the state and 
CMS models, the large majority of episode spending occurs in the first 
30 days post-discharge so the state and CMS models contain most of the 
same episode spending. Third, the state and CMS models include most 
services furnished in the episode post-discharge from the anchor 
hospitalization, although the state models are not quite as inclusive. 
Fourth, episode payments are tied to quality measures in both the state 
and CMS models. Finally, both the state and CMS models included two-
sided risk and risk adjustment (or risk stratification) based on payer-
specific factors.
---------------------------------------------------------------------------

    \60\ Episodes for AMI and CABG beneficiaries initiated by all 
U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule, that began in CY 2012-2014.
---------------------------------------------------------------------------

    Both the state and CMS CABG and acute PCI models support the 
implementation and testing of bundled payment models for these costly 
episodes that significantly impact the health of individuals with 
cardiac disease. While it is operationally infeasible for CMS to apply 
the different definitions used by state Medicaid agencies in different 
states testing episode payment in an EPM of the scope of the CMS CABG 
and AMI models, the state and CMS models that included CABG and acute 
PCI are sufficiently similar and clinical pathways around CABG and 
acute PCI care reasonably well-established such that we believe 
coordination among the various providers, including hospitals and 
physicians, caring for all beneficiaries in CABG and acute PCI 
episodes, regardless of payer, should not pose a significant burden on 
the providers involved. Although the CMS CABG model places the 
responsibility for the episode upon the hospital, like the Tennessee 
CABG model, the financial arrangements that are permissible for 
individuals and entities that collaborate with the hospital toward the 
goal of improved quality and efficiency of CABG episode care as 
discussed in section III.I. of this final rule provide participant 
hospitals with substantial opportunity to share upside and downside 
risk with their collaborators, including physicians that might be 
leading CABG bundled payment efforts

[[Page 264]]

in Arkansas. The financial arrangement policies under the CMS CABG 
model should help to minimize the occurrence of independent, 
potentially overlapping efforts of hospitals and physician groups to 
redesign care for CABG patients covered by different insurers. We 
believe that the state and CMS bundled payment models for overlapping 
clinical conditions are complementary efforts that will provide 
substantial new information about the effects of bundled payments on 
the quality and cost of care for CABG and acute PCI. While we 
understand that implementation of the EPMs will result in testing CABG 
and acute PCI episodes with minor differences in design for 
beneficiaries of Medicare versus Medicaid and other commercial payers 
in MSAs selected for the AMI and CABG models in Arkansas, Tennessee, 
and Ohio, these differences are unlikely to affect the episode care 
redesign strategies of the responsible hospitals under the CMS and 
state models.
    Comment: While a number of commenters supported the proposal to 
update the EPM excluded services through the proposed sub-regulatory 
process to provide for flexibility and timeliness in adding exclusions 
to EPM episodes, several commenters opposed CMS' proposal to make 
changes to EPM episode exclusions through an annual, at a minimum, 
update outside of rulemaking. The commenters encouraged CMS to use 
notice and comment rulemaking to evaluate and exclude additional 
services from EPM episodes. The commenters stated that because 
participation in the EPMs is required in selected geographic areas and, 
therefore, the EPMs affect a large number of hospitals and providers, 
it is important that CMS implement the process to update services to be 
excluded from these episodes through notice and comment rulemaking, so 
that provider feedback throughout the course of EPM implementation is 
reflected in CMS' decisions. They added that hospitals of different 
sizes, geographic locations, organizational capabilities, and socio-
economic factors all have unique preferences, and their ideas and 
opinions should be accounted for when CMS makes changes to the list of 
conditions and services to be included and/or excluded from the 
episodes.
    Many commenters recommended CMS to continue to evaluate the list of 
services to be excluded from EPM episodes. They encouraged CMS to 
consider excluding a variety of additional services, including hospital 
readmissions planned for the beneficiary prior to the anchor 
hospitalization for consistency with other CMS policies such as the 
treatment of planned readmissions under the HRRP; ongoing care for 
beneficiaries' chronic conditions for which management is outside the 
scope of the EPMs and their exclusion could confound the EPM test of 
optimizing quality and costs for certain episodes; and post-acute care 
following excluded readmissions where little is known about the causal 
relationship between the hospital readmission and subsequent post-acute 
care services.
    Response: We appreciate the interest of the commenters in ensuring 
that future changes to the EPM episode definitions involve a 
transparent process with opportunity for broad stakeholder input. We 
have some experience with a similar sub-regulatory update process for 
the CJR model for both the list of excluded services and the fracture 
ICD-10-CM diagnosis codes that are used to identify episodes for 
fracture risk-stratification. We used this process after publication of 
the CJR Final Rule and again more recently to update the CJR model 
exclusion list for changes to the FY 2017 IPPS MS-DRGs and ICD-10-CM 
diagnosis codes. We have received significant public input through 
those processes, which has allowed us to consider and incorporate, as 
appropriate based on the regulatory review standards for the processes, 
stakeholder input and in turn communicate timely final updates to the 
exclusions and fracture lists to CJR participant hospitals. We have not 
heard any concerns about the sub-regulatory update processes as we have 
applied them during CJR model implementation.
    As we concluded for the CJR model, we continue to believe that 
updating the exclusions annually, at a minimum, is most appropriate for 
the 5-year EPMs, and allowing more frequent updates than through 
rulemaking as necessary to accommodate timely ICD-10-CM annual coding 
changes and annual IPPS MS-DRG changes, as well as to address 
significant issues raised by EPM participants and other stakeholders or 
by CMS as we continue to evaluate the list of excluded services for the 
EPM episodes. We will explore the additional areas recommended by the 
commenters and others that may arise during EPM implementation, and we 
will utilize the exclusion list update process to suggest any future 
changes based on our additional analyses.
    The commenters who supported an exclusion list update process 
outside of rulemaking did not suggest specific revisions to the 
proposed standards for updating the EPM episode exclusions, namely:
     We would not exclude the following items or services that 
are:
    ++ Directly related to the EPM episode or the quality or safety of 
the EPM episode care.
    ++ For chronic conditions that may be affected by the EPM episode 
care.
     We would exclude the following items and services that 
are:
    ++ For chronic conditions not generally affected by the EPM episode 
care.
    ++ For acute clinical conditions, not arising from existing EPM 
episode-related chronic clinical conditions or complications of EPM 
episode care.
    Thus, we continue to believe these standards provide the 
appropriate clinical review framework for updates to the EPM exclusion 
list. Finally, we believe that our proposed process to post the 
potential revised exclusions, which could include additions to or 
deletions from the exclusion list, to the CMS Web site to allow for 
public input on our planned application of these standards, and then 
adopt changes to the exclusion list with posting to the CMS Web site of 
the final revised exclusion list after our consideration of the public 
input is consistent with the recommendation of commenters that we use a 
transparent process reflective of broad opportunity for public input, 
including implementation experience with the EPMs. Conducting this 
update process outside of rulemaking based on the standards set forth 
in this final rule allows us the greatest flexibility to update the 
exclusions as changes to the MS-DRGs and ICD-10-CM diagnosis codes, 
upon which our exclusions rely, are released. This process also allows 
us to respond quickly to any episode definition issues that arise 
during implementation of the EPMs across the broad array of EPM 
participants in the selected MSAs, as well as consider any new analysis 
conducted by CMS or stakeholders about the relationship among items and 
services to the EPM episodes that might result in a different 
assessment of the inclusion or exclusion of existing MS-DRGs or ICD-10-
CM diagnosis codes in the definition of EPM episodes. We would widely 
publicize the opportunity for review and public input through the CMS 
Web site and listservs. We also note that any changes to our overall 
approach to identifying excluded items and services or to our standards 
for evaluating items and services for exclusion would be address 
through future rulemaking. Therefore, we are finalizing our proposal to 
update the exclusion list annually, at a minimum, using the standards 
and process as described.

[[Page 265]]

    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.210(a), without 
modification, to identify related items and services for EPM episodes 
as the following items and services paid under Medicare Part A and Part 
B, after the EPM-specific exclusions are applied:
     Physicians' services.
     Inpatient hospital services.
     IPF services.
     LTCH services.
     IRF services.
     SNF services.
     HHA services.
     Hospital outpatient services.
     Independent outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment.
     Part B drugs.
     Hospice.
    We are also finalizing the proposals, without modification, to use 
the following standards to exclude items and services from EPM 
episodes:
     Hospital readmissions for MS-DRGs that group to the 
following categories of diagnoses: Oncology; trauma medical admissions; 
surgery for chronic conditions unrelated to a condition likely to have 
been affected by care furnished during the EPM episode; and surgery for 
acute conditions unrelated to a condition resulting from or likely to 
have been affected by care during the EPM episode.
     Part B items and services for acute disease diagnoses 
unrelated to a condition resulting from or likely to have been affected 
by care during the EPM episode, and 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 care during 
the EPM episode or whether substantial services were likely to be 
provided for the chronic condition during the EPM episode.
     Drugs that are paid outside of the MS-DRGs included in the 
EPM episode definitions, specifically hemophilia clotting factors.
     IPPS new technology add-on payments for drugs, 
technologies, and services.
     OPPS transitional pass-through payments for medical 
devices.
    We are finalizing the proposals in Sec.  512.210(b) to exclude from 
EPM episodes specific readmissions, Part B-covered items and services 
with specific ICD-9-CM or ICD-10-CM diagnosis codes in the principal 
position on claims for items and services during the 90 days post-
discharge from the anchor hospitalization, and additionally Part-B 
covered DME with specific ICD-9-CM or ICD-10-CM diagnosis codes in the 
principal position on claims during the anchor hospitalization, with 
modification to place MS-DRGs 326-328 on the AMI MS-DRG-anchored AMI 
exclusion list and MS-DRGs 266-267 on the AMI MS-DRG-anchored AMI 
exclusion list and the CABG exclusion list. As discussed in section 
III.C.4.a.(5) of this final rule, we are not finalizing our proposed 
AMI model inpatient-to-inpatient transfer episode initiation and 
attribution policy so we will not use the terms chained anchor 
hospitalization and price MS-DRG in the final AMI episode definition 
and pricing policies. Therefore, the applicable EPM exclusion list is 
applied to the EPM episode on the basis of the MS-DRG that anchors the 
EPM episode. The final EPM exclusion lists based on ICD-9-CM and ICD-
10-CM diagnosis codes and MS-DRGs as of FY 2016 are posted on the CMS 
Web site at https://innovation.cms.gov/initiatives/epm.
    Lastly, we are finalizing our proposals in Sec.  512.210(c) to 
update the exclusion lists by sub-regulatory guidance on an annual 
basis, at a minimum, to reflect annual changes to ICD-10-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 throughout the course of 
the EPMs, without modification. The standards for this updating process 
are:
     Include any items or services that are directly related to 
the EPM episode diagnosis or procedure (for example, a subsequent 
admission for heart failure or repeat revascularization) or the quality 
or safety of care (for example, sternal wound infection following 
CABG);
     Include items or services for chronic conditions that may 
be affected by the EPM diagnosis or procedure and the post-discharge 
care (for example, diabetes);
     Exclude items and services for chronic conditions that are 
generally not affected by the EPM diagnosis or procedure and the post-
discharge care (for example, prostate removal for cancer); and
     Exclude items and services for acute clinical conditions 
not arising from existing EPM episode-related chronic clinical 
conditions or complications from the EPM episode (for example, 
appendectomy).
    The potential revised exclusions, which could include additions to 
or deletions from the exclusion lists, will be posted to the CMS Web 
site to allow for public input. After receiving and reviewing public 
input on potential revised exclusions, we will post the final revised 
exclusion lists, including providing information to the public about 
when the revisions would take effect and to which episodes they would 
apply.
    With the publication of this final rule, we are initiating the sub-
regulatory update process to incorporate changes to the MS-DRGs and 
ICD-10-CM diagnosis codes for 2017 into the EPMs by posting potential 
changes to the exclusion lists for the EPMs. We did not consider the 
2017 changes in the EPM proposed rule, because the final MS-DRGs and 
ICD-10-CM codes were not yet available when the proposed rule was 
published in the Federal Register on August 2, 2016. There are no MS-
DRG changes for FY 2017 that resulted in our suggesting potential 
changes to the exclusion lists for the EPMs. We are suggesting 
potential modifications to the principal ICD-10-CM diagnosis code 
categories for excluded Part B services in the AMI, CABG, and SHFFT 
models as of July 1, 2017, based on new ICD-10-CM diagnosis code 
categories for FY 2017 and clinical review of existing ICD-10-CM 
diagnosis code categories to which new ICD-10-CM diagnosis codes have 
been added for FY 2017. The potential modifications to the exclusion 
list for each EPM are posted on the CMS Web site at https://innovation.cms.gov/initiatives/epm. We request that public input on the 
potential modifications be sent to [email protected] by 11:59 p.m. on 
Friday, January 27, 2017. After receiving and reviewing public input on 
potential revised exclusions, we will post the final revised exclusions 
by February 24, 2017, including providing information to the public 
about when the revisions will take effect and to which episodes they 
would apply.
4. EPM Episodes
a. Beneficiary Care Inclusion Criteria and Beginning of EPM Episodes
(1) General Beneficiary Care Inclusion Criteria
    Because of the clinical variability leading up to these EPM 
episodes and the challenge of identifying unrelated services given the 
multiple chronic conditions experienced by many EPM beneficiaries, we 
proposed to follow the CJR model precedent and not begin an EPM episode 
prior to the anchor hospitalization (80 FR 73315 and 73318). We 
proposed that all services that were already included in the IPPS 
payment based on established Medicare policies (for example, 3-day 
payment window payment policies) would be included in these EPM 
episodes, and that the defined population of Medicare beneficiaries 
whose care would be included in the EPMs would meet all of

[[Page 266]]

the following criteria on admission to the anchor or chained anchor 
hospitalization:
     Enrolled in Medicare Part A and Part B.
     Eligible for Medicare not on the basis of end-stage renal 
disease.
     Not enrolled in any managed care plan (for example, 
Medicare Advantage, Health Care Prepayment Plans, cost-based health 
maintenance organizations).
     Not covered under a United Mine Workers of America health 
plan, which provides health care benefits for retired mine workers.
     Have Medicare as their primary payer.
     Not aligned to an ACO in the Next Generation ACO model or 
an ACO in a track of the Comprehensive ESRD Care Initiative 
incorporating downside risk for financial losses.
     Not under the care of an attending or operating physician, 
as designated on the inpatient hospital claim, who is a member of a 
physician group practice that initiates BPCI Model 2 episodes at the 
EPM participant for the MS-DRG that would be the anchor MS-DRG under 
the EPM.
     Not already in any BPCI model episode.
     Not already in an AMI, SHFFT, CABG or CJR model episode 
with an episode definition that does not exclude the MS-DRG that would 
be the anchor MS-DRG under the applicable EPM.
    For a discussion of our proposal to exclude certain ACO-assigned 
beneficiaries from EPM episodes, we refer to section III.D.6.c.(3) of 
the proposed rule (81 FR 50869 through 50870). For a discussion of our 
proposals for addressing potential overlap of beneficiaries in episode 
payment models that are relevant to these last two criteria, we refer 
to sections III.D.6.c.(1) and (2) of the proposed rule (81 FR 50868 
through 50869).
    The proposal for beneficiary care inclusion policies was included 
in proposed Sec.  512.230. We sought comment on our proposal of 
beneficiary care inclusion policies.
    The following is a summary of the comments received and our 
responses. We refer to sections III.D.6.c.(1) through (3) of this final 
rule for a summary of the comments received and our responses on the 
proposed three general beneficiary care inclusion criteria that relate 
to beneficiaries in other CMS models and programs.
    Comment: Many commenters expressed support for the proposed general 
beneficiary care inclusion criteria as reasonable and consistent with 
other models and programs. On the other hand, a number of commenters 
requested that CMS exclude beneficiaries with certain clinical 
characteristics from all three proposed EPMs, including beneficiaries 
receiving hospice care before or during the episode; experiencing an 
inpatient psychiatric hospitalization preceding or during an episode; 
having preexisting functional disabilities in activities of daily 
living; bearing a diagnosis of dementia; residing in a SNF; and 
experiencing illnesses for which it is expected that the beneficiary 
would be likely to die within the upcoming year. The commenters 
generally stated that these beneficiaries should be excluded due to 
high and variable needs for care that would not be typical for 
beneficiaries in EPM episodes. One commenter recommended CMS to adopt 
an ``out clause'' for the most complex patients to be exempt from the 
EPMs, such as beneficiaries with multi-organ system involvement or 
comorbidities or poly-chronic illnesses. The commenters were concerned 
that without accurate risk adjustment under the EPMs, hospitals 
disproportionately caring for these beneficiaries would experience 
undue financial risk for necessary episode care. The commenters 
recommended that if CMS did not exclude high-risk beneficiaries, CMS 
must adopt more robust risk adjustment to account for socioeconomic, 
clinical, or other risk factors that are out of the hospital's control 
and impact patients' health and recovery. Several commenters 
recommended that at least the initial implementation of the EPMs should 
exclude vulnerable populations with complicated or intensive care needs 
from the EPMs until the EPMs demonstrate sufficient quality outcomes 
and have developed accurate risk adjustments and patient safeguards to 
ensure high-quality care for populations that the commenters believe 
could face serious care disadvantages in the EPMs and put hospitals at 
an unacceptable level of financial risk.
    Response: Most beneficiaries with anchor hospitalizations that 
would initiate EPM episodes would have underlying conditions that may 
affect care throughout the episode or that may be influenced by the 
surgery or AMI that initiates the episode. Similar to our rationale in 
the CJR Final Rule regarding LEJR episodes (80 FR 73371), we believe it 
is important to include these beneficiaries in the EPMs so that they 
can benefit from the increased opportunities for care coordination and 
management throughout the episodes, and including the broadest feasible 
array of Medicare beneficiaries in the EPMs provides EPM participants 
with the greatest volume of episodes and incentive to redesign episode 
care. We do not believe it would be appropriate to exclude 
beneficiaries from the EPMs just because they are potentially expected 
to have high-cost, variable health care needs under the EPMs. We refer 
to section III.D.4.b.(2) of this final rule for a discussion of risk 
adjustment for the EPMs. Therefore, we will not exclude additional 
beneficiaries with certain clinical characteristics from the EPMs 
beyond those general beneficiary care inclusion criteria that we 
proposed.
    Comment: Several commenters requested that CMS exclude 
beneficiaries with a home address not in the service area of the 
treating hospital. The commenters believe that including beneficiaries 
in this scenario would result in an unfair financial and administrative 
burden for EPM participants relative to other EPM beneficiaries 
residing in the service area of the hospital in meeting the challenges 
of remote post-discharge care coordination and ensuring ultimate 
quality outcomes for medically complex out-of state-patients.
    Response: We acknowledge that in occasional circumstances, EPM 
participants may have limited ability to coordinate care. For similar 
reasons as our discussion in the CJR Final Rule (80 FR 73317 through 
73318) regarding LEJR episodes, following the care coordination that 
takes place in the EPM participant during the anchor hospitalization, 
we expect that much of the subsequent coordination of post-acute care 
services and other related services for EPM beneficiaries during the 90 
days post-discharge can be accomplished through telecommunications that 
do not require the patient to remain within the geographic proximity of 
the hospital responsible for the EPM episode. In addition, the design 
of the EPMs does not preclude hospitals from coordinating care with 
other providers outside of their immediate service area, which may be 
necessary especially in the case of beneficiaries who are admitted to a 
o-i or inpatient-to-inpatient (i-i) transfer hospital after an 
outpatient-to-inpatient or inpatient-to-inpatient transfer, 
respectively, for a different or higher level of cardiac care that is 
not available at the local hospital to which they originally presented 
with symptoms of an AMI. As discussed in section III.C.4.a.(5) of this 
final rule, under our final AMI model policy we are canceling all AMI 
episodes that begin at an initial treating hospital through an 
inpatient admission that

[[Page 267]]

initiates the AMI episode when the beneficiary is transferred for 
admission to an i-i transfer hospital after the AMI episode begins. 
Thus, hospitals that are AMI and CABG model participants and that 
receive beneficiaries in transfer either from outpatient or inpatient 
status at an initial treating hospital will commonly initiate and be 
responsible for AMI or CABG episodes that begin at the o-i/i-i transfer 
hospital. This attribution of episodes to the o-i/i-i transfer hospital 
increases the probability that the home of beneficiaries is not in the 
service area of the responsible hospital under the AMI or CABG model, 
yet most commenters requested that we adopt this transfer attribution 
policy. Therefore, we believe that most EPM participants have the tools 
to engage in effective remote care coordination that results in high 
quality episode care.
    Finally, we note that we are finalizing several waivers of Medicare 
program rules, as discussed in section III.J. of this final rule, to 
facilitate efficient and effective episode care coordination for 
beneficiaries in remote or distant locations outside of the EPM 
participant's immediate community. We are also finalizing policies for 
financial arrangements in section III.I. of this final rule that allow 
EPM participants to share upside and downside financial risk with a 
variety of individuals and entities who collaborate with the EPM 
participant in redesigning care and caring for EPM beneficiaries, 
regardless of the geographic proximity of these individuals and 
entities to the EPM participant. Through financial arrangements, EPM 
participants could align the financial incentives of providers in the 
EPM beneficiary's home community with the goals of the EPM participant 
to improve the quality and reduce the cost of EPM episodes. Therefore, 
we will not exclude beneficiaries from the EPMs who are referred to EPM 
participants that are not close to the beneficiary's home.
    Comment: Several commenters requested clarification about whether 
patients who buy in to Medicare A or B through the Medicaid program 
would be excluded from the EPMs.
    Response: As long as the beneficiaries are enrolled in both 
Medicare Part A and Part B, regardless of whether enrollment occurs 
through Medicaid program buy in, and assuming the beneficiaries meet 
the other general beneficiary care inclusion criteria, their care would 
be included in the EPMs.
    Comment: A commenter presented a scenario where an EPM participant 
admitted and successfully treated a beneficiary with a SHFFT procedure, 
but the patient later falls and has a subsequent hip fracture requiring 
surgical fracture repair within the post[hyphen]acute period of the 
episode. The commenter requested clarification about whether this 
instance would trigger a new SHFFT episode or the cost of the 
readmission to repair the second fracture would be included in the 
prior SHFFT episode's total cost.
    Response: During such a readmission, the beneficiary would already 
be in a SHFFT episode. Therefore, the ongoing SHFFT episode would not 
be canceled and a new SHFFT episode would not be initiated because the 
beneficiary would not meet the proposed beneficiary care inclusion 
criteria to initiate a SHFFT episode since he or she is already in a 
SHFFT episode. Because SHFFT MS-DRGs 480-482 are not on the exclusion 
list for SHFFT episodes, the related readmission would be included in 
the ongoing SHFFT episode and its cost included in the calculation of 
actual episode spending for the SHFFT episode that began with the 
initial hospitalization for a SHFFT procedure.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.230 for the 
general beneficiary care inclusion criteria, with modification to 
remove references to chained anchor hospitalization which we are not 
including in the final EPM policies as discussed in section 
III.C.4.a.(5) of this final rule. We are additionally excluding from 
EPM episodes beneficiaries who are assigned to a Shared Savings Program 
ACO in Track 3, as discussed in section III.D.6.c.(3) of this final 
rule. We define the population of Medicare beneficiaries whose care is 
included in the EPM as those who meet all of the following criteria on 
admission to the anchor hospitalization:
     Enrolled in Medicare Part A and Part B.
     Eligible for Medicare not on the basis of end-stage renal 
disease.
     Not enrolled in any managed care plan (for example, 
Medicare Advantage, Health Care Prepayment Plans, cost-based health 
maintenance organizations).
     Not covered under a United Mine Workers of America health 
plan, which provides health care benefits for retired mine workers.
     Have Medicare as their primary payer.
     Not prospectively assigned to:
    ++ An ACO in the Next Generation ACO model;
    ++ An ACO in a track of the Comprehensive ESRD Care Model 
incorporating downside risk for financial losses; or
    ++ A Shared Savings Program ACO in Track 3.
     Not under the care of an attending or operating physician, 
as designated on the inpatient hospital claim, who is a member of a 
physician group practice that initiates BPCI Model 2 episodes at the 
EPM participant for the MS-DRG that would be the anchor MS-DRG under 
the EPM.
     Not already in any BPCI model episode.
     Not already in an AMI, SHFFT, CABG or CJR model episode 
with an episode definition that does not exclude the MS-DRG that would 
be the anchor MS-DRG under the applicable EPM.
(2) Beginning AMI Episodes
    We proposed that, as long as the beneficiary met the general 
beneficiary care inclusion criteria, then an AMI episode would begin 
with admission of a Medicare beneficiary to an IPPS hospital for the 
following MS-DRGs, where the specific MS-DRG would be called the anchor 
MS-DRG for the episode:
     AMI MS-DRGs--
    ++ 280 (Acute myocardial infarction, discharged alive with MCC);
    ++ 281 (Acute myocardial infarction, discharged alive with CC); and
    ++ 282 (Acute myocardial infarction, discharged alive without CC/
MCC).
     PCI MS-DRGs, when the claim includes an AMI ICD-10-CM 
diagnosis code in the principal or secondary position on the IPPS claim 
as specified in Table 3--
    ++ 246 (Percutaneous cardiovascular procedures with drug-eluting 
stent with MCC or 4+ vessels/stents);
    ++ 247 (Percutaneous cardiovascular procedures with drug-eluting 
stent without MCC);
    ++ 248 (Percutaneous cardiovascular procedures with non-drug-
eluting stent with MCC or 4+ vessels/stents);
    ++ 249 (Percutaneous cardiovascular procedures with non-drug-
eluting stent without MCC);
    ++ 250 (Percutaneous cardiovascular procedures without coronary 
artery stent with MCC); and
    ++ 251 (Percutaneous cardiovascular procedures without coronary 
artery stent without MCC).
    Table 3 displays the ICD-9-CM codes that we proposed to use to 
identify historical AMI episodes for beneficiaries discharged from PCI 
MS-DRGs, as well as the ICD-10-CM diagnosis codes that would be used to 
identify AMI episodes for beneficiaries discharged from PCI MS-DRGs 
throughout the duration of the AMI model. The sub-regulatory process 
for updating this AMI ICD-10-CM diagnosis code list was described in

[[Page 268]]

section III.C.3.a.(1) of the proposed rule (81 FR 50831).
    We first identified the ICD-9-CM diagnosis codes for the initial 
AMI episode-of-care that were historically used to report care for a 
newly diagnosed AMI patient admitted to the hospital. These codes all 
have a fifth digit of ``1'' and were applicable until the patient was 
discharged from acute medical care, including for any transfers to and 
from other acute care facilities that occurred. These AMI ICD-9-CM 
diagnosis codes would be used to identify historical AMI episodes for 
developing AMI model-episode benchmark prices for anchor PCI MS-DRGs. 
We proposed to cross-walk the ICD-9-CM diagnosis codes for the initial 
AMI episode-of-care to the ICD-10-CM diagnosis codes that would be 
reported for similar beneficiaries during the AMI model performance 
years. The crosswalk in Table 5 is consistent with the crosswalk CMS 
posted for public comment regarding ICD-9-CM to ICD-10-CM diagnosis 
codes used for HIQR Program measures, including AMI quality 
measures.\61\
---------------------------------------------------------------------------

    \61\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/HIQR-ICD9-to-ICD10-Tables.pdf.

 Table 5--Proposed ICD-9-CM and ICD-10-CM AMI Diagnosis Codes in the Principal or Secondary Position on the IPPS
                           Claim for PCI MS-DRGS (246-251) That Initiate AMI Episodes
----------------------------------------------------------------------------------------------------------------
                                                                    ICD-10-CM
    ICD-9-CM Diagnosis code           ICD-9-CM Description       Diagnosis code       ICD-10-CM Description
----------------------------------------------------------------------------------------------------------------
410.01........................  Acute myocardial infarction of           121.09  ST elevation (STEMI) myocardial
                                 anterolateral wall, initial                      infarction involving other
                                 episode of care.                                 coronary artery of anterior
                                                                                  wall.
                                                                          122.0  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  anterior wall.
410.11........................  Acute myocardial infarction of           121.01  ST elevation (STEMI) myocardial
                                 other anterior wall, initial                     infarction involving left main
                                 episode of care.                                 coronary artery.
                                                                         121.02  ST elevation (STEMI) myocardial
                                                                                  infarction involving left
                                                                                  anterior descending coronary
                                                                                  artery.
                                                                         121.09  ST elevation (STEMI) myocardial
                                                                                  infarction involving other
                                                                                  coronary artery of anterior
                                                                                  wall.
                                                                          122.0  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  anterior wall.
410.21........................  Acute myocardial infarction of           121.10  ST elevation (STEMI) myocardial
                                 inferolateral wall, initial                      infarction involving other
                                 episode of care.                                 coronary artery of inferior
                                                                                  wall.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.31........................  Acute myocardial infarction of           121.11  ST elevation (STEMI) myocardial
                                 inferoposterior wall, initial                    infarction involving right
                                 episode of care.                                 coronary artery.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.41........................  Acute myocardial infarction of           121.19  ST elevation (STEMI) myocardial
                                 other inferior wall, initial                     infarction involving other
                                 episode of care.                                 coronary artery of inferior
                                                                                  wall.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.51........................  Acute myocardial infarction of           121.29  ST elevation (STEMI) myocardial
                                 other lateral wall, initial                      infarction involving other
                                 episode of care.                                 sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.61........................  True posterior wall infarction,          121.29  ST elevation (STEMI) myocardial
                                 initial episode of care.                         infarction involving other
                                                                                  sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.71........................  Subendocardial infarction,                121.4  Non-ST elevation (NSTEMI)
                                 initial episode of care.                         myocardial infarction.
                                                                          122.2  Subsequent non-ST elevation
                                                                                  (NSTEMI) myocardial
                                                                                  infarction.
410.81........................  Acute myocardial infarction of           121.21  ST elevation (STEMI) myocardial
                                 other specified sites, initial                   infarction involving left
                                 episode of care.                                 circumflex coronary artery.
                                                                         121.29  ST elevation (STEMI) myocardial
                                                                                  infarction involving other
                                                                                  sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.91........................  Acute myocardial infarction of            121.3  ST elevation (STEMI) myocardial
                                 unspecified site, initial                        infarction of unspecified
                                 episode of care.                                 site.
                                                                          122.9  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  unspecified site.
----------------------------------------------------------------------------------------------------------------

    The proposal for beginning AMI episodes was included in proposed 
Sec.  512.240(a)(1). We sought comment on our proposal to begin AMI 
episodes.
    We address some of the comments related to the proposed AMI ICD-CM 
diagnosis codes displayed in Table 5 in section III.C.3.a.(1) of this 
final rule in the context of our discussion of the clinical conditions 
that define AMI episodes. We received no comments specific to the ICD-
9-CM to ICD-10-CM crosswalk of the AMI ICD-CM diagnosis codes included 
in Table 5.

[[Page 269]]

The following is a summary of the comments received on other issues 
related to our proposal to begin AMI episodes and our responses.
    Comment: Several commenters stated that uncomplicated acute AMI can 
be treated and discharged the next day. They pointed out that under 
Medicare's Two-Midnight rule, these beneficiaries would be classified 
as outpatients. They requested clarification about whether CMS believes 
these beneficiaries with AMI should be classified as inpatient even if 
the expectation of the treating physician is a less than Two-Midnight 
hospital stay so the AMI model would include all beneficiaries with 
AMI.
    Response: The AMI model does not change Medicare's current payment 
policy for classifying Medicare beneficiaries as outpatients or 
inpatients, including beneficiaries with AMI. Therefore, AMI model 
participants should continue to follow all existing Medicare rules that 
apply to classifying beneficiaries as inpatients or outpatients for 
beneficiaries with AMI who could potentially initiate AMI episodes if 
they were admitted to the AMI model participant.
    To provide greater clarity to hospitals and physician stakeholders, 
and to address the higher frequency of beneficiaries being treated as 
hospital outpatients for extended periods of time, CMS adopted the Two-
Midnight rule for admissions beginning on or after October 1, 2013. 
This rule established Medicare payment policy regarding the benchmark 
criteria to use when determining whether inpatient admission is 
reasonable and necessary for purposes of payment under Medicare Part 
A.\62\ In general, the original Two-Midnight rule stated that:
---------------------------------------------------------------------------

    \62\ Fact Sheet: Two-Midnight Rule; CMS; October 30, 2015.
---------------------------------------------------------------------------

     Inpatient admissions would generally be payable under Part 
A if the admitting practitioner expected the patient to require a 
hospital stay that crossed two midnights and the medical record 
supported that reasonable expectation.
     Medicare Part A payment was generally not appropriate for 
hospital stays expected to last less than two midnights. Cases 
involving a procedure identified on the inpatient-only list or that 
were identified as ``rare and unusual exception'' to the Two-Midnight 
benchmark by CMS were exceptions to this general rule and were deemed 
to be appropriate for Medicare Part A payment.
    The Two-Midnight rule also specified that all treatment decisions 
for beneficiaries were based on the medical judgment of physicians and 
other qualified practitioners. The Two-Midnight rule did not prevent 
the physician from providing any service at any hospital, regardless of 
the expected duration of the service.
    We acknowledge that full provider implementation of hospital care 
in accordance with the Two-Midnight rule did not occur immediately on 
October 1, 2013 and that the first CMS' contractor reviews of short 
stay inpatient admissions did not begin until October 2015. Therefore, 
we understand that shifts in classifying certain beneficiaries with 
uncomplicated AMI as outpatients instead of inpatients could have 
occurred during the period of historical AMI episodes that would span 
January 1, 2013 and December 31, 2015 and would be used for setting 
quality-adjusted target prices in performance years 1 and 2 of the AMI 
model. Under our monitoring and evaluation activities as discussed in 
sections III.G.4. through 6. and section IV. of this final rule, 
respectively, we will monitor the site-of-service for treatment of 
beneficiaries with AMI over the course of the model to detect any 
issues related to access to care, quality of care, or delayed care. We 
will also evaluate the AMI model with respect to changes in AMI case 
mix for AMI model participants, and if we observe them, we would 
conduct analyses about the potential causes of such changes, including 
whether AMI model participants shifted to treating some uncomplicated 
beneficiaries with AMI as outpatients rather than inpatients. We 
further note that when we first update the data used for historical EPM 
episode payments in performance year 3 of the EPMs to be calendar years 
2015 through 2017, we expect that any changes in care patterns related 
to the Two-Midnight rule would have been made by the beginning of that 
3-year period.
    Comment: One commenter agreed with CMS that it is currently rare 
for a beneficiary with AMI to have an outpatient PCI and, therefore, 
almost all beneficiaries with AMI who are treated with PCI would be in 
the AMI model under current hospital treatment practices. However, the 
commenter added that by excluding beneficiaries who receive outpatient 
PCI from the AMI model, EPM participants may change their billing to 
outpatient PCI, especially for more complex and costly beneficiaries 
for which AMI episode costs would be expected to be high. The commenter 
recommended that CMS should put all AMI patients on the inpatient only 
list.
    Response: We appreciate the concern expressed by the commenter 
about the potential for the financial incentives in the AMI model to 
lead to shifting in the site-of-service for PCI for beneficiaries with 
AMI from inpatient to outpatient. We note that the OPPS inpatient only 
list includes procedures that are only paid under the IPPS and does not 
assign certain diagnoses to inpatient only care. PCI currently is 
commonly performed in the outpatient hospital department for 
beneficiaries that do not have AMI, and we do not believe it would be 
appropriate to place PCI procedures on the inpatient only list due to 
concerns about the shifting of the site-of-service from inpatient to 
outpatient for AMI model beneficiaries who require PCI. As we stated in 
the proposed rule (81 FR 50829) patients experiencing an AMI are almost 
uniformly admitted to the hospital for further evaluation and 
management based on clinical guidelines for the treatment of 
beneficiaries with AMI.\63\ We do not believe that EPM participants 
would change their patterns of treatment of beneficiaries with AMI, 
especially for those complex patients with significant medical needs, 
in ways that would risk beneficiaries not receiving the medically 
necessary inpatient hospital evaluation and management recommended for 
their AMI treatment. We will be monitoring patterns of care as 
discussed in sections III.G.4. through 6. of this final rule for 
evidence of clinically-unexplained changes in care, including the site-
of-service for AMI beneficiaries who receive PCI, especially if we 
believe there is the potential to compromise beneficiary access to care 
or quality of care or to delay care.
---------------------------------------------------------------------------

    \63\ Amsterdam et al. 2014 AHA/ACC Guideline for the Management 
of Patients with Non-ST--Elevation Acute Coronary Syndromes. 
Circulation. 2014; 130:e344-e426.
---------------------------------------------------------------------------

    Comment: A commenter requested that CMS further clarify how an EPM 
participant can determine whether beneficiaries with AMI who have a 
CABG would be attributed to the AMI or CABG model.
    Response: We appreciate the opportunity to provide clarification on 
the specific episode attribution of beneficiaries with AMI who have a 
CABG. We refer to section III.D.4.a.(5) of this final rule for further 
discussion of the final transfer attribution policy for AMI episodes 
that involve an inpatient-to-inpatient transfer for AMI care. AMI and 
CABG episodes are initiated based on the MS-DRG that is assigned to the 
final discharge that occurs during the anchor hospitalization. Thus, if 
a beneficiary hospitalized for treatment of AMI has a CABG during that 
anchor hospitalization, we expect that the

[[Page 270]]

beneficiary would be discharged from a CABG MS-DRG (231-236) and, 
therefore, would initiate a CABG episode. We refer to section 
III.D.4.b.(b) of this final rule for the pricing adjustment that would 
apply to CABG episodes for beneficiaries who have a CABG during the 
initial hospitalization for AMI treatment. However, if a beneficiary 
with an AMI hospitalized for initial treatment is discharged from the 
anchor hospitalization and then readmitted for CABG during the 90 day 
post-discharge episode duration, the beneficiary would initiate an AMI 
episode, which would not be canceled due to the CABG readmission. We 
refer to section III.D.4.b.(c) of this final rule for the pricing 
adjustment that would apply to AMI episodes with CABG readmissions.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.240(a)(1), 
without modification, to begin AMI episodes with admission of a 
Medicare beneficiary to an IPPS hospital for the following MS-DRGs, 
where the specific MS-DRG is called the anchor MS-DRG for the episode:
     AMI MS-DRGs--
    ++ 280 (Acute myocardial infarction, discharged alive with MCC);
    ++ 281 (Acute myocardial infarction, discharged alive with CC); and
    ++ 282 (Acute myocardial infarction, discharged alive without CC/
MCC).
     PCI MS-DRGs, when the claim includes an AMI ICD-10-CM 
diagnosis code in the principal or secondary position on the IPPS claim 
as specified in Table 6--
    ++ 246 (Percutaneous cardiovascular procedures with drug-eluting 
stent with MCC or 4+ vessels/stents);
    ++ 247 (Percutaneous cardiovascular procedures with drug-eluting 
stent without MCC);
    ++ 248 (Percutaneous cardiovascular procedures with non-drug-
eluting stent with MCC or 4+ vessels/stents);
    ++ 249 (Percutaneous cardiovascular procedures with non-drug-
eluting stent without MCC);
    ++ 250 (Percutaneous cardiovascular procedures without coronary 
artery stent with MCC); and
    ++ 251 (Percutaneous cardiovascular procedures without coronary 
artery stent without MCC).

  Table 6--Final ICD-9-CM and ICD-10-CM AMI Diagnosis Codes in the Principal or Secondary Position on the IPPS
                           Claim for PCI MS-DRGS (246-251) That Initiate AMI Episodes
----------------------------------------------------------------------------------------------------------------
                                                                    ICD-10-CM
    ICD-9-CM Diagnosis code           ICD-9-CM Description       Diagnosis code       ICD-10-CM Description
----------------------------------------------------------------------------------------------------------------
410.01........................  Acute myocardial infarction of           121.09  ST elevation (STEMI) myocardial
                                 anterolateral wall, initial                      infarction involving other
                                 episode of care.                                 coronary artery of anterior
                                                                                  wall.
                                                                          122.0  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  anterior wall.
410.11........................  Acute myocardial infarction of           121.01  ST elevation (STEMI) myocardial
                                 other anterior wall, initial                     infarction involving left main
                                 episode of care.                                 coronary artery.
                                                                         121.02  ST elevation (STEMI) myocardial
                                                                                  infarction involving left
                                                                                  anterior descending coronary
                                                                                  artery.
                                                                         121.09  ST elevation (STEMI) myocardial
                                                                                  infarction involving other
                                                                                  coronary artery of anterior
                                                                                  wall.
                                                                          122.0  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  anterior wall.
410.21........................  Acute myocardial infarction of           121.10  ST elevation (STEMI) myocardial
                                 inferolateral wall, initial                      infarction involving other
                                 episode of care.                                 coronary artery of inferior
                                                                                  wall.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.31........................  Acute myocardial infarction of           121.11  ST elevation (STEMI) myocardial
                                 inferoposterior wall, initial                    infarction involving right
                                 episode of care.                                 coronary artery.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.41........................  Acute myocardial infarction of           121.19  ST elevation (STEMI) myocardial
                                 other inferior wall, initial                     infarction involving other
                                 episode of care.                                 coronary artery of inferior
                                                                                  wall.
                                                                          122.1  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  inferior wall.
410.51........................  Acute myocardial infarction of           121.29  ST elevation (STEMI) myocardial
                                 other lateral wall, initial                      infarction involving other
                                 episode of care.                                 sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.61........................  True posterior wall infarction,          121.29  ST elevation (STEMI) myocardial
                                 initial episode of care.                         infarction involving other
                                                                                  sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.71........................  Subendocardial infarction,                121.4  Non-ST elevation (NSTEMI)
                                 initial episode of care.                         myocardial infarction.
                                                                          122.2  Subsequent non-ST elevation
                                                                                  (NSTEMI) myocardial
                                                                                  infarction.
410.81........................  Acute myocardial infarction of           121.21  ST elevation (STEMI) myocardial
                                 other specified sites, initial                   infarction involving left
                                 episode of care.                                 circumflex coronary artery.
                                                                         121.29  ST elevation (STEMI) myocardial
                                                                                  infarction involving other
                                                                                  sites.
                                                                          122.8  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of other
                                                                                  sites.
410.91........................  Acute myocardial infarction of            121.3  ST elevation (STEMI) myocardial
                                 unspecified site, initial                        infarction of unspecified
                                 episode of care.                                 site.

[[Page 271]]

 
                                                                          122.9  Subsequent ST elevation (STEMI)
                                                                                  myocardial infarction of
                                                                                  unspecified site.
----------------------------------------------------------------------------------------------------------------

(3) Beginning CABG Episodes
    We proposed that, as long as a beneficiary met the general 
beneficiary care inclusion criteria, a CABG episode would begin with 
the admission of a Medicare beneficiary to an IPPS hospital for a CABG 
that is paid under the following CABG MS-DRGs and the specific MS-DRG 
would be called the anchor MS-DRG for the episode:
     231 (Coronary bypass with percutaneous transluminal 
coronary angioplasty (PTCA) with MCC).
     232 (Coronary bypass with PTCA without MCC).
     233 (Coronary bypass with cardiac catheterization with 
MCC).
     234 (Coronary bypass with cardiac catheterization without 
MCC).
     235 (Coronary bypass without cardiac catheterization with 
MCC).
     236 (Coronary bypass without cardiac catheterization 
without MCC).
    The proposal for beginning CABG episodes was included in proposed 
Sec.  512.240(b)(1). We sought comment on our proposal to begin CABG 
episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter recommended that CMS begin elective CABG 
prior to admission for the anchor hospitalization, since all of the 
workup prior to an elective CABG happens in the weeks or months before 
the hospitalization. The commenter claimed that the patient workup can 
vary considerably among providers, which may result in unnecessary 
costs. As an example, the commenter stated that a patient could have 
every cardiac diagnostic test prior to CABG when only several may be 
necessary. To help address unnecessary utilization prior to elective 
CABG, the commenter recommended that CMS begin the episode for elective 
CABG prior to the hospitalization for surgery.
    The commenter further disagreed with CMS' proposal that elective 
and urgent CABG would be included in one EPM, because the beneficiaries 
behave differently during the episode and with respect to their risk 
profiles. The commenter recommended that CMS separate CABG under these 
two circumstances into separate EPMs and test both models.
    Response: We appreciate the interest expressed by the commenter in 
starting CABG episodes prior to the hospital admission, and we 
recognize that the beneficiary's care that ultimately leads to the 
CABG, including the physician-patient relationship and diagnostic 
workup, can begin long before the surgical procedure. However, for 
similar reasons to our consideration of analogous comments in the CJR 
Final Rule (81 FR 73316 through 73317) regarding LEJR episodes, 
beginning the episode too far in advance of the CABG would make it 
difficult to avoid bundling unrelated items and services, and starting 
the episode prior to the hospital admission is more likely to encompass 
costs that vary widely among beneficiaries with CAD that are potential 
candidates for CABG, which would make the episode more difficult to 
price appropriately. We continue to believe that beginning the CABG 
episode with the anchor hospitalization is most appropriate due to the 
clinical variability leading up to the CABG and the challenge of 
distinguishing between related and unrelated services. We also believe 
that beginning the episode with the anchor hospitalization, and not 
prior to admission, would be easier to administer and provide more 
consistent episodes for testing the CABG model.
    Furthermore, we agree with the commenter that beneficiaries 
experiencing elective versus urgent CABG behave differently during the 
episode due to their different health care needs. However, rather than 
creating two EPMs for these beneficiaries for whom we believe the same 
CABG episode definition would apply, we are providing a pricing 
adjustment as discussed in section III.D.4.b.(2)(b) of this final rule 
for CABG model beneficiaries with an AMI diagnosis code on the claim 
for the anchor hospitalization who have substantially higher historical 
episode spending than CABG model beneficiaries without AMI. The two 
groups correspond to the urgent versus elective groups recommended by 
the commenter. We believe this pricing adjustment policy accomplishes 
the major objective of the commenter who recommended two CABG EPMs so 
that we price CABG episodes for the two groups of CABG model 
beneficiaries differently based on their different patterns of health 
care utilization.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.240(b)(1), 
without modification, to begin CABG episodes with the admission of a 
Medicare beneficiary to an IPPS hospital for a CABG that is paid under 
the following CABG MS-DRGs and the specific MS-DRG is called the anchor 
MS-DRG for the episode:
     231 (Coronary bypass with percutaneous transluminal 
coronary angioplasty (PTCA) with MCC).
     232 (Coronary bypass with PTCA without MCC).
     233 (Coronary bypass with cardiac catheterization with 
MCC).
     234 (Coronary bypass with cardiac catheterization without 
MCC).
     235 (Coronary bypass without cardiac catheterization with 
MCC).
     236 (Coronary bypass without cardiac catheterization 
without MCC).
(4) Beginning SHFFT Episodes
    We proposed that as long as a beneficiary met the general inclusion 
criteria, a SHFFT episode would begin with the admission of a Medicare 
beneficiary to an IPPS hospital for surgical treatment of hip or femur 
fracture (other than joint replacement) that is paid under the 
following SHFFT MS-DRGs and where the specific MS-DRG would be called 
the anchor MS-DRG for the episode:
     480 (Hip and femur procedures except major joint with 
MCC).
     481 (Hip and femur procedures except major joint with 
complication or comorbidity (CC).
     482 (Hip and femur procedures except major joint without 
CC or MCC).
    The proposal for beginning SHFFT episodes was included in proposed 
Sec.  512.240(c)(1). We sought comment on our proposal to begin SHFFT 
episodes.
    We received no comments specific to our proposal to begin SHFFT 
episodes.
    Final Decision: We are finalizing the proposals in Sec.  
512.240(c)(1), without modification, to begin SHFFT episodes with the 
admission of a Medicare beneficiary to an IPPS hospital for

[[Page 272]]

surgical treatment of hip or femur fracture (other than joint 
replacement) that is paid under the following SHFFT MS-DRGs and where 
the specific MS-DRG is called the anchor MS-DRG for the episode:
     480 (Hip and femur procedures except major joint with 
MCC).
     481 (Hip and femur procedures except major joint with 
complication or comorbidity (CC).
     482 (Hip and femur procedures except major joint without 
CC or MCC).
(5) Special Policies for Hospital Transfers of Beneficiaries With AMI
    The asymmetric distribution of cardiac care across hospitals makes 
transfer, either from an inpatient admission or from the emergency 
department (without inpatient admission) of one hospital to another, a 
common consideration in the treatment course for beneficiaries with an 
initial diagnosis of AMI. Therefore, transfer for cardiac care is an 
important consideration for the AMI and CABG models.
    The availability of revascularization and intensive cardiac care 
are particularly important considerations in the transfer of 
beneficiaries with an AMI. A substantial portion of hospitals do not 
have revascularization capability (that is, a cardiac catheterization 
lab for PCI or cardiothoracic surgeons who can perform CABG) or 
cardiovascular intensive care units (CVICU) and, therefore, must 
transfer beneficiaries to provide access to these services. In the PCI 
and CABG examples, the discharge from the transfer hospital that 
accepted the beneficiary would result in discharge under the MS-DRGs 
for PCI (246-251) or CABG (231-236). For the CVICU example, the 
transfer hospital's discharge MS-DRG would be AMI (280-282). There is 
evidence of the asymmetric distribution of cardiac care in the 2014 
IPPS and critical access hospital claims data: While 4,332 hospitals 
submitted at least one claim for an AMI MS-DRG, only 1,755 (41 percent) 
and 1,156 (27 percent) of these hospitals filed at least one claim for 
PCI or CABG MS-DRGs, respectively.\64\
---------------------------------------------------------------------------

    \64\ AMI, CABG and PCI MS-DRG inpatient claims from all U.S. 
IPPS hospitals and CAHs derived from the 2014 Geographic Variations 
Inpatient Claims File located in the Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    The potential transfer scenarios are best illustrated by the care 
pathways experienced by beneficiaries with AMI. These beneficiaries 
typically present to a hospital's emergency department where the 
evaluation identifies the AMI diagnosis and determines the initial 
indicated treatments. Depending on the beneficiary's clinical needs and 
the hospital's treatment capacity, the beneficiary could be--
     Admitted to the initial treating hospital, with no 
transfer to another hospital during the initial hospitalization for 
AMI. We refer to this scenario as no transfer;
     Admitted to the initial treating hospital and later 
transferred to a transfer hospital. We refer to this scenario as 
inpatient-to-inpatient transfer and the transfer hospital as an i-i 
transfer hospital; or
     Transferred from the initial treating hospital to a 
transfer hospital without admission to the initial treating hospital. 
We refer to this scenario as outpatient-to-inpatient transfer and the 
transfer hospital as an o-i transfer hospital.
    Our proposals and alternatives considered for these scenarios are 
described in detail in this section. In our proposals for AMI or CABG 
episodes for initial AMI care, our overarching policy was that every 
AMI or CABG episode would begin at the first AMI or CABG model 
participant to which the beneficiary was admitted for an AMI MS-DRG, 
PCI MS-DRG with an AMI ICD-CM diagnosis code, or CABG MS-DRG. The AMI 
or CABG model participant where the episode began would then be 
financially responsible for the AMI or CABG episode unless the episode 
was canceled.
    Based on our analysis of Medicare claims data, in the proposed rule 
(81 FR 50836) we presented the finding that about 75 percent of 
historical AMI episodes and CABG episodes for beneficiaries with AMI 
began through the emergency department of the hospital where the anchor 
hospitalization for the AMI or CABG episode would occur. In another 18 
percent of historical AMI episodes and CABG episodes for beneficiaries 
with AMI, the anchor hospitalization occurred at a transfer hospital 
following an emergency department visit at another hospital without 
admission to that hospital for an MS-DRG that would initiate an AMI or 
CABG episode.\65\
---------------------------------------------------------------------------

    \65\ Episode for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in the proposed rule, that end in CY 
2014.
---------------------------------------------------------------------------

    In each of these scenarios, policies to determine which episode 
type would apply, the beginning of the episode, and the specific 
hospital with financial responsibility for the episode must be 
determined (for example, AMI or CABG, if CABG is provided as an initial 
treatment in an outpatient-to-inpatient or inpatient-to-inpatient 
scenario). In the proposed rule, we discussed each of the scenarios in 
detail and provide a summary of the scenarios in Table 7.
    In the no transfer scenario, the episode would begin upon admission 
to an AMI or CABG model participant under circumstances that meet the 
criteria discussed in sections III.C.4.a.(1) and (2) or (3) of the 
proposed rule (81 FR 50847 through 50848), and the AMI or CABG episode 
that applied would be determined by the specific MS-DRG for the anchor 
hospitalization. Financial responsibility for the episode would be 
attributed to the sole treating hospital involved in the initial AMI 
care. Under this proposal, the treating hospital's quality measure 
performance would determine the effective discount factor to be applied 
to the AMI or CABG model benchmark episode price for the episode at 
reconciliation as described in section III.D.4.b.(10) of the proposed 
rule (81 FR 50861 through 50862).
    The inpatient-to-inpatient transfer scenario had several potential 
outcomes. If the beneficiary initially presented for AMI care to a 
hospital that was not an AMI model participant and was admitted and 
then transferred to an i-i transfer hospital that was an AMI or CABG 
model participant, the episode would first initiate at the i-i transfer 
hospital and, therefore, the i-i transfer hospital would be financially 
responsible for the AMI or CABG episode. The i-i transfer hospital's 
quality measure performance would determine the effective discount 
factor to be applied to the AMI or CABG model benchmark episode price 
for the episode at reconciliation as described in section 
III.D.4.b.(10) of the proposed rule (81 FR 50861 through 50862).
    If a beneficiary initially presented for AMI care to an AMI model 
participant and was admitted and then transferred to an i-i transfer 
hospital (hereinafter a chained anchor hospitalization) and the i-i 
transfer hospital was not an AMI or CABG model participant, the episode 
would initiate at the initial treating hospital and would only be 
canceled for beneficiaries discharged from the i-i transfer hospital 
under MS-DRGs that were not anchor MS-DRGs for AMI or CABG episodes as 
discussed in section III.C.4.b. of the proposed rule (81 FR 50841 
through 50842). The initial treating hospital's quality measure 
performance would determine the effective discount factor to be applied 
to the AMI or CABG model benchmark episode price for the episode at 
reconciliation as described in section III.D.4.b.(10) of the proposed 
rule (81 FR 50861 through 50862). We also refer to section 
III.D.4.b.(2)(a) of the proposed rule (81 FR 50849 through 50851) for

[[Page 273]]

further discussion of our proposal for price MS-DRGs that could differ 
from the anchor MS-DRG in AMI episodes that included a chained anchor 
hospitalization, in order to provide pricing adjustments for episodes 
where the initial treating hospital was responsible for the AMI 
episode.
    Inpatient-to-inpatient transfers between AMI and CABG model 
participant hospitals were further considered in this section and 
specifically included beneficiaries experiencing an AMI who were 
transferred for revascularization (that is, PCI or CABG) or a higher 
level of medical AMI care. We noted that of all beneficiaries 
experiencing an AMI in historical episodes, about half received no 
revascularization (PCI or CABG) during the anchor hospitalization or 
the 90-day post-hospital discharge period, about 40 percent received a 
PCI, and less than 10 percent had CABG surgery.\66\ Moreover, three-
quarters of CABG procedures and over 90 percent of PCIs for 
beneficiaries experiencing an AMI occurred at the hospital that first 
admitted the beneficiary for an inpatient hospitalization.\67\
---------------------------------------------------------------------------

    \66\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in the proposed rule, that end in CY 
2014.
    \67\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in the proposed rule, that end in CY 
2014.
---------------------------------------------------------------------------

    However, given the asymmetric distribution of cardiac care 
capacity, we noted in the proposed rule (81 FR 50837) that there would 
be beneficiaries who initiated an AMI episode by admission to an 
initial treating hospital but then required transfer to an i-i transfer 
hospital for additional treatment during the AMI episode, resulting in 
a chained anchor hospitalization. For historical AMI episodes ending in 
CY 2014, only about 12 percent of beneficiaries who would have 
initiated an AMI episode through admission and assignment to an AMI MS-
DRG at the initial treating hospital were transferred to an i-i 
transfer hospital, with 30 percent and 20 percent receiving PCI or 
CABG, respectively, at the i-i transfer hospital. Another 20 percent 
were discharged from the i-i transfer hospital in the chained anchor 
hospitalization under an AMI MS-DRG. The remaining 30 percent of 
beneficiaries were discharged from the i-i transfer hospital in the 
chained anchor hospitalization under other MS-DRGs that would not have 
initiated AMI or CABG episodes, including cardiac valve surgery, 
septicemia, and renal failure. From the perspective of hospital 
capacity and transfer patterns, most hospitals transferred less than 10 
percent of beneficiaries initiating a historical AMI episode under an 
AMI MS-DRG at the first admitting hospital, and only a handful of 
hospitals transferred the majority of their patients in this 
scenario.\68\ This small number of hospitals that transferred the 
majority of their patients included a range of urban and rural 
hospitals with 50 to 250 beds.
---------------------------------------------------------------------------

    \68\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in the proposed rule, that end in CY 2014.
---------------------------------------------------------------------------

    The need to transfer a beneficiary in an AMI episode during the 
anchor hospitalization for appropriate care that resulted in a chained 
anchor hospitalization where the hospitals were both AMI or CABG model 
participants raised considerations about whether attribution of the AMI 
episode should be to the first treating hospital that admitted the 
beneficiary or the i-i transfer hospital, as well as considerations 
about the specific model (AMI or CABG) for attribution of the episode 
in some circumstances. For example, if the first treating hospital 
initiated an AMI episode by admitting a beneficiary and then 
transferred the beneficiary to another hospital where the beneficiary 
was treated and ultimately discharged from acute care, ending the 
chained anchor hospitalization under a CABG MS-DRG, then we needed to 
determine whether the beneficiary would be included in the AMI or CABG 
model, which hospital would assume financial responsibility for the 
beneficiary's episode, and under what circumstances, if any, would the 
AMI episode be canceled if a transfer occurred.
    In considering the model episode that would include the 
beneficiary's care and accountability for the beneficiary in inpatient-
to-inpatient transfer scenarios between AMI and CABG model participant 
hospitals that resulted in a chained anchor hospitalization for AMI, 
several factors were relevant, including the timing of final discharge 
disposition of the beneficiary, including to post-acute care; the 
location of the post-acute care; the identity and location of the 
physician who was most responsible for managing the beneficiary's care 
after discharge; and consistency with other CMS transfer policies. We 
noted in the proposed rule (81 FR 50837) that while 64 percent of CABG 
beneficiaries in historical episodes received post-acute care services 
following discharge from the anchor hospitalization (most commonly home 
health services--43 percent received home health services only and 13 
percent a combination of home health and SNF services), only 36 percent 
of historical AMI beneficiaries received post-acute services.\69\ Of 
further relevance for beneficiaries with an AMI diagnosis was that 
significant follow up care was usually performed by cardiologists who 
managed the patient's underlying cardiovascular disease, rather than 
the interventional cardiologist or cardiothoracic surgeon that 
performed the revascularization procedure. PCI procedures, billed by 
interventional cardiologists, have a 0-day global period, reflecting 
that follow up care is not typically furnished by interventional 
cardiologists. We further noted that patients in commercial programs 
that require travel to regional centers of excellence for CABG 
generally only stay in the remote location away from the patient's home 
for a week or so post-hospital discharge. We expected that 
beneficiaries hospitalized for treatment of AMI, even if they were 
transferred to a revascularization hospital resulting in a chained 
anchor hospitalization, would receive most follow up care in their 
local communities, a view that was supported by many commenters on the 
CJR model proposed rule who believed that many patients requiring post-
acute care prefer to return to their home communities for that care 
following hospital discharge (80 FR 23457). Finally, consistency across 
other CMS program policies when a beneficiary with an AMI experienced 
an inpatient-to-inpatient transfer was relevant to developing policies 
for the AMI and CABG models. Specifically, we noted that the Hospital-
Level, Risk-Standardized Payment Associated with a 30-Day Episode of 
Care for AMI (NQF #2431) measure used in the hospital value-based 
purchasing (HVBP) Program attributes payments for transferred 
beneficiaries to the hospital that admitted the patient for the initial 
AMI hospitalization.\70\
---------------------------------------------------------------------------

    \69\ Episodes for AMI and CABG beneficiaries initiated by all 
U.S. IPPS hospitals and constructed using standardized Medicare FFS 
Parts A and B claims, as proposed in the proposed rule, that end in 
CY 2014.
    \70\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Based on these considerations, we proposed that once an AMI episode 
was initiated at an AMI model participant hospital through an inpatient 
hospitalization, the AMI episode would continue under the financial 
responsibility of that participant hospital, regardless of whether the

[[Page 274]]

beneficiary was transferred to another AMI or CABG model participant 
hospital for further medical management of AMI, or for a PCI or CABG 
during a chained anchor hospitalization. Under this proposal, the 
initial treating hospital's quality measure performance would determine 
the effective discount factor to be applied to the AMI model benchmark 
episode price for the episode at reconciliation as described in section 
III.D.4.b.(10) of the proposed rule (50861 through 50862) rule. Our 
proposal to cancel AMI episodes for beneficiaries discharged from the 
i-i transfer hospital under MS-DRGs that were not anchor MS-DRGs for 
AMI or CABG episodes was discussed in section III.C.4.b. of the 
proposed rule (81 FR 50841 through 50842). We also referred to section 
III.D.4.b.(2)(a) of the proposed rule (81 FR 50849 through 50851) for 
further discussion of the proposal for price MS-DRGs that could differ 
from the anchor MS-DRG in AMI episodes that included a chained anchor 
hospitalization, in order to provide pricing adjustments for episodes 
where the initial treating hospital was responsible for the AMI 
episode.
    In the proposed rule (81 FR 50838), we noted that we did not 
propose to cancel the AMI episode even if the transfer and admission to 
the i-i transfer hospital would otherwise initiate a CABG episode at 
the i-i transfer hospital. We believed that once the AMI episode had 
been initiated, all related care during the episode (including hospital 
care for transfers and related readmissions for CABG) should be fully 
attributed to the AMI episode in the manner described in this section 
for the episode and that the first hospital that initiated the AMI 
episode should be financially responsible for the AMI episode. 
Therefore, we did not propose to cancel the AMI episode if a CABG was 
performed during a chained anchor hospitalization, nor did we propose 
that a beneficiary could simultaneously be in an AMI and CABG episode 
for overlapping periods of time due to the different MS-DRGs that 
applied during the chained anchor hospitalization. Instead, we would 
make an AMI episode pricing adjustment for these circumstances by 
paying the AMI model participant based on a price MS-DRG that was 
different from the anchor MS-DRG to reflect Medicare payment for the 
CABG as discussed in section III.D.4.b.(2)(a) of the proposed rule (81 
FR 50849 through 50851).
    We considered several alternatives to our proposal for AMI episode 
attribution for inpatient-to-inpatient transfer scenario where both 
hospitals are AMI or CABG model participants. First, we considered 
canceling the AMI episode initiated at the initial treating hospital 
when a transfer occurs, and basing any AMI or CABG episode initiation 
on the MS-DRG for the final i-i transfer hospital admission in the 
chained anchor hospitalization as long as that latter hospital was an 
AMI or CABG model participant. This would place financial 
responsibility for the episode on the i-i transfer hospital if the 
beneficiary went on to be discharged from acute care at that hospital. 
Attributing episodes under this alternative policy would assign 
beneficiaries to the final i-i transfer hospital for the AMI or CABG 
episode based on the model episode definitions in sections 
III.C.4.a.(2) and (3) of the proposed rule (81 FR 50834 through 50835). 
That is, if the beneficiary was discharged from the final admission in 
the chained anchor hospitalization under an AMI MS-DRG or a PCI MS-DRG, 
then the AMI episode initiated at the initial treating hospital would 
be canceled and the i-i transfer hospital accepting the beneficiary on 
referral would initiate an AMI episode. Similarly, if the beneficiary 
was discharged from the final admission in the chained anchor 
hospitalization under a CABG MS-DRG, then the AMI episode initiated at 
the first hospital would be canceled and the i-i transfer hospital 
accepting the beneficiary on referral would initiate a CABG episode. 
Under this alternative, the i-i transfer hospital's quality measure 
performance would determine the effective discount factor to be applied 
to the AMI or CABG model benchmark episode price for the episode at 
reconciliation as described in section III.D.4.b.(10) of the proposed 
rule (81 FR 50861 through 50862). However, we did not propose this 
alternative because we believed that post-acute care and care 
management following hospital discharge would be more likely to be 
effectively provided near the beneficiary's home community, rather than 
near the i-i transfer hospital accepting the beneficiary upon referral.
    Second, we considered proposing an episode hierarchy such that, 
during a chained anchor hospitalization, the most resource-intensive 
MS-DRG during the whole chained anchor hospitalization would determine 
the model episode and the financially responsible hospital for the 
episode. For example, if we established CABG, PCI, and AMI MS-DRGs in 
descending order of inpatient hospital resource-intensity, we would 
initiate a model episode based on the most resource-intensive MS-DRG 
during the chained anchor hospitalization and attribute the model 
episode to the hospital discharging the beneficiary under that MS-DRG. 
Under this scenario, either the initial treating or i-i transfer 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI or CABG model benchmark 
episode price for the episode at reconciliation as described in section 
III.D.4.b.(10) of the proposed rule (81 FR 50861 through 50862), 
depending on the specific hospital discharging the beneficiary under 
the most resource-intensive MS-DRG during the chained anchor 
hospitalization. However, we did not propose this alternative because 
we believed, like the first alternative we considered, this could 
frequently lead to episode responsibility being attributed to the i-i 
transfer hospital when the local hospital first caring for the 
beneficiary with AMI may be better positioned to coordinate care in the 
beneficiary's home community.
    Thus, our proposal would have placed responsibility for care during 
the 90-day post-hospital discharge period in the AMI episode on the AMI 
model participant hospital to which the beneficiary initially presented 
for AMI care and was admitted, rather than on the i-i transfer hospital 
to which the beneficiary was transferred after initiating the AMI 
episode. Given the broad episode definition of AMI episodes, we 
believed that the post-discharge care required following 
hospitalization that included CABG, PCI, or medical management was best 
coordinated and managed by the hospital that originally admitted the 
beneficiary for the AMI. Such post-discharge care could include follow 
up for adherence to cardiac rehabilitation referral and management of 
the beneficiary's underlying CAD and comorbidities. Even in the case of 
the more common surgical complications of CABG, such as wound 
infection, the beneficiary commonly would be admitted to the local 
hospital for treatment.
    We further proposed that, as discussed in section III.I.3. of the 
proposed rule (81 FR 50918 through 50920), hospitals could be 
collaborators in the AMI, CABG, and SHFFT models in order to increase 
the financial alignment of hospitals and other EPM collaborators with 
EPM participants that were financially responsible for EPM episodes. 
Therefore, we expected that community hospital participants in the AMI 
model would be able to enter into sharing arrangements with i-i 
transfer hospitals accepting AMI model beneficiaries on referral to 
allow sharing of episode reconciliation payments or

[[Page 275]]

repayment responsibility with the i-i transfer hospitals if those 
hospitals played a significant role in care redesign of AMI or CABG 
care pathways or management of beneficiaries throughout AMI or CABG 
episodes, including during the 90 days post-hospital discharge. We 
expected that community hospitals would need to coordinate closely with 
i-i transfer hospitals accepting AMI model beneficiaries on referral as 
the beneficiaries in AMI episodes were discharged from those hospitals, 
in order to improve the quality and efficiency of AMI episodes. This 
coordination could potentially be enhanced if i-i transfer hospitals 
were AMI model collaborators with financial incentives that were 
aligned with those of the AMI model participants through sharing 
arrangements.
    The proposal for AMI episode attribution in circumstances that 
involve inpatient-to-inpatient transfers of beneficiaries with AMI was 
included in proposed Sec.  512.240(a)(2). We sought comment on our 
proposal for AMI episode attribution in circumstances that involved 
inpatient-to-inpatient transfers of beneficiaries with AMI, including 
comment on the alternatives considered.
    In the outpatient-to-inpatient transfer scenario where a 
beneficiary with AMI was transferred from the emergency department of 
the initial treating hospital without admission to that hospital as an 
inpatient to an o-i transfer hospital for admission, we proposed that 
the AMI or CABG episode would begin at the o-i transfer hospital based 
on the MS-DRG (and AMI ICD-CM diagnosis code if a PCI MS-DRG applies) 
that was assigned to that anchor hospitalization. That is, if a 
beneficiary received initial AMI care in a hospital emergency 
department without admission and was transferred to an AMI or CABG 
model participant (the o-i transfer hospital) for admission, then the 
AMI or CABG episode would begin in the first hospital involved in the 
beneficiary's AMI or CABG care that admitted the beneficiary as an 
inpatient, specifically the o-i transfer hospital. Therefore, the o-i 
transfer hospital would be financially responsible for the AMI or CABG 
episode. This attribution was in accordance with the AMI and CABG model 
rules, as discussed in sections III.C.4.a.(2) and (3) of the proposed 
rule (81 FR 50834 through 50835), that initiated an AMI episode with a 
hospitalization that results in discharge from an AMI MS-DRG or PCI MS-
DRG with an AMI ICD-CM diagnosis code in the principal or secondary 
position from an AMI model participant or a CABG episode with a 
hospitalization that resulted in discharge from a CABG MS-DRG. Under 
this proposal, the o-i transfer hospital's quality measure performance 
would determine the effective discount factor to be applied to the AMI 
or CABG model benchmark episode price for the episode at reconciliation 
as described in section III.D.4.b.(10) of the proposed rule (81 FR 
50861 through 50862). Under this proposal, regardless of whether the 
initial treating hospital was an AMI or CABG model participant, an AMI 
or CABG episode would only be initiated at the o-i transfer hospital if 
that hospital was an AMI or CABG model participant.
    We considered an overarching alternative policy that would begin 
every AMI or CABG episode at the first AMI or CABG model participant at 
which either:
     The beneficiary presented to the emergency department for 
initial AMI care before being transferred to an o-i transfer hospital; 
or
     The beneficiary was admitted for an AMI MS-DRG, PCI MS-DRG 
with an AMI ICD-CM diagnosis code, or a CABG MS-DRG.
    The AMI or CABG model participant where the episode began would 
then be financially responsible for the AMI or CABG episode unless the 
episode was canceled. Under this alternative, there would no changes to 
our proposals for attributing episodes with no transfers or inpatient-
to-inpatient transfers.
    However, under this alternative, if the beneficiary presented for 
initial AMI care to the emergency department of an AMI or CABG model 
participant, the AMI or CABG episode would begin at this initial 
treating hospital when a beneficiary was transferred from the emergency 
department for his or her first inpatient hospitalization which 
occurred at an o-i transfer hospital. This would place financial 
responsibility for the AMI or CABG episode on the initial treating 
hospital despite the fact that the beneficiary was transferred from 
that hospital without being admitted, and the initial treating 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI or CABG model benchmark 
episode price for the episode at reconciliation as described in section 
III.D.4.b.(10) of the proposed rule (81 FR 50861 through 50862).
    Identifying the emergency department visit at the initial treating 
hospital would require using Field (Form Locator) 15--Point of Origin 
for Admission or Visit code on the CMS 1450 IPPS claim from the o-i 
transfer hospital to identify transfer from another hospital and 
linking that claim to the hospital outpatient claims from the initial 
treating hospital for the emergency department visit and other hospital 
outpatient services that occurred within a certain period of time prior 
to the o-i transfer hospital admission and that were related to the AMI 
care. The episode would be assigned to the AMI model even if the 
beneficiary received a CABG at the o-i transfer hospital, and we would 
assign financial responsibility for the AMI episode to the initial 
treating hospital. Under this alternative, the initial treating 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI model benchmark episode price 
for the episode at reconciliation as described in section 
III.D.4.b.(10) of the propose rule (81 FR 50861 through 50862). We 
would also need to identify other types of related services to include 
in the episode that would begin prior to the o-i transfer hospital 
admission, such as physicians' services for care in the emergency 
department.
    This alternative would have had the benefit of consistently 
including all care in each AMI or CABG episode that occurred following 
presentation of a beneficiary with AMI to the emergency department of 
an AMI or CABG model participant to the AMI or CABG episode, regardless 
of whether an AMI or CABG episode involved no transfer, o-i transfer, 
or i-i transfer. However, because this alternative would have begun the 
AMI episode prior to the initial hospital admission, we would have 
needed to establish additional policies for identifying the 
beneficiaries who initiated these episodes and defined the timeframe 
and services that would have been included in the AMI or CABG episode 
prior to admission to the o-i transfer hospital.
    We did not propose this alternative because we believed the 
policies necessary to begin the AMI or CABG episode at the first 
treating hospital when an inpatient hospitalization did not occur would 
be complex, challenging to operationalize, and required assumptions 
about the relationship of care to the AMI based solely on 
administrative claims data that were insufficient to ensure we could 
accurately identify related care. We believed it remained problematic 
to define the services to be included in AMI or CABG episodes if those 
services preceded an inpatient hospitalization that would otherwise 
initiate the AMI or CABG episode. For example, we would need to define 
the timeframe for beginning an AMI or CABG episode with an emergency 
department visit for AMI that resulted in a transfer to the o-

[[Page 276]]

i transfer hospital, as well as the Part A and Part B services to be 
included in the AMI or CABG episode that would result. As we discussed 
in section III.C.4.a.(1) of the proposed rule (81 FR 50834), we did not 
propose to begin any EPM episode prior to the anchor hospitalization 
because of the clinical variability leading up to all EPM episodes and 
the challenge of identifying unrelated services prior to the inpatient 
hospitalization. Thus, we did not propose to make an exception for 
transfers from the emergency department of the initial treating AMI or 
CABG model participant hospital when the beneficiary with AMI was not 
admitted to that hospital.
    We sought comment on the proposal for AMI and CABG episode 
initiation and attribution for the outpatient-to-inpatient transfer 
scenario, as well as the alternative considered that would begin an 
episode upon presentation of a beneficiary for initial AMI care to the 
emergency department of an AMI or CABG model participant when the care 
resulted in an outpatient-to-inpatient transfer.
    Table 7 included in the proposed rule (81 FR 50840) provided a 
summary of episode initiation and attribution at the beginning of AMI 
care for no transfer, inpatient-to-inpatient transfer, and outpatient-
to-inpatient transfer scenarios, including a description of how these 
related to the participation in the AMI or CABG models of hospitals 
providing initial AMI care.

  Table 7--Proposed Initiation and Attribution of AMI and CABG Episodes
  That Involve No Transfer, or Outpatient-to-Inpatient or Inpatient-to-
            Inpatient Transfers at the Beginning of AMI Care
------------------------------------------------------------------------
                                         Proposed episode initiation and
                Scenario                           attribution
------------------------------------------------------------------------
No transfer (participant): Beneficiary   Initiate AMI or CABG episode
 admitted to an initial treating          based on anchor
 hospital that is a participant in the    hospitalization MS-DRG.
 AMI or CABG model for an AMI MS-DRG,    Attribute episode to the
 PCI MS-DRG with AMI ICD-CM diagnosis     initial treating hospital.
 code, or CABG MS-DRG.
No transfer (nonparticipant):            No AMI or CABG episode is
 Beneficiary admitted to an initial       initiated.
 treating hospital that is not a
 participant in the AMI or CABG model
 for an AMI MS-DRG, PCI MS-DRG with AMI
 ICD-CM diagnosis code, or CABG MS-DRG.
Inpatient-to-inpatient transfer          Initiate AMI or CABG episode
 (nonparticipant to participant):         based on the MS-DRG at i-i
 Beneficiary admitted to an initial       transfer hospital.
 treating hospital that is not an AMI    Attribute episode to the i-i
 or CABG model participant and later      transfer hospital.
 transferred to an i-i transfer
 hospital that is an AMI or CABG model
 participant for an AMI MS-DRG, PCI MS-
 DRG with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Inpatient-to-inpatient transfer          Initiate AMI or CABG episode
 (participant to participant or           based on anchor
 participant to nonparticipant):          hospitalization MS-DRG at
 Beneficiary admitted to an initial       initial treating hospital. If
 treating hospital that is an AMI or      the chained anchor
 CABG model participant for an AMI MS-    hospitalization results in a
 DRG, PCI MS-DRG with AMI ICD-CM          final AMI, PCI, or CABG MS-
 diagnosis code, or CABG MS-DRG and       DRG, calculate episode
 later transferred to an i-i transfer     benchmark price based on the
 hospital for an AMI, PCI, or CABG MS-    AMI, PCI or CABG MS-DRG with
 DRG, regardless of whether the i-i       the highest IPPS weight. If
 transfer hospital is an AMI or CABG      the final MS-DRG is not an
 model participant.                       AMI, PCI, or CABG MS-DRG,
                                          cancel the episode. Attribute
                                          episode to the initial
                                          treating hospital.
Outpatient-to-inpatient transfer         Initiate AMI or CABG episode
 (nonparticipant to participant or        based on anchor
 participant to participant):             hospitalization MS-DRG at o-i
 Beneficiary transferred without          transfer hospital. Attribute
 admission from the initial treating      episode to the o-i transfer
 hospital, regardless of whether the      hospital.
 initial treating hospital is an AMI or
 CABG model participant, to a o-i
 transfer hospital that is an AMI or
 CABG model participant and is
 discharged from the o-i transfer
 hospital for an AMI MS-DRG, PCI MS-DRG
 with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Outpatient-to-inpatient transfer         No AMI or CABG episode is
 (participant to nonparticipant):         initiated.
 Beneficiary transferred without
 admission from the initial treating
 hospital that is an AMI or CABG
 participant to an o-i transfer
 hospital that is not an AMI or CABG
 model participant.
------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters expressed support for the proposed 
AMI model transfer episode initiation and attribution policy that would 
initiate an AMI episode under the responsibility of an initial treating 
hospital that is an AMI model participant where the beneficiary is 
assigned to an AMI MS-DRG or PCI MS-DRG with AMI ICD-CM diagnosis code 
and the beneficiary is later transferred to another hospital and 
ultimately discharged from an AMI, PCI, or CABG MS-DRG. One commenter 
further recommended that CMS consider implementing this policy in the 
BPCI initiative and future episode payment models that are under 
development. Several commenters stressed the importance of 
beneficiaries receiving rehabilitation services in their home 
communities to improve adherence to the treatment plan, and 
acknowledged that CMS' AMI model transfer attribution proposal would 
encourage this care pattern. Another commenter pointed out that CMS 
should differentiate patient-directed presentation with AMI at a 
hospital emergency department versus emergency medical services-
directed delivery to the hospital emergency department. The commenter 
explained that the usual practice in the case of STEMI identified in 
the field by emergency medical services would be to transport the 
beneficiary to a hospital with appropriate capacity to avoid any need 
for transfer that could delay treatment and impair outcomes. The 
commenter added that the trend nationally for emergency medical 
services delivery of patients with an AMI is for the patient to be 
taken to a facility that is capable of managing that patient rather 
than taking them to the closest hospital. Thus, the commenter believes 
the transfer issues should be only applicable to the minority of 
beneficiaries who present to the emergency department under their own 
power.
    Other commenters who supported the proposed AMI model transfer 
episode initiation and attribution policy, including the proposal to 
cancel

[[Page 277]]

episodes that contain a chained anchor hospitalization with a final 
discharge MS-DRG that is not an AMI, PCI, or CABG MS-DRG, however 
expressed concern that the proposal for a price MS-DRG payment 
adjustment does not go far enough to provide a level playing field for 
AMI episodes involving a chained anchor hospitalization. One of these 
commenters presented analysis showing that while only a minority of 
episodes involving a chained anchor hospitalization resulted in a final 
discharge MS-DRG other than an AMI, PCI, or CABG MS-DRG, the episode 
costs were very high in those cases because they were atypical. The 
commenter concluded that CMS' proposal to cancel these episodes was 
appropriate.
    Additional analysis by the commenter demonstrated that hospitals 
that transfer AMI beneficiaries frequently are more likely to be 
smaller community hospitals with much higher episode spending, who 
would be penalized by the lack of a more robust transfer-adjustment 
methodology just because they do not have the most sophisticated 
cardiac care available. Several commenters stated that these hospitals 
often have no choice but to transfer their most complicated patients to 
larger, tertiary hospitals so that the patients can receive the most 
appropriate cardiac care and that hospitals should not be penalized for 
doing so. These commenters requested that CMS exclude the IPPS amount 
paid to the initial admitting hospital when calculating quality-
adjusted target prices and actual episode spending to put these 
hospitals on a more level playing field with larger referral hospitals 
that offer comprehensive cardiac care in order to encourage the best 
provision of care to beneficiaries in AMI episodes. Additionally, the 
commenters recommended that CMS provide additional explanation of the 
framework for chained anchor hospitalizations in the final rule and 
include illustrative examples about how the methodology works.
    One commenter expressed support for the second of the two 
alternatives considered by CMS for attributing AMI episodes in 
inpatient-to-inpatient transfer scenarios that would begin an AMI 
episode and assign episode responsibility to the hospital in the 
chained anchor hospitalization discharging the beneficiary under the 
most resource-intensive MS-DRG according to a hierarchy of CABG, PCI, 
and AMI MS-DRGs in descending order of inpatient hospital resource-
intensity. The commenter reasoned that in comparison with CMS' 
proposal, this approach would provide a more direct association in the 
transfer policy between hospital episode responsibility and the 
hospital providing the highest level of care for the beneficiary with 
AMI during the chained anchor hospitalization. The commenter stated 
that if a hospital admits a beneficiary but then has to transfer the 
beneficiary to another hospital for more advanced cardiac care that the 
initial treating hospital cannot provide, it does not seem reasonable 
to make that initial hospital responsible for all follow up care post-
discharge for that condition.
    The majority of commenters opposed CMS' proposed AMI model transfer 
episode initiation and attribution policy, with the majority addressing 
the inpatient-to-inpatient transfer scenario where the initial treating 
hospital and the i-i transfer hospital are both AMI and CABG model 
participants. In general, the commenters believe the inpatient-to-
inpatient transfer proposal was too complex and would be unmanageable 
for EPM participants. They stated that while CMS partially predicated 
its AMI model transfer episode initiation and attribution proposal on 
public input on the CJR model that beneficiaries often prefer to 
receive follow up care after hospital discharge in their community, the 
AMI and CABG models are sufficiently different from the CJR model that 
this perspective may not apply to the proposed models. In the AMI and 
CABG models, the commenters emphasized that beneficiaries would be more 
likely to require emergent care and, therefore, have less of an 
opportunity to seek care from a facility located outside of their 
region. Thus, the commenters believe that many AMI model beneficiaries 
experiencing a chained anchor hospitalization during their initial 
hospital treatment for AMI would remain in the same region as the i-i 
transfer hospital for post-acute care services, in contrast to 
primarily elective LEJR under the CJR model where procedures may be 
planned in advance and involve farther travel for the surgery. Thus, 
the commenters reasoned that the initial treating hospital and the i-i 
transfer hospital caring for a beneficiary in an AMI episode would be 
likely to be in the same region as one another and the beneficiary's 
home community. Thus, they concluded that CMS' interest in AMI model 
attribution policy for inpatient-to-inpatient transfers that could 
support beneficiary follow up in their own community following 
discharge could be met equally well through AMI episode attribution to 
the i-i transfer hospital as to the initial treating hospital.
    Therefore, for inpatient-to-inpatient transfer scenarios for AMI 
model beneficiaries, many commenters who disagreed with CMS' proposal 
recommended CMS to adopt the first alternative considered for i-i 
transfers once an AMI episode is initiated at the initial treating 
hospital. Consistent with CMS' discussion of this alternative 
considered in the proposed rule (81 FR 50838), the commenters 
encouraged CMS to cancel the AMI episode initiated at the initial 
treating hospital every time an inpatient-to-inpatient transfer occurs, 
and base any AMI or CABG episode initiation on the MS-DRG for the final 
i-i transfer hospital admission in the chained anchor hospitalization 
if the i-i transfer is an AMI or CABG model participant. This would 
place financial responsibility for the episode on the i-i transfer 
hospital if the beneficiary went on to be discharged from acute care at 
that hospital and the hospital was an AMI or CABG model participant. 
The commenters claimed this approach would greatly simplify the 
initiation, attribution, and pricing methodologies under the AMI and 
CABG models.
    The commenters favoring AMI episode initiation and episode 
assignment to the i-i transfer hospital contended that CMS' proposal to 
assign AMI episode responsibility to the initial treating hospital 
could encourage the initial treating hospital to either prematurely 
transfer patients who present to the emergency department with symptoms 
of AMI or not transfer AMI patients at all to retain control of the 
episode and its associated costs. The commenters speculated that while 
these hospital responses could be clinically appropriate, it is unclear 
whether this would be the best approach for beneficiaries and whether 
long-term this type of transfer policy within the AMI model could 
reduce the capacity of small and rural hospitals to effectively manage 
care for cardiac patients, while creating an overreliance on larger 
hospitals.
    The commenters stated that CMS' proposal placed too much importance 
on the role of the local hospital and physicians associated with the 
initial AMI treatment and too little importance on the role of the 
hospital providing the majority of the AMI care. They maintained that 
the i-i transfer hospital would be more likely to influence the post-
discharge plan and post-acute care the beneficiary receives and would 
be in a better position to retain financial responsibility for the 
beneficiary and assume final risk for the EPM episode. The commenters 
claimed that it is the

[[Page 278]]

discharging i-i transfer hospital that would develop the discharge 
plan; make recommendations on the type of post-acute care services 
necessary and make arrangements with specific post-acute care 
providers; schedule follow up appointments; educate the beneficiary and 
caregivers about the beneficiary's clinical condition; and communicate 
post-discharge instructions.
    In addition, several commenters pointed out that the initial 
treating hospital may not know the beneficiary's final MS-DRG until 
days after discharge from the i-i transfer hospital. They stated that 
this time lag makes it problematic to assign episode responsibility to 
the initial treating hospital because that hospital would not be able 
to identify and intervene with AMI model beneficiaries prior to their 
discharge from acute care, a care redesign strategy that the commenters 
believe is important for AMI model success. Some commenters stated that 
CMS failed to appreciate the complexity of accurate beneficiary 
identification and its impact on facilitating effective post-acute care 
services in the proposed AMI model transfer policy.
    A number of commenters recognized CMS' intent to link transferring 
hospitals with larger, tertiary hospitals through the AMI model 
transfer episode initiation and attribution proposal in order to 
strengthen the quality and efficiency of health care within 
communities. The commenters agreed that there needs to be increased 
communication and collaboration among these hospitals in order to 
achieve better patient outcomes, yet they also believe that ongoing 
challenges with the timely communication of beneficiary information 
among providers and the current competitive healthcare landscape are 
not conducive to this type of collaboration.
    In general, many commenters expressed concern that the complexity 
of the AMI model's proposed transfer attribution policies and the 
potential resulting confusion about beneficiary notification and 
hospital episode responsibility in an environment that lacks 
established electronic tracking programs that can communicate among 
many hospitals in different systems. Several commenters believe the 
proposed policy could focus an AMI model participant's limited 
resources on administrative issues that do not actually improve care 
and reduce episode costs for AMI beneficiaries. They stated that 
hospital time and resources would be better spent improving care, 
developing sharing arrangements among providers, and tracking 
beneficiary outcomes. The commenters emphasized that this is especially 
true since transfers are expected to occur in a small minority of AMI 
episodes.
    The majority of commenters also expressed various concerns about 
potential beneficiary harm due to AMI model transfer policies under an 
EPM, whether those proposed or recommended by some of the commenters, 
that would establish new financial incentives for hospitals around 
transfers for beneficiaries with AMI in the absence of clear best 
transfer practices for hospitals with varying levels of cardiac care 
capacity. The commenters claimed that CMS' proposal did not include 
sufficient protections against EPM participants engaging in adverse 
patient selection to improve quality and cost performance in each type 
of transfer scenario (no transfer, outpatient-to-inpatient, and 
inpatient-to-inpatient). The commenters believe that inappropriate 
transfers and cost-shifting among competitors in a geographic market 
could occur under the AMI model, and they recommended to CMS to provide 
robust patient protections and transfer methodologies in the final 
rule.
    Most commenters expressed support for CMS' proposal to initiate AMI 
episodes upon admission to the o-i transfer hospital in an outpatient-
to-inpatient transfer scenario, as well as attribute responsibility for 
the episode to the o-i transfer hospital. The commenters agreed with 
CMS that this approach would not require potentially flawed assumptions 
about the relatedness of services preceding the hospital admission and, 
therefore, would result in clearly defined AMI episodes. However, 
several commenters recommended CMS to address the operational issues 
identified in the proposed rule (81 FR 50839) related to outpatient-to-
inpatient transfers that would not allow CMS to begin AMI episodes when 
an initial treating hospital provides only outpatient emergency care 
prior to transfer to an o-i transfer hospital. The commenters believe 
it would be important to mitigate these concerns in order to avoid the 
potential unintended consequences of unnecessary and medically 
inappropriate outpatient-to-inpatient beneficiary transfers.
    Due to the complexity of transfer scenarios and the lack of clarity 
about the best approaches to caring for beneficiaries with AMI under an 
EPM in communities with varying cardiac care capacity distributed among 
hospitals in the region, several commenters further recommended that 
CMS gather clinical expert advice through an advisory panel or other 
dialogue with stakeholders to further explore the AMI model transfer 
policy consequences on hospitals' willingness to transfer patients. 
Finally, many commenters recommended CMS to provide clarification and 
ongoing guidance and support to AMI model participants related to 
transfers and episode attribution and monitor for any unintended 
consequences of the final AMI model transfer episode initiation and 
attribution policies.
    Response: We appreciate the variety of perspectives of the 
commenters on the proposed AMI model transfer episode initiation and 
attribution policies. We agree with the commenters that this area of 
policy is both complex and significant under the AMI model, given the 
variety of care patterns experienced by beneficiaries with AMI and the 
variation in cardiac care capacity among hospitals. The transfer policy 
has substantial implications for AMI and CABG model participants with 
varying cardiac care capacity, beneficiaries who experience transfers 
during emergency treatment of AMI, and CMS due to the potential for the 
AMI model transfer policy to result in changes in transfer patterns 
that do not improve the quality or efficiency of care for beneficiaries 
with AMI, both those beneficiaries included the model and those whose 
care is not included in the AMI model. We recognized the importance of 
considering the potential advantages and disadvantages of various 
approaches to AMI model transfer episode initiation and attribution for 
beneficiaries and hospitals in our extensive discussion in the proposed 
rule (81 FR 50838 through 50840) about alternatives considered for 
outpatient-to-inpatient and inpatient-to-inpatient transfer scenarios. 
We also continue to believe that collaboration among community 
hospitals and referral hospitals with more advanced cardiac care 
capacity is important to improving the quality and efficiency of health 
care in communities, especially for beneficiaries with conditions 
requiring emergency evaluation and treatment such as AMI.
    We considered the analysis provided by some commenters and the 
commenters' different perspectives on the proposed AMI model transfer 
episode initiation and attribution proposal and the alternatives 
considered, including the potential for unintended consequences under 
any transfer policy we would establish for the AMI model. At this point 
in time, we appreciate that there are important advantages and 
disadvantages to each of the potential AMI model transfer

[[Page 279]]

episode initiation and attribution policies that require ongoing 
consideration over the longer-term during AMI model implementation in 
order to optimize the interests of beneficiaries, hospitals, and CMS, 
while limiting the risk of unintended consequences that could create 
problems for beneficiaries, hospitals, and CMS. For example, several 
commenters stressed that changes to current AMI transfer patterns under 
transfer policies of the AMI model that encourage the initial treating 
hospital to either more quickly transfer patients who present to the 
emergency department with symptoms of AMI or not transfer AMI patients 
at all to retain control of the episode and its associated cost could 
be clinically appropriate but also could reflect premature transfers 
that were not medically necessary or a care pattern that poses a risk 
to beneficiaries' health. Thus, while we are finalizing a policy now to 
address transfer situations under the AMI model to allow for 
implementation of the model, we are also coupling this policy with 
heightened monitoring and evaluation of transfers of Medicare AMI 
beneficiaries to and from AMI and CABG model participants and may 
propose refinements to the policy or payment adjustments in the future 
depending on our findings.
    With respect to the policy for outpatient-to-inpatient transfers of 
beneficiaries with AMI, we proposed to begin AMI and CABG episodes upon 
the first inpatient admission to a treating hospital that is an AMI or 
CABG model participant, rather than in the outpatient department of the 
initial treating hospital that did not admit the beneficiary. In the 
proposed rule (81 FR 50839), we also considered an overarching 
alternative policy that could begin every AMI and CABG episode at the 
first AMI or CABG model participant at which the beneficiary was either 
admitted for an AMI MS-DRG, PCI MS-DRG with an AMI ICD-CM diagnosis 
code, or CABG MS-DRG or presented to the emergency department for 
initial AMI care (including observation status) before being 
transferred to an o-i transfer hospital. However, we are not beginning 
AMI or CABG episodes with care furnished by an AMI or CABG model 
participant when the beneficiary is not admitted as an inpatient to 
that hospital. Given the commenters' concerns about our proposal to 
begin AMI episodes at the initial treating hospital under the 
circumstance of an inpatient-to-inpatient transfer, we believe that 
beginning AMI episodes at a hospital furnishing only emergency AMI care 
could interfere with the hospital's focus on emergency stabilization 
and transfer of the beneficiary. It could also place an undue burden on 
the initial treating hospital for long-term responsibility for the AMI 
episode in which the initial treating hospital had a role that was 
limited to stabilization prior to transfer for AMI treatment. We would 
not expect the initial treating hospital in these circumstances to be 
substantially involved in the beneficiary's AMI treatment after the 
initial emergency care. The commenters confirmed our concerns, as 
discussed in the proposed rule (81 FR 50839), that this approach would 
be complex, challenging to operationalize, and require assumptions 
about the relationship of care to the AMI based solely on 
administrative claims data that would be insufficient to ensure we 
could accurately identify related care.
    Thus, we have concluded that it remains problematic to define the 
services to be included in AMI episodes if those services precede an 
inpatient hospitalization that would otherwise initiate the AMI or CABG 
episode. As we discuss in section III.C.4.a.(1) of this final rule, we 
are not beginning an EPM episode prior to the anchor hospitalization 
because of the clinical variability leading up to all EPM episodes and 
the challenge of identifying unrelated services prior to the inpatient 
hospitalization. Thus, we will not make an exception for transfers from 
the emergency department or observation status of the initial treating 
AMI or CABG model participant when the beneficiary with AMI is not 
admitted to that hospital. As discussed in sections III.G.4. through 6. 
and IV. of this final rule, we will be engaged in monitoring and 
evaluation specifically as they relate to the risks associated with 
this policy of adverse patient selections that could result in 
increased transfers of complex beneficiaries with AMI to other 
hospitals so that an AMI model participant can avoid high-cost 
episodes. Should we observe concerning outpatient-to-inpatient transfer 
patterns, we may engage in future rulemaking to refine the AMI episode 
initiation policy or to make a payment adjustment for this scenario.
    With respect to the proposed policy for inpatient-to-inpatient 
transfers, we appreciate the detailed comments on the proposal as well 
as on the two alternatives considered in the proposed rule (81 FR 
50838). In response to the commenters who contended that the proposal 
to assign AMI episode responsibility to the initial treating hospital 
in an inpatient-to-inpatient transfer scenario could increase premature 
transfers, we are unclear that this would be the case since we also 
proposed not to initiate AMI episodes based only on care in the 
outpatient department. Thus, we believe it would be more likely 
expected that AMI model participants pursuing early transfer would 
transfer the beneficiary prior to admission to the hospital. However, 
we are concerned that the proposal to assign AMI episode responsibility 
to the initial treating hospital could lead to beneficiaries not being 
transferred in circumstances where they need a higher level of cardiac 
care, as a number of commenters claimed.
    We appreciate the support of the commenter for the second 
alternative we discussed in the proposed rule (81 FR 50838) for 
inpatient-to-inpatient transfer, which would assign AMI or CABG episode 
responsibility to the hospital in the chained anchor hospitalization 
discharging the beneficiary under the most resource-intensive MS-DRG 
according to a hierarchy of CABG, PCI, and AMI MS-DRGs in descending 
order of inpatient hospital resource-intensity. While we continue to 
believe that this alternative could have merit by placing AMI episode 
responsibility on the hospital that furnished the most intensive 
treatment to the AMI beneficiary during the chained anchor 
hospitalization, we are not adopting this policy due to concerns about 
the episode attribution complexity that it would present. Many 
commenters pointed out significant challenges for AMI model 
participants that would arise under our proposal to assign AMI episode 
responsibility consistently to the initial treating hospital that 
admitted the beneficiary regarding the ability of AMI model 
participants to meet the requirements of the model, such as timely 
beneficiary notification. They also raised concerns about the 
timeliness of the responsible hospital's identification of model 
beneficiaries especially if the hospital is not the one discharging the 
beneficiary from acute care and stated that a delay in beneficiary 
identification could seriously impede the hospital's ability to 
intervene with AMI and CABG model beneficiaries to begin coordinating 
care prior to hospital discharge. Thus, we believe that an inpatient-
to-inpatient transfer policy that assigns AMI episode responsibility in 
some cases to the initial treating hospital and in other cases to the 
i-i transfer hospital depending on the different MS-DRGs during the 
chained anchor hospitalization would be even more

[[Page 280]]

complex and could lead to even greater hospital confusion than our 
proposal.
    We also considered the potential for making a payment adjustment 
while holding the initial treating hospital accountable for the AMI 
episode as recommended by a number of commenters, in order to put 
hospitals with lesser cardiac care capacity that more frequently need 
to transfer AMI beneficiaries on a more level playing field with 
hospitals that can themselves furnish comprehensive cardiac care. While 
this recommendation from the commenters would be operationally feasible 
and address some of the concerns raised by commenters about the 
transfer incentives inherent in our proposal, while maintaining the 
responsible hospital for the AMI episode in an inpatient-to-inpatient 
transfer scenario as the initial treating hospital that would be most 
likely to be in the beneficiary's community, this recommendation would 
add even greater complexity to the AMI model pricing methodology, 
already an area of significant concern to the commenters. This 
refinement also would not address the challenges for the initial 
treating hospital raised by other commenters related to timely 
beneficiary identification and notification. Therefore, we are not 
adopting this recommendation for the AMI model. However, we note that 
because we are changing the responsible hospital for AMI and CABG 
episodes that involve inpatient-to-inpatient transfers in our final 
policy as discussed later in this section, we believe the commenters' 
interest in creating a more level playing field among AMI model 
participants that transfer beneficiaries to variable degrees is 
addressed through that final policy.
    Most commenters favored the first alternative we discussed in the 
proposed rule (81 FR 50838) for AMI model transfer episode initiation 
and attribution in the inpatient-to-inpatient transfer scenario. 
Specifically, this policy would cancel the AMI episode initiated at the 
initial treating hospital that is an AMI model participant when any 
inpatient-to-inpatient transfer occurs. The beneficiary would initiate 
a new AMI or CABG episode at the i-i transfer hospital if that hospital 
is an AMI or CABG model participant and the MS-DRG for that 
hospitalization is an AMI MS-DRG, PCI MS-DRG with AMI ICD-CM diagnosis 
code, or CABG MS-DRG. If the i-i transfer hospital is not an AMI or 
CABG model participant, then the beneficiary would not be included in 
any AMI or CABG episode regardless of the MS-DRG assigned. This 
approach would place financial responsibility for the AMI or CABG 
episode on the i-i transfer hospital if the beneficiary went on to be 
discharged from acute care at that hospital. Episode initiation and 
attribution in this way addresses the concerns of commenters about 
establishing a level playing field for AMI model participants that more 
frequently transfer beneficiaries for AMI treatment because it would 
not hold those hospitals accountable for AMI episodes with inpatient-
to-inpatient transfers that are, on average, higher-cost than AMI 
episodes without transfers.
    This approach also addresses the commenters' significant concerns 
about the potential burden our proposal would have placed on the 
initial treating hospital to track beneficiaries transferred to the i-i 
transfer hospital and determine if they were discharged from the i-i 
transfer hospital under an MS-DRG that would assign the beneficiary to 
an AMI episode for which the initial treating hospital would be 
responsible. The resources necessary for the initial treating hospital 
to coordinate with the i-i transfer hospital that was actually 
discharging the beneficiary around the discharge and follow up plan 
could be substantial, given that the i-i transfer hospital would hold 
the discharge planning responsibility for that beneficiary. It is not 
clear that the opportunity for the initial treating hospital to enter 
into financial arrangements to share upside and/or downside risk with 
the i-i transfer hospital as discussed in section III.I. of this final 
rule would have been sufficient to incentivize the degree of timely 
collaboration and coordination by the i-i transfer hospital that would 
be needed by the responsible initial treating hospital.
    Therefore, we believe the most prudent final AMI model transfer 
episode initiation and attribution policy at this time is to cancel the 
AMI episode initiated at the initial treating hospital whenever an 
inpatient-to-inpatient transfer occurs, and base any new AMI or CABG 
episode initiation on the MS- DRG for the i-i transfer hospital 
admission if the i-i transfer hospital is an AMI or CABG model 
participant. This attribution approach is simple and unambiguous. It 
eliminates the need for us to adopt the concept of chained anchor 
hospitalization altogether, as well as the complex policy that would 
have established a price MS-DRG that could be different from the MS-DRG 
that was assigned to the hospitalization that initiates the AMI 
episodes as discussed in section III.D.4.b.(2)(a) of this final rule. 
We do not believe there is a need to make any additional pricing 
adjustments for inpatient-to-inpatient transfer scenarios that include 
more than one IPPS payment for continuous acute care services in the 
beginning of AMI episodes in order to ensure a level playing field for 
hospitals that more commonly transfer beneficiaries for AMI treatment. 
By making the hospital ultimately discharging the beneficiary from 
acute care responsible for the AMI or CABG episode and beginning the 
episode at that hospital, we reduce the hospital's uncertainty as much 
as possible around identifying beneficiaries in the model. In the 
inpatient-to-inpatient transfer scenario, the uncertainty about 
identification of beneficiaries who were transferred is no different 
than if all the care for the beneficiary occurred at a single hospital. 
We also do not hold a hospital financially responsible for inpatient or 
outpatient hospital and Part B services that precede the beneficiary's 
admission to the responsible hospital, services the responsible 
hospital would be unable to influence according to the commenters.
    While we are finalizing this AMI model transfer episode initiation 
and attribution policy at this time for the AMI model that differs from 
our proposal for the reasons discussed, we continue to have some 
concerns about the care patterns that could be perpetuated and changes 
that could be incentivized by the policy. First, we recognize that this 
policy does not encourage any efficiencies in the transfer patterns of 
beneficiaries with AMI, while we know that episodes which include 
inpatient-to-inpatient transfers in the beginning of AMI care are 
costly for the Medicare program. A recent analysis by DataGen of 90-day 
episodes of care for AMI found that nationally, Medicare payments (that 
is, costs to the program) for AMI acute care transfers (not just those 
receiving PCI) were second only to the costs for patients going to 
long-term care.\71\ This analysis is consistent with information 
provided by the commenters that AMI episodes that include inpatient-to-
inpatient transfers are significantly more costly than AMI episodes 
that do not include such transfers. The analysis identified three 
scenarios for AMI care as follows:
---------------------------------------------------------------------------

    \71\ The Truth Behind Variation in Episode Payments; May 5, 
2014. Accessed October 18, 2016 at http://www.beckershospitalreview.com/finance/the-truth-behind-variation-in-episode-payments.html.
---------------------------------------------------------------------------

     In hospitals that are licensed to perform PCIs, a patient 
who is admitted with AMI and needs a PCI receives his or her full 
treatment at that hospital. This results in one MS-DRG assignment and 
payment for the PCI.

[[Page 281]]

     In hospitals not licensed to perform PCIs, a patient 
admitted with an AMI who needs a PCI is assigned an AMI MS-DRG at the 
initial treating hospital and then transferred to an i-i transfer 
hospital for the PCI. This results in two MS-DRG payments, one for the 
AMI care and one for the PCI. In this case, the inpatient acute care 
costs for the initial AMI treatment are substantially higher. The 
analysis found that the average length-of-stay at the initial treating 
hospital was 3 days, but it was not possible to determine from 
administrative claims whether that relatively long length-of-stay was 
due to patient stabilization or the need to wait for the PCI to be 
scheduled at the i-i transfer hospital.
     In hospitals that are licensed to perform PCIs, a patient 
who is admitted with an AMI and needs a PCI receives some care at the 
initial treating hospital and then is transferred to an i-i transfer 
hospital for the PCI. This also results in two MS-DRG payments and 
substantially higher inpatient acute care costs for the initial AMI 
treatment
    In summary, medically unnecessary or inappropriate inpatient-to-
inpatient transfers lead to inefficiencies in initial AMI treatment, 
yet both the second and third scenarios may provide opportunities for 
care redesign. However, the final AMI model transfer episode initiation 
and attribution policy is not able to test such opportunities at this 
time.
    In addition to not creating incentives for transfer efficiency, the 
final AMI model policy may create additional incentives for an AMI 
model participant to transfer complex beneficiaries or beneficiaries 
with potentially avoidable complications resulting from AMI treatment 
who would be expected to result in high-cost episodes to i-i transfer 
hospitals. Transfers could occur to i-i transfer hospitals that are 
also participants in the AMI model where the costs of care at the 
initial treating hospital would not be included in the AMI episode 
initiated at the i-i transfer hospital or to hospitals outside the MSA 
that would not be participants in the AMI model. Such transfer patterns 
could ultimately result in either complex beneficiaries or those with 
complications resulting from the initial AMI treatment 
disproportionately not being the financial responsibility of the 
initial AMI model treating hospital or not being included in the AMI 
model at all.
    Given these concerns about the potential missed opportunities and 
unintended consequences due to the final AMI model transfer episode 
initiation and attribution policy, we will be examining AMI transfers 
to and from AMI model participants very closely through our monitoring 
and evaluation activities as discussed in sections III.G.4. through 6. 
and IV. of this final rule, both of beneficiaries that ultimately are 
included in AMI episodes and those that are not. We may revisit the 
transfer policy or propose payment adjustments through future 
rulemaking if we see reduced AMI transfer efficiency; opportunities to 
increase transfer efficiency; disproportionate transfers of complex AMI 
beneficiaries suggesting that AMI model participants are engaging in 
adverse patient selection; high rates of transfers of beneficiaries 
with potentially avoidable complications of AMI treatment at the 
initial treating hospital; inordinate loss of beneficiaries from the 
AMI model due to transfer outside of the MSAs where the AMI and CABG 
models are being tested; or other patterns of concern.
    The final policies for initiation and attribution of AMI and CABG 
episodes that involve no transfer, outpatient-to-inpatient transfer, or 
inpatient-to-inpatient transfers at the beginning of AMI care are 
summarized in Table 8.
    Comment: One commenter requested that CMS establish a transfer 
attribution policy for the SHFFT model as well, because beneficiaries 
with SHFFT are occasionally transferred from the initial treating 
hospital to another hospital for SHFFT surgery. The commenter 
recommended that the SHFFT episode be attributed to the transfer 
hospital, that is, the hospital receiving the beneficiary upon transfer 
from the initial treating hospital.
    Response: We appreciate the commenter's suggestion. However, we do 
not believe it is necessary to establish a specific transfer policy for 
the SHFFT model. A SHFFT episode would only be initiated in the 
hospital where the beneficiary had SHFFT surgery and where a SHFFT 
model MS-DRG is first assigned to the beneficiary's hospitalization. 
The initial treating hospital would only assign a SHFFT model MS-DRG to 
the beneficiary if the beneficiary received SHFFT surgery at that 
hospital and the transfer hospital could not assign a SHFFT model MS-
DRG unless the beneficiary had surgery on the other hip, an unlikely 
scenario. Therefore, under the circumstances described by the 
commenter, without any special policies beyond the standard rules of 
SHFFT episode initiation, the SHFFT episode would be initiated at the 
transfer hospital, which would be responsible for the SHFFT episode. We 
note that if the SHFFT surgery was performed at the initial treating 
hospital where an episode was initiated and then the beneficiary was 
transferred to another hospital for additional care, the SHFFT episode 
would continue under the responsibility of the initial treating 
hospital. We note that we would apply the SHFFT model exclusion list to 
the transfer hospital MS-DRG to determine whether those inpatient 
services were included in the SHFFT episode.
    Final Decision: After consideration of the public comments 
received, we are not finalizing our proposal to attribute AMI episodes 
to the initial treating hospital when an inpatient-to-inpatient 
transfer occurs during the anchor hospitalization. Instead, we are 
adopting a final policy to cancel the AMI episode initiated at the 
initial treating hospital when an inpatient-to-inpatient transfer 
occurs, and base any AMI or CABG episode initiation on the MS-DRG for 
the final i-i transfer hospital admission if the i-i transfer hospital 
is an AMI or CABG model participant. If the i-i transfer hospital is 
not an AMI or CABG model participant, the beneficiary's care is not 
included in any AMI or CABG episode. We are not using the terms chained 
anchor hospitalization and price MS-DRG in the final episode definition 
and pricing policies for the AMI model as discussed in sections 
III.C.4.a.(5) and III.D.4.b.(2)(a) of this final rule. Instead, the 
episode definition and pricing is determined only by the anchor MS-DRG 
for the AMI or CABG model episode.
    The proposal for AMI episode attribution in circumstances that 
involve inpatient-to-inpatient transfers of beneficiaries with AMI was 
included in proposed Sec.  512.240(a)(2). We no longer need a specific 
attribution provision for the AMI model because attribution of AMI and 
CABG episodes occurs in the usual manner to the AMI or CABG model 
participant that discharges the beneficiary under an AMI MS-DRG, PCI 
MS-DRG with AMI ICD-CM diagnosis code, or CABG MS-DRGs that initiates 
the AMI or CABG episode at that hospital. Therefore, we are renumbering 
proposed Sec.  512.240(a)(3) (Cancellation of an AMI model episode) to 
Sec.  512.240(a)(2), and revising proposed Sec.  512.240(a)(3)(iii) 
which has been renumbered Sec.  512.240(a)(2)(iii) to specify that an 
AMI model episode is canceled if the beneficiary is transferred during 
the anchor hospitalization to another hospital for inpatient 
hospitalization.
    The final policies for initiation and attribution of AMI and CABG 
episodes that involve no transfer, outpatient-to-inpatient transfer, or 
inpatient-to-inpatient transfers at the beginning of AMI care are 
summarized in Table 8.

[[Page 282]]



 Table 8--Final Initiation and Attribution of AMI and CABG Episodes That
    Involve No Transfer, or Outpatient-to-Inpatient or Inpatient-to-
            Inpatient Transfers at the Beginning of AMI Care
------------------------------------------------------------------------
                                           Final episode initiation and
                Scenario                        attribution policy
------------------------------------------------------------------------
No transfer (participant): Beneficiary   Initiate AMI or CABG episode
 admitted to an initial treating          based on anchor
 hospital that is a participant in the    hospitalization MS-DRG.
 AMI or CABG model for an AMI MS-DRG,    Attribute episode to the
 PCI MS-DRG with AMI ICD-CM diagnosis     initial treating hospital.
 code, or CABG MS-DRG.
No transfer (nonparticipant):            No AMI or CABG episode is
 Beneficiary admitted to an initial       initiated.
 treating hospital that is not a
 participant in the AMI or CABG model
 for an AMI MS-DRG, PCI MS-DRG with AMI
 ICD-CM diagnosis code, or CABG MS-DRG.
Inpatient-to-inpatient transfer          Initiate AMI or CABG episode
 (nonparticipant to participant):         based on the MS-DRG at i-i
 Beneficiary admitted to an initial       transfer hospital.
 treating hospital that is not an AMI    Attribute episode to the i-i
 or CABG model participant and later      transfer hospital.
 transferred to an i-i transfer
 hospital that is an AMI or CABG model
 participant for an AMI MS-DRG, PCI MS-
 DRG with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Inpatient-to-inpatient transfer          Cancel AMI episode. No other
 (participant to nonparticipant):         AMI or CABG episode is
 Beneficiary admitted to an initial       initiated.
 treating hospital that is an AMI or
 CABG model participant for an AMI MS-
 DRG or PCI MS-DRG with AMI ICD-CM
 diagnosis code and later transferred
 to an i-i transfer hospital for an
 AMI, PCI, or CABG MS-DRG, where the i-
 i transfer hospital is not an AMI or
 CABG model participant.
Inpatient-to-inpatient transfer          Cancel AMI episode at the
 (participant to participant):            initial treating hospital.
 Beneficiary admitted to an initial       Initiate an AMI or CABG
 treating hospital that is an AMI or      episode at the i-i transfer
 CABG model participant for an AMI MS-    hospital. Attribute episode to
 DRG or PCI MS-DRG with AMI ICD-CM        the i-i transfer hospital.
 diagnosis code later transferred to an
 i-i transfer hospital for an AMI, PCI,
 or CABG MS-DRG, where the i-i transfer
 hospital is an AMI or CABG model
 participant.
Outpatient-to-inpatient transfer         Initiate AMI or CABG episode
 (nonparticipant to participant or        based on anchor
 participant to participant):             hospitalization MS-DRG at o-i
 Beneficiary transferred without          transfer hospital. Attribute
 admission from the initial treating      episode to the o-i transfer
 hospital, regardless of whether the      hospital.
 initial treating hospital is an AMI or
 CABG model participant, to a o-i
 transfer hospital that is an AMI or
 CABG model participant and is
 discharged from the o-i transfer
 hospital for an AMI MS-DRG, PCI MS-DRG
 with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Outpatient-to-inpatient transfer         No AMI or CABG episode is
 (participant to nonparticipant):         initiated.
 Beneficiary transferred without
 admission from the initial treating
 hospital that is an AMI or CABG
 participant to an o-i transfer
 hospital that is not an AMI or CABG
 model participant.
------------------------------------------------------------------------

b. Middle of EPM Episodes
    Similar to the CJR model, we proposed that once an EPM episode 
begins, it would continue until the end of the episode as described in 
the following section, unless certain circumstances arise during the 
episode (80 FR 73318). When an EPM episode was canceled, we proposed 
that the services furnished to beneficiaries prior to and following the 
EPM episode cancellation would continue to be paid by Medicare as usual 
but there would be no actual EPM episode spending calculation that 
would be reconciled against the EPM quality-adjusted target price.
    Specifically, we proposed that the following circumstances 
occurring during an EPM episode would cancel the EPM episode:
     The beneficiary ceases to meet any of the general 
beneficiary inclusion criteria described in section III.C.4.a.(1) of 
the proposed rule (81 FR 50834), except the three criteria regarding 
inclusion in other episode payment model episodes.
     The beneficiary dies during the anchor hospitalization.
     The beneficiary initiates any BPCI model episode.
    For purposes of cancellation of EPM episodes for beneficiary 
overlap with other episode payment models, we proposed that if a 
beneficiary in an EPM episode would initiate any BPCI model episode, 
the EPM episode would be canceled. We refer to section III.D.6.c.(1) of 
the proposed rule (81 FR 50868) for further discussion of our proposals 
addressing potential overlap of beneficiaries in the EPMs with the BPCI 
initiative. We also refer to section III.D.6.c.(3) of the proposed rule 
(81 FR 50869 through 50871) for discussion of our proposal to cancel 
EPM episodes for beneficiaries who become assigned to specified ACOs 
during EPM episodes.
    Our proposal to only cancel the EPM episode if a beneficiary dies 
during the anchor hospitalization differs from the final CJR model 
policy that cancels an episode if a beneficiary dies any time during 
the episode (80 FR 73318). As discussed in the CJR Final Rule for LEJR 
episodes, we believe that it also would be appropriate to cancel an 
episode in the AMI, CABG, and SHFFT models when a beneficiary dies 
during the anchor hospitalization as there would be limited incentives 
for efficiency that could be expected during the anchor hospitalization 
itself (80 FR 73318). We agreed with commenters on the CJR model 
proposed rule that we should cancel CJR episodes for death any time 
during those episodes, because beneficiary deaths following LEJR would 
be uncommon and expected to vary unpredictably, leading to extremely 
high or low episode spending that was not typical for a LEJR episode. A 
recent analysis that pooled results from 32 studies showed the 
incidence of mortality during the first 30 and 90 days following hip 
replacement to be 0.30 percent and 0.65 percent, respectively, 
confirming our expectation of low mortality rates during LEJR 
episodes.\72\

[[Page 283]]

In contrast, the 30-day national CABG and AMI mortality rates as 
displayed on Hospital Compare are significantly higher at approximately 
3 percent and 14 percent respectively.\73\ Several CMS programs use 30-
day mortality measures for CABG and AMI as measures of hospital 
quality, and these measures were proposed for use in the pay-for-
performance methodology for the CABG and AMI models as discussed in 
section III.E.3.f. of the proposed rule (81 FR 50880). Similarly, a 
2009 study shows a 30-day hip fracture mortality rate for Medicare 
beneficiaries of approximately 5 percent, significantly higher than the 
mortality rate following LEJR procedures.\74\ Thus, we would expect 
that deaths during SHFFT episodes would be more common than in CJR 
episodes. Because beneficiaries in AMI, CABG, and SHFFT episodes would 
be at significant risk of death during these episodes that we proposed 
to extend 90 days post-hospital discharge, we considered mortality to 
be a harmful beneficiary outcome that should be targeted for 
improvement through care redesign incentivized by the EPMs for these 
clinical conditions. Therefore, in the proposed rule (81 FR 50841) we 
discussed our belief that it would not be appropriate to exclude 
beneficiaries from AMI, CABG, or SHFFT episodes who die any time during 
the episode like we do in the CJR model. Instead, we proposed to 
maintain beneficiary episodes in the EPMs even if death occurred during 
the episodes, meaning we would calculate actual EPM episode spending 
when beneficiaries die following discharge from the anchor 
hospitalization but within the 90-day post-hospital discharge episode 
duration and reconcile it against the quality-adjusted target price. We 
believed this proposal would encourage EPM participants to actively 
manage EPM beneficiaries to reduce their risk of death, especially as 
death would often be preceded by expensive care for emergencies and 
complications. Because of the higher mortality rates for all of the EPM 
episodes than for LEJR episodes in the CJR model, we did not consider 
mortality following hospital discharge to be atypical and, therefore, 
we proposed to cancel EPM episodes only for death during the anchor 
hospitalization.
---------------------------------------------------------------------------

    \72\ Berstock JR, Beswick AD, Lenguerrand E, Whitehouse MR, Blom 
AW. Mortality after total hip replacement surgery: A systematic 
review. Bone & Joint Research. 2014; 3(6):175-182. doi:10.1302/2046-
3758.36.2000239.
    \73\ https://www.medicare.gov/hospitalcompare/search.html.
    \74\ Brauer CA, Coca-Perraillon M, Cutler DM, Rosen AB. 
Incidence and Mortality of Hip Fractures in the United States. JAMA. 
2009;302(14):1573-1579. doi:10.1001/jama.2009.1462.
---------------------------------------------------------------------------

    We further proposed that the following circumstances also would 
cancel an AMI episode in the circumstances of a chained anchor 
hospitalization when the beneficiary was discharged from acute care 
under an MS-DRG from the final transfer hospital in the chained anchor 
hospitalization that could not, itself, initiate an AMI or CABG 
episode, regardless of whether the final transfer hospital was an AMI 
or CABG model participant (that is, the episode would be canceled if 
the final transfer hospital MS-DRG was any MS-DRG other than an AMI MS-
DRG, PCI MS-DRG, or CABG MS-DRG).
    While we proposed to begin an AMI episode with the first 
hospitalization in the chained anchor hospitalization that would 
initiate an episode as discussed in section III.C.4.a.(5) of the 
proposed rule (81 FR 50836 through 50840), we also proposed to cancel 
AMI episodes under the circumstances when a beneficiary in an AMI 
episode was discharged from acute care under an MS-DRG from the final 
i-i transfer hospital in the chained anchor hospitalization that was 
not an AMI, PCI, or CABG MS-DRG that could initiate an AMI or CABG 
episode (that is, the episode would be canceled if the final transfer 
hospitalization MS-DRG was any MS-DRG other than an AMI, PCI, or CABG 
MS-DRG). Overall, this proposal treated the hospital that initiated the 
AMI episode and then transferred the beneficiary most similarly to a 
hospital that furnished all of the beneficiary's inpatient care itself, 
with respect to whether or not the beneficiary's care was ultimately 
included as an episode in the AMI model.
    Finally, we did not propose to cancel an AMI episode altogether for 
a CABG readmission during the 90-day post-hospital discharge period or 
cancel the AMI episode and initiate a CABG episode because planned CABG 
readmission following an anchor hospitalization that initiates an AMI 
episode may be an appropriate clinical pathway for certain 
beneficiaries. Instead, we proposed to provide an adjusted AMI model-
episode benchmark price that includes a CABG readmission in such 
circumstances so as not to financially penalize participant hospitals 
for relatively uncommon, costly, clinically appropriate care patterns 
for beneficiaries in AMI episodes. We refer to section III.D.4.b.(2)(c) 
of the proposed rule (81 FR 508520 for discussion of the adjusted AMI 
model-episode benchmark price that would apply in the case of CABG 
readmission during an AMI episode.
    The proposals for cancellation of EPM episodes were included in 
proposed Sec. Sec.  512.240(a)(3), (b)(2), and (c)(2). We sought 
comment on our proposals for cancellation of EPM episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: With the exception of the proposal for cancellation of EPM 
episodes for death only during the anchor hospitalization, many 
commenters expressed support for the other proposed EPM episode 
cancellation policies, especially the proposal to cancel EPM episodes 
in the circumstances of a chained anchor hospitalization when the 
beneficiary is discharged from acute care under an MS-DRG from the 
final transfer hospital in the chained anchor hospitalization that 
could not, itself, initiate an AMI or CABG episode. The commenters 
pointed out that when a transfer results in discharge from the final 
hospital in the chained anchor hospitalization under an MS-DRG that 
could not initiate an AMI or CABG episode, those episodes are 
disproportionately likely to reflect high-cost episodes that would not 
be conducive to care redesign due to beneficiary complexity and the 
need for atypical beneficiary care. Several commenters encouraged CMS 
to monitor cancellation circumstances because EPM participants could 
engage in gaming by discharging a dying patient from the hospital to 
garner a low-cost episode or encouraging beneficiaries to enroll in a 
Medicare Advantage plan.
    A few commenters requested that CMS cancel EPM episodes when a 
beneficiary has an excluded readmission because the Part A and Part B 
services furnished following that readmission would be related to the 
clinical condition that was the basis for the readmission, and not the 
condition that was the focus of the EPM.
    Response: We appreciate the support for our proposals to cancel an 
EPM episode when a beneficiary initiates an EPM episode but then fails 
to meet the general beneficiary care inclusion criteria sometime during 
the episode, which include enrollment in Medicare Part A and Part B; 
eligibility for Medicare not on the basis of end-stage renal disease; 
not enrolled in any managed care plan; not covered under a United Mine 
Workers of American health plan; have Medicare as their primary payer; 
and not to an ACO in the Next Generation ACO model or an ACO in a track 
of the Comprehensive ESRD Care Model incorporating downside risk for 
financial losses. In addition, we appreciate the support for our 
proposals to cancel an AMI episode when a beneficiary initiates any 
BPCI episode and when an AMI model beneficiary is discharged from the 
final hospital in a

[[Page 284]]

chained anchor hospitalization under an MS-DRG that is not an AMI, PCI, 
or CABG MS-DRG, regardless of whether the final transfer hospital is an 
AMI or CABG model participant. As discussed in section III.C.4.a.(5) of 
this final rule, we are finalizing this proposal, but with modification 
to cancel all AMI episodes that begin at an initial treating hospital 
when an inpatient-to-inpatient transfer occurs after the AMI episode 
has begun.
    In response to those commenters requesting that we cancel EPM 
episodes for the occurrence of an excluded readmission, we do not agree 
that all Part A and Part B services furnished following discharge from 
the excluded readmission but within the original 90-day post-discharge 
period for the EPM episode would be unrelated to the clinical condition 
that is the focus of the EPM. Instead, we believe care during that 
period would also be furnished for EPM beneficiary management and 
recovery following the AMI, CABG, or SHFFT hospitalization that 
initiated the EPM episode. The application of our exclusion list for 
readmissions and Part B services continues to identify those 
readmissions and Part B services that would be excluded from the EPM 
episode definition throughout the full post-discharge episode duration, 
regardless of the occurrence of an excluded readmission during the EPM 
episode.
    Additionally, as discussed in sections III.G.4. through 6. of this 
final rule, we plan to monitor EPM participants' claims data and audit 
EPM participants' and their EPM collaborators medical records and 
claims as we deem appropriate and will include canceled EPM episodes in 
this monitoring to ensure that we do not observe patterns of 
cancellation suggestive of gaming of the EPM episode cancellation 
policies.
    Comment: Several commenters expressed support for CMS' proposal to 
cancel EPM episodes for death during the anchor hospitalization but not 
for death during the 90-day post-discharge episode period. These 
commenters agreed that death during the inpatient hospitalization would 
be atypical and should result in EPM episode cancellation, whereas 
death within the 90 days following hospital discharge would not be rare 
for the clinical conditions in the EPMs and could appropriately be 
targeted for improvement through EPM care redesign. The commenters 
pointed out that CMS' proposals to use AMI and CABG mortality rates in 
the AMI and CABG model pay-for-performance methodologies was consistent 
with the opportunities for EPM care redesign to reduce mortality rates 
in the 30 days following discharge from the anchor hospitalization for 
AMI and CABG. A few commenters suggested that CMS should not cancel EPM 
episodes for any death once they are initiated, even for death during 
the anchor hospitalization, arguing that such cancellations could skew 
episode costs and that some in-hospital deaths may be preventable, 
which the EPMs should provide incentives to prevent.
    However, many commenters, including MedPAC, recommended that CMS 
adopt the same policy as the CJR model and cancel episodes for death at 
any time during the EPM episode, including during the 90 days post-
hospital discharge. Some of the commenters stated that episodes during 
which a beneficiary dies usually involve atypical courses of care, 
which may include extensive end-of-life care that hospitals should not 
be penalized for providing. MedPAC speculated that on the one hand, 
stays during which the EPM beneficiary dies could be exceptionally 
high-cost if the patient lives for most of the 90 days and receives 
end-of-life care. On the other hand, if the EPM beneficiary dies 
shortly after discharge from the hospital, the patient may receive 
little post-acute care services or end-of-life care, resulting in 
unusually low-cost episodes. They concluded that in either case, the 
episode spending would not be typical and, therefore, these stays 
should be excluded from calculating the target price and reconciliation 
payment for the EPM participant. They stated that excluding these 
episodes would make the spending data less ``noisy'' and better reflect 
the typical spending for the EPM participant's episodes. MedPAC also 
claimed that CMS has better tools than including in the EPMs 
beneficiaries who die in the 90 days following hospital discharge that 
encourage lower mortality rates, such as use of the AMI and CABG 
mortality rates in the HVBP Program, and care coordination, such as the 
Medicare Spending Per Beneficiary (MSPB) measure in the HVBP Program 
and the HRRP.
    Some commenters further contended that the proposal to cancel SHFFT 
episodes only for death during the anchor hospitalization compared to 
CJR model episode cancellation for beneficiary death any time during a 
LEJR episode leads to a lack of consistency between hip fracture 
beneficiaries included in the CJR and SHFFT models. Under CMS' 
proposal, hip fracture beneficiaries treated with a SHFFT would be 
subject to one set of rules, while those treated with a hip replacement 
would be subject to another set, leading to confusion among the 
hospitals that would be participants in both the CJR and SHFFT models 
and inequitable treatment of beneficiaries with the same clinical 
condition of hip fracture. The commenters also believe that CMS' 
rationale for not canceling SHFFT episodes for beneficiaries who die 
following discharge from the anchor hospitalization due to a higher 
risk of death for hip fracture patients than patients receiving LEJR 
ignored the fact that a substantial portion of the hip fracture 
population is treated with a LEJR. These commenters concluded that this 
overlap of fracture beneficiaries between SHFFT and LEJR confounded the 
comparison CMS was trying to make between the higher mortality rate of 
beneficiaries following SHFFT versus LEJR and led to questions about 
its validity.
    Response: While we appreciate that there may be some opportunities 
to reduce in-hospital deaths for beneficiaries treated with CABG or 
SHFFT, we believe that there are limited efficiencies that could be 
expected during the anchor hospitalization itself. Furthermore, we note 
that there are three separate MS-DRGs for beneficiaries who die during 
a hospitalization for AMI (MS-DRG 283 Acute Myocardial Infarction, 
Expired with MCC; MS-DRG 284 Acute Myocardial Infarction, Expired with 
CC; MS-DRG 285 Acute Myocardial Infarction, Expired without CC/MCC), 
and we did not propose that these MS-DRGs would initiate AMI episodes. 
Thus, there would be no situations when AMI episodes were canceled for 
death during an anchor hospitalization. Thus, we do not believe it 
would be appropriate to include beneficiaries who die during the anchor 
hospitalization in any of the EPMs.
    While beneficiary deaths in the 90-days post-discharge from the 
anchor hospitalization would be expected to be more common in AMI, 
CABG, and SHFFT episodes than in the LEJR episodes included in the CJR 
model, we agree with the commenters that the costs of such episodes are 
likely to vary unpredictably across EPM participants. We also agree 
with the commenters' argument about the importance of policy 
consistency in similar episode payment models for deaths because 
adopting different cancellation policies for death under the CJR model 
than we proposed for the EPMs could be confusing for those hospitals 
that are participants in both the SHFFT and CJR models. While we 
continue to believe that reductions in mortality following discharge 
from a hospitalization for AMI, CABG, or SHFFT are a harmful

[[Page 285]]

beneficiary outcome that should be targeted for improvement through 
care redesign incentivized by the EPMs for these clinical conditions, 
we agree with the commenters that it would be appropriate to cancel all 
EPM episodes for beneficiary death any time during the episode. We note 
that our use of 30-day AMI and CABG mortality measures in the pay-for-
performance methodologies of the AMI and CABG models, respectively, as 
discussed in sections III.E.2.b. and c. of this final rule encourages 
AMI and CABG model participant to actively manage AMI and CABG 
beneficiaries to reduce this risk of death, to supplement existing 
incentives in other CMS programs that encourage lower mortality rates.
    Comment: Several commenters requested that CMS clarify its 
administrative policies for identifying and informing EPM participants 
about beneficiaries whose episodes are initiated and then canceled. The 
commenters stated that CMS should inform EPM participants in a timely 
manner when an episode is canceled for any reason, with one commenter 
specifying at least quarterly notification. The commenters pointed out 
that an EPM participant's awareness of episode cancellation is 
important for several reasons, including the EPM participant's 
simultaneous calculation of EPM episode spending; beneficiary 
notification; provision of beneficiary engagement incentives; and 
determination of beneficiary eligibility for certain Medicare program 
rule waivers which is discussed further in section III.J. of this final 
rule. The commenters claimed that while the EPM participant is in the 
best position to know when the triggering procedures or services they 
have been providing will result in a MS-DRG that would initiate an EPM 
episode, the EPM participant will not always know when a patient meets 
certain exclusion criteria throughout the course of the EPM episode. 
The commenters emphasized that it is important for the EPM participant 
to know if beneficiaries they expect to be part of the EPM episode are 
going to be part of the EPM episode on a timely basis for cancellations 
or events that would serve to disqualify the beneficiary from a given 
hospital's attribution of an episode. Therefore, the commenters 
recommended that CMS inform EPM participant and CJR participant 
hospitals timely when an episode is canceled for any reason.
    Response: We appreciate the interest of the commenters in 
conducting timely analysis of EPM episode spending, as well as ensuring 
that the requirements of the EPM are met in their treatment of Medicare 
beneficiaries. Given our plans for providing and updating episode 
claims data to EPM participants upon request as frequently as quarterly 
as discussed in section III.K.5 of this final rule, we will explore 
adding indicators to the beneficiary-identifiable claims data supplied 
to EPM participants that provide information about circumstances that 
could result in EPM episode cancellation, such as admission of a 
beneficiary to a hospital that initiates episodes under a BPCI model 
for care that could potentially cancel an EPM episode. To the extent 
adding such indicators to the claims data is feasible, providing this 
information through the claims data to EPM participants would ensure 
that EPM participants are informed as frequently as quarterly about 
beneficiary circumstances that could result in EPM episode 
cancellation. This information would not be real-time, however, and 
while our best estimate, would likely be incomplete even based on the 
best available information at the time. At a minimum, it would always 
reflect the time lag for the EPM episode claims to be submitted and 
processed and then reported back to the EPM participant in the updated 
claims data. We note that at reconciliation, complete information would 
be provided to EPM participants that have requested beneficiary-level 
claims data or summary beneficiary claims data reports about those 
episodes that were ultimately included in the EPM participant's 
reconciliation report as discussed in section III.D.5. of this final 
rule.
    We note that we expect EPM participants to be actively managing all 
of their beneficiaries with conditions characterized by AMI, CABG, or 
SHFFT based on their care pathways developed for such beneficiaries, 
regardless of the model or program that may ultimately apply to the 
beneficiary under the uncommon circumstances of EPM episode 
cancellation. We also emphasize the importance of strong, ongoing 
communication among providers in a given geographic area caring for 
beneficiaries in similar models or programs where provider interests in 
delivering high quality, efficient health care should align.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec. Sec.  512.240(a)(2), 
(b)(2), and (c)(2) for cancellation of EPM episodes, with modification 
to also cancel EPM episodes if the beneficiary dies during the episode.
    We are canceling EPM episodes for the following circumstances:
     The beneficiary ceases to meet any of the general 
beneficiary inclusion criteria described in section III.C.4.a.(1) of 
this final rule, except the three criteria regarding inclusion in other 
episode payment model episodes.
     The beneficiary dies.
     The beneficiary initiates any BPCI model episode.
    Additionally, in the AMI model we are canceling the AMI episode 
when a beneficiary is transferred during the anchor hospitalization for 
inpatient hospitalization at another hospital as discussed in section 
III.C.4.a.(5) of this final rule.
    Because we are not finalizing the proposed AMI model transfer 
episode initiation and attribution policy, as discussed in section 
III.C.4.a.(5) of this final rule, we are not adopting the policy 
included in proposed Sec.  512.240(a)(2). Therefore, we are renumbering 
proposed Sec.  512.240(a)(3) to Sec.  512.240(a)(2) to specify the 
final AMI episode cancellation policy. This includes renumbering 
proposed Sec.  512.240(a)(3)(iii) to final Sec.  512.240(a)(2)(iii) and 
revising the provision to specify the final inpatient-to-inpatient 
transfer policy that cancels an AMI model episode if the beneficiary is 
transferred during the anchor hospitalization for inpatient 
hospitalization at another hospital.
c. End of EPM Episodes
(1) AMI and CABG Models
    We proposed a 90-day post-hospital discharge episode duration for 
AMI episodes. AMI in general, whether managed medically or with 
revascularization, has a lengthy recovery period, during which the 
beneficiary has a higher than average risk of additional cardiac events 
and other complications, as well as higher utilization of diagnostic 
testing and related cardiac procedures. AMI frequently serves as a 
sentinel event that marks the need for a heightened focus on medical 
management of coronary artery disease and other beneficiary risk 
factors for future cardiac events, cardiac rehabilitation over multiple 
months, and beneficiary education and engagement. Given the broad 
episode definition for AMI episodes that includes beneficiaries 
receiving both medical and PCI management for an acute event, we do not 
believe that an episode longer than 90 days would be feasible due to 
the higher risk of including unrelated services in the episode beyond 
several months after hospital discharge. However, we believe that 90-
day post-hospital discharge episodes would provide substantial

[[Page 286]]

incentives for aggressive medical management, cardiac rehabilitation, 
and beneficiary education and engagement, whereas a shorter episode 
duration would have less effect. We acknowledge that ongoing disease 
management for beneficiaries with cardiovascular disease must extend 
long after the conclusion of the AMI episodes. However, we believe the 
90-day post-hospital discharge episode duration remains appropriate for 
an episode payment model focused around a hospitalization. We expect 
that the medical management and care coordination during AMI episodes 
would continue to be provided as beneficiaries transition out of AMI 
episodes, potentially into a primary care medical home or other model 
or program with accountability for population health, such as an ACO.
    We further note based on analysis of historical episodes that about 
10 percent of beneficiaries hospitalized with AMI who received a CABG 
received the CABG between 2 and 90 days post-discharge from the anchor 
hospitalization (these beneficiaries would be in AMI episodes), while 
the remaining 90 percent of CABGs for beneficiaries hospitalized with 
AMI were provided during the initial hospitalization (these 
beneficiaries would in CABG episodes). In contrast, fewer than 3 
percent of those AMI model beneficiaries who received an inpatient or 
outpatient PCI during an AMI episode received the PCI between 2 and 90 
days post-discharge from the anchor hospitalization, while more than 97 
percent received the PCI during the anchor hospitalization.\75\ We 
refer to section III.D.4.b.(2)(c) of this final rule for further 
discussion of pricing adjustments and alternatives considered for 
setting EPM-episode benchmark prices for AMI episodes where PCI or CABG 
occurs during the AMI episode but post-discharge from the anchor or 
chained anchor hospitalization.
---------------------------------------------------------------------------

    \75\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in the proposed rule, that end in CY 2014.
---------------------------------------------------------------------------

    Finally, for similar reasons, we believe CABG episodes should 
extend 90 days post-hospital discharge. About one-third of CABG 
procedures are performed in the context of a hospital admission for 
AMI, leading to the same considerations discussed previously in this 
section around the appropriate episode duration for beneficiaries with 
AMI. The remaining CABG model beneficiaries are likely to have 
significant ischemic heart disease, making the occurrence of CABG 
itself a sentinel event, like AMI, that marks the need for a heightened 
focus on medical management of CAD and other beneficiary risk factors 
for future cardiac events, cardiac rehabilitation over multiple months, 
and beneficiary education and engagement. Moreover, CABG procedures 
have 90-day global periods under the Physician Fee Schedule, consistent 
with the lengthy period of recovery associated with major chest 
surgery. Thus, a 90-day post-hospital discharge episode duration is 
consistent with the recovery period from CABG surgery. We acknowledge 
that ongoing disease management for beneficiaries with cardiovascular 
disease must extend long after the conclusion of the CABG episodes. 
However, we believe the 90-day post-hospital discharge episode duration 
remains appropriate for an episode payment model focused around a 
hospitalization. We expect that the medical management and care 
coordination during CABG episodes would continue to be provided as 
beneficiaries transition out of CABG episodes, potentially into a 
primary care medical home or other model or program with accountability 
for population health, such as an ACO.
    As in the CJR model, we proposed that the day of discharge from the 
anchor hospitalization counts as day 1 of the post-hospital discharge 
period (80 FR 73324). Since the post-hospital discharge period is 
intended to extend 90 days for recovery following hospital discharge, 
we believe it is appropriate under these circumstances to begin the 90-
day count when the beneficiary is ultimately discharged from acute care 
for the first time during the AMI episode. However, the hospital that 
initiated the AMI episode in the chained anchor hospitalization would 
continue to be responsible in the AMI model for the episode discussed 
previously in section III.C.4.a.(5) of this final rule.
    The proposals for the end of AMI and CABG episodes were included in 
proposed Sec. Sec.  512.240(a)(1) and (b)(1), respectively. We sought 
comment on our proposals to end AMI and CABG episodes.
    We received a number of comments on the proposed episode duration 
for the AMI and CABG models, although most commenters provide similar 
rationale and recommendations for the three proposed EPMs. Thus, we 
refer to the next section for a discussion of the comments regarding 
the proposed ending of EPM episodes, including SHFFT as well as AMI and 
CABG episodes.
(2) SHFFT Model
    We believe that SHFFT model beneficiaries are similar to CJR model 
beneficiaries who undergo hip replacement for fracture. We believe that 
the same episode duration as the CJR model of 90 days is appropriate 
for SHFFT episodes in order to include the full time for recovery of 
function for these beneficiaries, which extends beyond 60 days based on 
patterns of post-acute care provider use (80 FR 73319 through 73324). 
Therefore, we proposed a 90-day post-hospital discharge duration for 
SHFFT episodes.
    The proposal for the end of SHFFT episodes was included in proposed 
Sec.  512.240(c)(1). We sought comment on our proposal to end SHFFT 
episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters expressed support for the proposed 
90-day post-discharge episode duration for the AMI, CABG, and SHFFT 
models. These commenters reasoned that 90 days following discharge from 
an inpatient hospitalization was the most clinically appropriate length 
for the proposed conditions and would enhance the commitment of EPM 
participants and their collaborators to caring for patients over time. 
They added that this duration would be sufficiently long to capture 
many complications of treating EPM clinical conditions and engage 
multiple providers in inpatient, outpatient, and post-acute care 
provider settings. The commenters believe that the proposed episode 
length would move providers closer to achieving long-term population 
health management. Several commenters pointed out that hospitals are 
well-prepared to assume responsibility for EPM episodes that continue 
for 90 days after hospital discharge.
    Other commenters stated that the proposed 90-day EPM episode 
duration was too long, especially in the context of the proposals to 
include a broad array of related items services in EPM episodes. In 
general, the commenters who stated for a shorter episode duration 
believe that during the early stages of required bundled payment 
models, it would be more reasonable for hospitals to assume episode 
performance risk for 30 days post-discharge than 90 days as proposed 
and that CMS should adopt 30-days post-discharge as the standard EPM 
episode duration permanently or temporarily, such as for the first two 
model years, and then reevaluate.
    Several commenters contended that in using an episode definition 
that

[[Page 287]]

includes 90-day post-discharge, CMS was, in effect, making hospitals 
managers of population health. These commenters believe that hospitals 
lack the resources, skill sets, and infrastructure to engage in the 
mission of managing population health, and stated that the requirements 
are much different and more complex and demanding than what is need for 
episode payments. Several commenters reasoned that since the proposed 
quality metrics for the EPMs were 30 days after discharge and they 
believe that hospitals are more effective managing the first 30 days of 
an episode, the episode duration should be shortened to 30 days so the 
quality and performance metrics would be aligned.
    A number of commenters requested that CMS shorten the episode 
duration to 30 days because 30 days is a more appropriate duration for 
exacerbations of existing, unrelated chronic conditions to the 
condition that is the focus of the episode. Some commenters claimed 
that a post-surgical or post-event episode duration under the AMI, 
CABG, and SHFFT models longer than 30 days poses a greater risk for 
variability due to medical events outside the intended scope of the 
model and control of the hospital. They stated that this is 
particularly true for ill patients who are likely to have major 
complications or comorbidities when admitted and are at higher risk for 
developing new complications post-discharge. The commenters stated that 
because all the proposed models are urgent or emergent, rather than 
elective or time-sensitive, this danger poses greater concern than 
under other Innovation Center episode payment models, such as the CJR 
model and OCM. While such comorbidities contributing to all-cause 
readmission can be reasonably controlled in the immediate and 30-day 
post-operative or post-event period, the commenters contended that the 
most complex patients develop complications after discharge, which are 
highly varied and predominantly unrelated to the quality of care they 
receive. Therefore, they concluded that care for chronic conditions and 
other non-anchor MS-DRG-related conditions becomes much more prevalent 
in days 31 to 90 following hospital discharge. One commenter observed 
based on experience in its hospitals that after 30 days, an over 30 
percent increase in readmissions to a hospital other than the original 
facility occurred, creating a need for additional strategies to 
coordinate episode care after 30 days. The commenters stated that 
hospitals do not have the time, money, skill set or recourse to develop 
the infrastructure to support episode care management during the 31- to 
90-day post-discharge period. Finally, several commenters observed that 
Medicare beneficiaries may have more than one residence during the 
year, creating challenges with follow up for an episode that extends 90 
day following hospital discharge.
    Response: We appreciate the support of many commenters for the 
proposed 90-day post-hospital discharge EPM episode duration. We agree 
with the commenters that the episode duration should capture the 
majority of health care services that are related to the episode and be 
sufficiently long to include many complications and follow-up care to 
the anchor hospitalization. We believe that hospitalization is often a 
sentinel event for Medicare beneficiaries, representing an opportunity 
for increased care coordination and, in the case of the EPMs, improved 
care management of chronic conditions that may have led to the 
hospitalization for the cardiac event or cardiac or orthopedic surgery. 
This episode duration provides EPM participants with a substantial 
period of time in which to work to improve the quality and efficiency 
of EPM episode performance for beneficiaries who are hospitalized for 
the targeted conditions.
    We have substantial BPCI Model 2 experience in testing AMI, PCI, 
CABG, and SHFFT episodes that include beneficiaries who are most 
similar to those who would be included in the proposed EPMs. Almost all 
BPCI Model 2 Awardees testing these episodes have selected the 90-day 
episode duration, compared to the 30-day and 60-day alternative 
durations that are available in BPCI Model 2. Ninety days post-hospital 
discharge is also the episode duration in the CJR model. Our goal in 
the EPMs is to incentivize efficient, high quality care that returns 
beneficiaries to the community in the best health possible, and we 
believe that a 90-day post-discharge duration reflects a full continuum 
of clinical services and transition of care for average SHFFT, AMI, and 
CABG model beneficiaries, at which time the beneficiary's functional 
recovery and stabilization of medical conditions are relatively 
complete so the beneficiary is able to resume most usual activities of 
daily living.
    Similar to LEJR episodes under the CJR model, in our analysis of 
episode spending for the EPMs we observed the concentration of Medicare 
post-discharge episode spending in the earlier part of the episode 
following discharge from the anchor hospitalization in all the 
EPMs.\76\ Specifically, in the first 30 days following anchor 
hospitalization discharge in AMI episodes, excluding those AMI episodes 
with readmissions for CABG for which we make a payment adjustment under 
the AMI model as discussed in section III.D.4.b.(2)(c) of this final 
rule, we found 61 percent and 54 percent of post-discharge episode 
spending for AMI MS-DRG-anchored and PCI MS-DRG-anchored AMI episodes, 
respectively. Similarly, in the 30 days following discharge, we 
observed 68 percent and 69 percent of post-discharge episode spending 
for CABG and SHFFT episodes. For all of the EPMs, about 60 to 70 
percent of the remaining post-discharge spending occurred in days 31-60 
post-discharge, and one-third in days 61-90 post-discharge. Thus, while 
the 90-day post-discharge episode duration increases the EPM 
participant's financial risk somewhat compared to episodes that extend 
only 30 days, because we found that significant services related to the 
clinical condition that is the focus of the models occurred during days 
31-90 post-discharge, we believe there are significant opportunities 
for improved quality and efficiency in EPM episodes after 30 days and 
extending through 90 days post-discharge from the anchor 
hospitalization. If, as some commenters speculated, a post-surgical or 
post-event episode duration under the AMI, CABG, and SHFFT models 
longer than 30 days posed a significant risk of variability primarily 
due to medical events that are unrelated to the clinical condition that 
is the focus of the EPM episode, we would have expected to see an equal 
percentage of post-discharge episode spending in the periods of time 
from days 31-60 and 61-90. That was not the case in our analysis, 
because we continued to see EPM episode spending as a proportion of 
post-discharge spending drop off in relation to increasing time after 
discharge, suggesting that the EPM episode definitions are capturing 
related episode spending that declines, as would be expected, over the 
period of time post-discharge as the beneficiary recovers and returns 
to the community.
---------------------------------------------------------------------------

    \76\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule, that began in CY 2012-2014.
---------------------------------------------------------------------------

    While we understand that uncommon events during the 90-day post-
discharge episode duration may occur for an individual beneficiary, 
resulting in an unanticipated or unavoidable need for costly health 
care services, we believe

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that our EPM episode definitions that exclude unrelated items and 
services and our payment policies, namely the adjustment for high 
payment episodes and stop-loss policies discussed in sections 
III.D.3.d., III.D.7.b.(1), and III.D.7.d. of this final rule, provide 
sufficient protections for EPM participants from undue financial 
responsibility for the care of unrelated clinical conditions as well as 
for unusual circumstances. We also believe that shorter episode 
durations may incur a higher clinical risk for beneficiaries if EPM 
participants delay services beyond the EPM episode, and the risk to 
beneficiaries of this response by providers to episode payment can be 
minimized by the longer 90-day episode duration that we proposed for 
the EPMs. We refer to sections III.G.4. through 6. of this final rule 
for discussion of our plans to monitor for access to care, quality of 
care, and delayed care.
    In response to the commenters recommending a shorter episode 
duration in the earlier stages of bundled payment, as noted previously 
we have several years of experience with BPCI Model 2 where the 
majority of Awardee have selected a 90-day episode duration for 
episodes of a similar design to the EPMs that target the same clinical 
conditions. While entities choose to participate in the BPC models, we 
have also established a 90-day episode duration in the CJR model, which 
is the first episode payment model which has a geographic basis. Thus, 
we do not believe that it is necessary to adopt a shorter episode 
duration for the EPMs either permanently or temporarily.
    Regarding those commenters who believe that the 90-day post 
discharge episode duration and broad episode definitions would make 
hospitals responsible for population health, we note that the EPMs are 
not total cost-of-care models. As discussed in section III.C.3.b of 
this final rule, we exclude items and services that are unrelated to 
EPM episodes, namely those that are not directly related to the EPM 
episode or the quality or safety of the EPM episode care that is 
included in the EPM episode; for chronic conditions that are generally 
not affected by the EPM episode care; and for acute clinical conditions 
not arising from existing EPM episode-related chronic clinical 
conditions or complications of EPM episode care. We agree with the 
commenters in favor of the proposed 90-day post-discharge episode 
duration for the EPMs who stated that the proposed EPMs of this episode 
duration move providers closer to long-term population health 
management. Given the diversity of commenters' views on hospitals' 
readiness to assume responsibility for episodes of the proposed 
duration, we appreciate that EPM participants in models where 
participation is required are in various stages of readiness for 
managing the quality and cost performance of episode, based on their 
prior experience, resources, and infrastructure. We believe that all 
EPM participants have substantial opportunities to increase their 
capacity to manage the quality and cost of EPM episodes and achieve 
significant financial rewards from good performance, regardless of 
their starting point. We note that many of the EPM policies such as 
data sharing, financial arrangements, the phase-in of two-sided risk, 
and stop-loss limits afford hospitals the opportunity to learn about 
EPM episode care patterns, collaborate with others who have expertise 
in care redesign, and implement their initial EPM care plans for their 
beneficiaries in an initial environment of limited financial risk.
    We do not believe that the measurement period for the quality 
measures and the duration of the EPM episodes must necessarily align, 
although we note that we sought comment in the EPM proposed rule about 
potentially using quality measures that examine patient outcomes over a 
period that extends at least as long as the EPM episode (81 FR 50901). 
We proposed to use existing AMI and CABG outcome measures that assess 
outcomes over a 30-day period following discharge, at least initially, 
because they are in wide use and have gained acceptance among hospitals 
and because the AMI and CABG mortality measures have been reviewed and 
endorsed by the National Quality Forum. However, we believe that 90 
days is a period over which hospitals have substantial ability to 
influence the quality and efficiency of care that EPM beneficiaries 
receive. Rather than shorten EPM episodes to align with the existing 
30-day quality measure timeframe as some commenters recommended, we 
believe it would be more appropriate to seek to adapt the existing 
measures or to develop new related measures to assess outcomes over a 
longer timeframe, including timeframes at least as long as the EPMs. We 
refer to section III.E.4 of this final rule for further discussion of 
our plans regarding future quality measures that could be incorporated 
into the EPM pay-for performance methodologies.
    Finally, we appreciate the perspective of the commenters who 
believe that a 30-day episode duration would be more appropriate 
because a longer episode duration poses a greater risk for variability 
due to events outside the intended scope of the model and control of 
the hospital, including readmissions to a different hospital, and that 
this risk is higher for the EPMs than other Innovation Center bundled 
payment models due to the urgent or emergent clinical conditions 
included in the EPMs. We agree with the commenters that the EPMs test 
different clinical scenarios than the CJR model that targets LEJR, 
which is primarily elective, and that the complexity of many EPM 
beneficiaries requires new approaches to redesigning and coordinating 
care for the 90 days post-hospital discharge. While EPM beneficiaries 
may be more likely to develop a variety of complications requiring more 
related services following discharge than those in the CJR model, we 
continue to believe that complications most commonly have patterns and 
bear a significant relationship to the quality of care and 
effectiveness of care coordination following hospital discharge. Even 
though some EPM beneficiaries may be medically complex and fragile, we 
continue to believe there are substantial opportunities to improve the 
quality and efficiency of their care under the EPMs where EPM 
participants have quality and cost performance responsibility for 
episodes that extend 90-day post-discharge from the anchor 
hospitalization. We also agree with the commenters that EPM 
participants who are required to participate in the EPMs be protected 
from undue financial risk. We refer to section III.D.4.b.(2) of this 
final rule for further discussion of risk adjustment under the EPMs.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec. Sec.  512.240(a)(1), 
(b)(1), and (c)(1) for the end of AMI, CABG, and SHFFT episodes, 
respectively, based on an EPM episode duration that extends 90 days 
following discharge from the anchor hospitalization, with modification 
to revise Sec.  512.240(a)(1) to eliminate proposed paragraphs 
(a)(1)(i) and (ii) and incorporate the 90-day post-discharge episode 
duration in the general provision. We no longer need to specify the 
episode duration separately for an AMI episode that includes an 
inpatient-to-inpatient transfer after an AMI episode has been initiated 
because we are not adopting the proposed policies for chained anchor 
hospitalizations. As discussed in section III.C.4.a.(5). of this final 
rule, we are not finalizing the AMI model transfer episode initiation 
and attribution proposal that would have required us to

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identify chained anchor hospitalizations.

D. Methodology for Setting EPM Episode Prices and Paying EPM 
Participants in the AMI, CABG, and SHFFT Models

1. Background
a. Overview
    We proposed that the AMI, CABG, and SHFFT models would provide 
incentives for EPM participants to work with other health care 
providers and suppliers to improve the quality and efficiency of care 
for Medicare beneficiaries by paying EPM participants or holding them 
responsible for repaying Medicare based on EPM participants' 
performance with respect to the quality and spending for AMI, CABG, and 
SHFFT episodes in a manner similar to the CJR model. Given the general 
similarity between the design of the CJR model and these EPMs, there is 
precedent for adopting the general payment and pricing parameters used 
under the CJR model, with modification to appropriately pay for EPM 
episodes that include the different clinical conditions treated in AMI, 
CABG, and SHFFT model episodes. The following sections describe our 
proposals for the:
     Performance year, retrospective episode payments, and two-
sided risk EPMs.
     Adjustments to actual EPM-episode payments and to 
historical episode payments used to set episode prices.
     EPM episode price-setting methodologies.
     Process for reconciliation.
     Adjustments for overlaps with other Innovation Center 
models and CMS programs.
     Limits or adjustments to EPM participants' financial 
responsibility.
b. Key Terms for EPM Episode Pricing and Payment
    For purposes of ease of understanding of the technical discussion 
that follows around EPM episode pricing and payment, our proposed rule 
provided the following definitions of terms that were used in sections 
that precede their technical definition and cross-references to other 
sections of the proposed rule for more detailed discussion of the 
policies associated with these terms.
     Anchor hospitalization--hospitalization that initiates an 
EPM episode and has no subsequent inpatient-to-inpatient transfer 
chained anchor hospitalization.
     Chained anchor hospitalization--an anchor hospitalization 
that initiates an AMI model episode and has at least one subsequent 
inpatient-to-inpatient transfer.
     Anchor MS-DRG--MS-DRG assigned to the first 
hospitalization discharge, which initiates an EPM episode.
     Price MS-DRG--for EPM episodes without a chained anchor 
hospitalization, the price MS-DRG is the anchor MS-DRG. For AMI model 
episodes with a chained anchor hospitalization, the price MS-DRG is the 
MS-DRG assigned to the AMI model episode according to the hierarchy 
that was described in III.D.4.b.(2)(i) of the proposed rule.
     Episode benchmark price--dollar amount assigned to EPM 
episodes based on historical EPM-episode data (3 years of historical 
Medicare payment data grouped into EPM episodes according to the EPM 
episode definitions as discussed in sections III.C.3. and III.C.4. of 
the proposed rule) prior to the application of the effective discount 
factor, as described throughout sections III.D.4.b through e. of the 
proposed rule.
     CABG readmission AMI model episode benchmark price--
episode benchmark price assigned to certain AMI model episodes with 
price MS-DRG 280-282 or 246-251 and with a readmission for MS-DRG 231-
236, as described in sections III.D.4.b.(2)(c) and III.D.4.e. of the 
proposed rule.
     Quality-adjusted target price--dollar amount assigned to 
EPM episodes as the result of reducing the episode benchmark price by 
the EPM participant's effective discount factor based on the EPM 
participant's quality performance, as described in sections 
III.D.4.b.(10) and III.E.3.f. of the proposed rule.
     Excess EPM-episode spending--dollar amount corresponding 
to the amount by which actual EPM-episode payments for all EPM episodes 
attributed to an EPM participant exceed the quality-adjusted target 
prices for the same EPM episodes, as discussed in section III.D.2.c. of 
the proposed rule.
2. Performance Years, Retrospective Episode Payments, and Two-Sided 
Risk EPMs
a. Performance Period
    Consistent with the methodology for the CJR model, we proposed 5 
performance years (PYs) for the EPMs, which would include EPM episodes 
for the periods displayed in the following Table 9:

                                  Table 9--Proposed Performance Years for EPMs
----------------------------------------------------------------------------------------------------------------
            Performance year  (PY)              Calendar year      EPM episodes included in performance year
----------------------------------------------------------------------------------------------------------------
1............................................            2017  EPM episodes that start on or after July 1, 2017
                                                                and end on or before December 31, 2017.
2............................................            2018  EPM episodes that end between January 1, 2018 and
                                                                December 31, 2018, inclusive.
3............................................            2019  EPM episodes that end between January 1, 2019 and
                                                                December 31, 2019, inclusive.
4............................................            2020  EPM episodes that end between January 1, 2020 and
                                                                December 31, 2020, inclusive.
5............................................            2021  EPM episodes that end between January 1, 2021 and
                                                                December 31, 2021, inclusive.
----------------------------------------------------------------------------------------------------------------

    As displayed in Table 9, some EPM episodes that would begin in a 
given calendar year may be captured in the following performance year 
due to some EPM episodes ending after December 31st of a given calendar 
year. For example, EPM episodes beginning in December 2017 and ending 
in March 2018 would be part of performance year 2. As we noted in our 
proposed rule, we believe that the proposed period of time for the 
EPMs, which generally aligns with the performance period for other 
Innovation Center models, for example, the CJR and Pioneer ACO models, 
should be sufficient to test and gather the data needed to evaluate the 
EPMs (80 FR 73325). In contrast, we were concerned whether an EPM with 
fewer than 5 performance years would be sufficient for these purposes.
    We considered extending the first PY, for example, to 18 months. As 
discussed further in section III.D.2.c. of the proposed rule, however, 
we instead proposed to delay the requirement for participants to begin 
accepting downside risk until the second quarter of PY2. As such, EPM 
participants would have a comparable transition period to that of CJR 
participants with respect to when they must accept downside risk while 
still allowing us to make timely reconciliation payments to EPM 
participants as well as to most effectively align EPM reconciliation

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with the reconciliation processes for other models and programs with 
which the EPMs overlap (for example, the Shared Savings Program, 
Pioneer ACO model, Comprehensive Primary Care Initiative, and Oncology 
Care Model). As stated in our proposed rule, we believe that it is 
important to synchronize the timing of reconciliation for EPMs with 
other efforts that need this information when making their financial 
calculations. We sought comment on this proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters requested that CMS delay implementation of 
the models; typically, for at least 6 months to a year--or a year from 
the final rule's issuance--so that participants would have a sufficient 
time to prepare for the new models. Some commenters recommended 
delaying the models entirely until CMS had additional time to consider 
evaluation results for BPCI or the CJR model. Other commenters 
recommended a phased-in approach for implementing the models, for 
example, by (1) first implementing the SHFFT model no sooner than 
January 1, 2018 and then implementing the cardiac EPM models no sooner 
than 6 months later as well as additional time if the final rule is 
delayed beyond January 1, 2018 or (2) conversely delaying the SHFFT 
model, given that hospitals are in the early stages of building 
infrastructure for the CJR model and having to do so for the SHFFT 
model as well could be too great a burden. A commenter recommended that 
CMS delay the start date to January 1, 2018 as it would better align 
with private payers' regulatory and business models, which are also 
developing and rolling out bundled payment models. In their view, this 
synchronization would reduce burden by simplifying record keeping 
requirements, performance metric submission, and financial tracking by 
both CMS and private payers.
    Among the reasons cited for a delay, some commenters expressed 
concern with the rapid pace of implementing additional models--
particularly, geographic-based models, which a number of commenters 
have said they oppose. For example, commenters expressed concerns that 
CMS was moving forward with new models in the absence of empirical 
results from the CJR model or promising results from BPCI. 
Specifically, results from the evaluation of year 2 results for BPCI 
showed no statistically significant difference in Medicare payments and 
an increase in mortality for the cardiovascular surgical episodes 
between the BPCI participants (which were voluntary), and comparison 
groups. Further, while there was a significant reduction in utilization 
of institutional post-acute care settings, there were instances where 
BPCI patients exhibited less functional improvement. As one commenter 
noted, CMS has not yet been able to ensure that the quality of care and 
beneficiary outcomes under the model are at least equivalent, if not 
better than, those in traditional fee-for-service Medicare.
    Commenters also pointed to the pre-implementation efforts that 
would be needed for participants to be successful with episode payment 
bundles, which they believe would take more time than would be granted 
under the proposal. For example, hospitals need more time than proposed 
to better understand the models' requirements and clinical and 
financial risk of their patient populations; build the clinical, legal, 
financial and quality infrastructure; analyze and understand the 
clinical and cost factors that affect their performance; and identify 
changes to care pattern to be successful. Moreover, there is 
considerable variation in hospital preparedness and capabilities to 
implement these models without a delay as well as challenges in doing 
so while simultaneously fulfilling the requirements of multiple models 
including the CJR model, MACRA, and the end of the grace period for 
ICD-10.
    A commenter noted that, given the broad-based clinical experience 
with continuity-of-care across episodes, appropriate workforce capacity 
and technology infrastructure, and significant investment by both the 
public and private sectors needed to be successful, the cardiac models 
could be particularly challenging. Further, these challenges could be 
especially acute for small hospitals that often have limited financial 
resources, have low case volume across which to spread financial 
experience, have high amounts of uncompensated care or are located in 
lower income geographic regions, do not yet have experience with 
episode-based payments, or lack existing networks with physicians and 
other providers. In addition to provider readiness, a commenter 
questioned whether CMS has the administrative and personal resources to 
manage the complexities of the newly proposed and expanded models in a 
way that would meet hospitals' needs to be successful under the models. 
Another commenter believed that, despite CMS proposing certain waivers 
under the models, insufficient protections existed with regard to 
regulatory and legal risk.
    Response: We appreciate the concerns commenters expressed on our 
proposed start date as well as their requests to delay the proposed 
models. Our general goals for the proposed models are to improve care 
quality for Medicare beneficiaries and efficiency in service delivery 
to better control growth in Medicare spending. Hence, we wish to move 
forward in implementing the proposed models as quickly as is reasonably 
possible. Many commenters expressed concerns about their readiness to 
participate in the models under our proposal; particularly, with the 
requirement to assume downside risk within 6 months of the models being 
implemented. We understand these concerns and share in hospitals' 
desire to be successful in improving care and increasing efficiencies 
under the models so that they earn reconciliation payments and Medicare 
and its beneficiaries realize improvements in care and efficiency. 
Thus, while we are not proposing to delay implementation of the models, 
as discussed in section III.D.2.c. of this final rule, we are modifying 
our proposal requiring participants to assume downside risk in the 
second quarter of PY2 so that they would have an additional 9 months of 
experience in the models without assuming downside risk. EPM 
participants would not be required to assume downside risk for episodes 
until PY3, but could voluntarily elect to do so in PY2. We believe that 
delaying the requirement for participants to assume downside risk under 
the models appropriately balances our interests in implementing the 
models in a timely way with the concerns and interests of participants 
with respect to their readiness to participate successfully in the 
models as well as accommodate to the proposed requirements in 
conjunction with other requirements under the Medicare program. As 
such, we do not believe it is also necessary to further delay or phase-
in the models. Likewise, we do not believe it is necessary to delay our 
models so that they are better aligned with private payer models. We 
would further note that, beginning in PY2, our proposed models would 
already follow the period suggested for this alignment to occur.
    We do not agree with commenters that the models should be delayed 
until additional BPCI or CJR model results are considered or in light 
of the BPCI year 2 results. The currently proposed models will test 
geographic-based bundled payments with a broader, more diverse, and 
different group of participants or episodes than is the case

[[Page 291]]

with BPCI or the CJR model, which will expand our understanding of 
these models with a broader and more complex array of conditions and 
procedures. We also do not believe that the unique challenges that 
could be presented under the cardiac models is a reason to delay the 
models. Rather, among other things, we would expect these models to 
assist us in empirically identifying what challenges there may be as 
well as the steps needed to overcome them. We also share commenters' 
concerns that smaller hospitals be successful under the models. 
Accordingly, our proposed rule included additional protections to limit 
financial risk for certain hospitals, including rural hospitals and 
sole community hospitals, through more generous stop loss thresholds, 
which we finalized in section III.D.7.c.(1) of this final rule. Also, 
as discussed further in section III.D.7.c.(1) of this final rule, we 
are extending these protections to hospitals determined to have a low 
volume of episodes under an EPM.
    We appreciate the comment on whether CMS is prepared 
administratively and with respect to personnel resources to implement 
the models, and note that the proposed models would not be implemented 
in the absence of our readiness to do so. Finally, we have considered 
and made final a range of waivers of program rules and provisions for 
financial arrangements that we believe are necessary and sufficient to 
facilitate participation in the models through allowing additional 
flexibilities in care delivery and giving participants to the tools to 
align the financial incentives of other providers, suppliers, and ACOs 
with the goals of the EPMs (see sections III.I. and III.J. of this 
final rule).
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
establish five performance years beginning with EPM episodes that start 
on or after July 1, 2017 as displayed in Table 10.

                                   Table 10--Final Performance Years for EPMs
----------------------------------------------------------------------------------------------------------------
            Performance year  (PY)              Calendar year      EPM episodes included in performance year
----------------------------------------------------------------------------------------------------------------
1............................................            2017  EPM episodes that start on or after July 1, 2017
                                                                and end on or before December 31, 2017.
2............................................            2018  EPM episodes that end between January 1, 2018 and
                                                                December 31, 2018, inclusive.
3............................................            2019  EPM episodes that end between January 1, 2019 and
                                                                December 31, 2019, inclusive.
4............................................            2020  EPM episodes that end between January 1, 2020 and
                                                                December 31, 2020, inclusive.
5............................................            2021  EPM episodes that end between January 1, 2021 and
                                                                December 31, 2021, inclusive.
----------------------------------------------------------------------------------------------------------------

b. Retrospective Payment Methodology
    Consistent with the CJR model (80 FR 73329), we proposed to apply a 
retrospective payment methodology to the proposed EPMs (81 FR 50844). 
Under this proposal, all providers and suppliers caring for Medicare 
beneficiaries in EPM episodes would continue to bill and be paid as 
usual under the applicable Medicare payment systems. After the 
completion of an EPM performance year, Medicare claims for services 
furnished to EPM beneficiaries would be grouped into EPM episodes and 
aggregated, and EPM participants' actual EPM episode-payments would be 
compared to quality-adjusted target prices (which account for the level 
of EPM episode quality), as described in section III.D.5.a. of the 
proposed rule (81 FR 50864 through 50865). Based on an EPM 
participant's performance (taking into account quality and spending), 
we would determine if Medicare would make a payment to the participant 
(reconciliation payment), or if the participant owes money to Medicare 
(resulting in Medicare repayment).
    We considered an alternative option of paying for EPM episodes 
prospectively by paying one lump sum amount to the EPM participant for 
the expected spending for the EPM episode which extends 90 days post-
hospital-discharge. However, as was the case when we established 
regulations for the CJR model (80 FR 73329), we believed that such an 
option would be challenging to implement at this time given the payment 
infrastructure changes for both EPM participants and Medicare that 
would need to be developed to pay and manage prospective episode 
payments under these EPMs. Moreover, we continued to believe that a 
retrospective payment approach can accomplish the objective of testing 
episode payments 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.
    We sought comment on this proposal. The following is a summary of 
the comments received and our responses.
    Comment: Most of the comments supported CMS' proposal to use a 
retrospective payment methodology. Commenters agreed with CMS' view 
that this would be the most administratively feasible and 
straightforward payment option since it uses the existing payment 
system infrastructure and processes. Some of these commenters reported 
that alternatively applying a prospective payment methodology, which 
would make one lump sum payment to the hospital for the episode, would 
be challenging to implement given the administrative and infrastructure 
changes it would entail for hospitals, other participating providers 
and Medicare. One commenter expressed concern that our proposed models 
would, in fact, require all payments be made to the responsible 
hospital so that other providers would have to submit bills for 
services they provided under an EPM episode to that hospital, which the 
commenter believed could result in both decreased access to care and 
increased administrative complexity.
    Response: We appreciate the comments we received that were in 
support of our proposed retrospective payment methodology, and concur 
with commenters' views on some of the benefits of this model. We would 
clarify that, as stated previously in this section, all providers and 
suppliers caring for Medicare beneficiaries in EPM episodes would 
continue to bill and be paid as usual under the applicable Medicare 
payment systems. As such, providers would submit claims for payment as 
they always have and would not submit claims to the responsible 
hospital.
    Comment: While not opposing the proposal, a commenter expressed the 
view that a retrospective model should be viewed as a stepping stone 
toward rather than the destination to requiring greater levels of 
financial risk. In their view, disadvantages of a retrospective model 
include their potential to reduce spending within an episode of care 
but not the volume of the episodes themselves, which could encourage a 
greater number of bundled procedures;

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fragmentation of care delivery due to the existence of multiple bundled 
payment programs designed around different disease states or 
procedures; and the potential that the considerable cost and effort 
expended to organize people and systems around each bundled episode 
could cause the total cost of these programs combined to be higher than 
the cost associated with operating a single program covering the full 
population and the full spectrum of care. As such, the commenter 
supported the proposed bundled payments for a limited time and for the 
purpose of stimulating efforts to full population based efforts.
    Response: We understand the commenter's view that bundled payments 
could be a stepping stone toward other models that establish greater 
risk for providers and recognize the various limitations of a fee-for-
service system with respect to higher volume of services and less 
coordinated delivery of care. In contrast to the commenter, however, we 
believe in and hence are empirically testing within our proposed models 
the potential to improve upon these dimensions as well as assist in 
lowering the cost of services within a fee-for-service rather than 
capitated framework.
    Comment: Some commenters opposed the proposed retrospective 
methodology. For example, a commenter reported their view that the 
proposed retrospective payment model would limit the possibility for 
real, innovative care redesign because it (1) offered no upfront 
incentive dollars to invest in new care delivery models and services 
that could deliver true value and (2) confined innovation care redesign 
by what the FFS structure will reimburse. That is, while participants 
would be held financially accountable for ensuring that care is 
delivered below the quality-adjusted target price, they could do little 
to affect the costs for the episode within their own setting as they 
continue to receive a MS-DRG payment for the diagnosis regardless of 
whether the patient stays a longer or shorter period of time, 
additional services are offered, or care coordination is provided. 
Thus, if a participant seeks to reduce costs, it is limited to reducing 
readmissions, improving care transitions, or reducing post-acute care 
costs--either by reducing the length of stay within a SNF (as it is 
paid on a per diem) or through substitutions of care (for example, 
directly discharging the patient home with or without services). In 
this commenter's view, significant care redesign would be better 
facilitated through providing a group of provider partners with a 
prospective payment.
    Similarly, a commenter suggested that participants are impeded in 
their ability to plan for the delivery of services if they do not know 
how much money will be available to support those services. As such, 
participants should have a risk-adjusted budget for the condition or 
episode in advance rather than after care has already been delivered. 
Further, payment amounts should be based on the actual costs of all of 
the services being delivered, not just the amounts that would have been 
paid under the fee-for-service system for the subset of services that 
would have been separately billable. As such, the commenter recommended 
that participants and their collaborators be paid for high-value 
services that are not currently billable as part of condition-based and 
episode-based payment models if providers have agreed to be accountable 
for overall spending related to a condition or episode.
    Another commenter recommended that CMS determine payment benchmarks 
through negotiated rates or competitive bids (rather than fee-for-
service claims) as it would foster more rapid transformation in cost 
and resource use as well as encourage competition among providers to 
achieve the best outcomes for the lowest cost. In their view, a 
prospective negotiated rate would offer providers more opportunity to 
innovate in how they deploy professional staff, choose technology, and 
engage with outpatient and home-based services. Also, a prospectively 
negotiated case rate would foster collaboration among all clinicians 
involved in patient care and provide predictable pricing.
    Response: We appreciate the concerns and challenges raised by these 
commenters, but are not persuaded to change our methodology. Rather, we 
believe that participants are capable of innovative care redesign in 
the absence of upfront incentives dollars and within the constraints of 
fee-for-service Medicare payment requirements. While our proposal did 
not provide participants with an up-front budget or a capitated payment 
amount, we would be providing them detailed information on their 
benchmark and likely quality-adjusted target prices as well as their 
financial performance both historically and during their participation 
in the models (see section III.K. of this final rule). We believe this 
information should be sufficient to enable participants' abilities to 
assess their performance as well as determine and plan changes in their 
practices to make them successful. Also, where appropriate, we have 
offered participants improved flexibilities under the models by waiving 
certain Medicare requirements and allowing for financial arrangements, 
which should facilitate their participation under the models (see 
sections III.I. and III.J. of this final rule). To the extent, we 
identify additional adjustments, we could consider them through future 
rulemaking. Finally, while we wish to explore and test a range of 
payment models, which could include capitated or competitive bidding 
models, the purpose of the proposed models is to examine ways in which 
to improve health care quality and reduce costs in a fee-for-service 
framework.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to 
implement a retrospective payment methodology. Also, we would like to 
clarify that when referring to Medicare claims data for services 
furnished to EPM beneficiaries, as we have stated immediately here and 
throughout this section, we mean any payment from the Part A or Part B 
trust fund on behalf of a beneficiary that is not specifically excluded 
as specified in section III.C. or III.D.6 of this final rule. 
Consistent with this, we have made conforming changes to our regulatory 
text--specifically, to our definition of actual episode payments as 
well as to Sec.  512.305(c)(1) and Sec.  512.307(a)(1).
c. Two-Sided Risk EPMs
    As we did for the CJR model (80 FR 73229 through 7333), we proposed 
to establish two-sided risk for EPM participants (81 FR 50844). Under 
this proposal, for each of performance years 1 through 5, we would make 
EPM-episode reconciliation payments to EPM participants that achieve 
reduced actual EPM payments relative to their quality-adjusted target 
prices. Likewise, beginning with episodes ending in the second quarter 
of performance year 2 and extending through each of performance years 3 
through 5, we would hold EPM participants responsible for repaying 
Medicare when their actual EPM-episode payments exceed their quality-
adjusted target prices. As such, our proposal differed from CJR in that 
we proposed a modestly shorter period in which EPM participants would 
accept downside risk in order to allow them a comparable transition 
period to that of CJR participants in which to do so. Accordingly, we 
referred to the two portions of performance year 2 as either having no 
downside risk (NDR) or having downside risk (DR); specifically--
     Performance Year 2 (NDR) or PY 2 (NDR) for the first 
quarter, that is

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January 1, 2018 to March 31, 2018, in which EPM participants assume no 
downside risk and therefore would have no Medicare repayment 
responsibility; and
     Performance Year 2 (DR) or PY 2 (DR) for the second, third 
and fourth quarters, that is April 1, 2018 to December 31, 2018, in 
which EPM participants assume downside risk and would have Medicare 
repayment responsibility.
    Our proposed rule noted our continued belief that our proposal to 
establish two-sided risk would provide appropriate incentives for EPM 
participants to improve their care quality and efficiency under the 
EPMs, and that we would diminish these incentives if we instead 
proposed to establish one-sided risk, in which an EPM participant could 
qualify for a reconciliation payment but not be held responsible for 
Medicare repayments. In recognition that EPM participants may need to 
make infrastructure, care coordination and delivery, and financial 
preparations for the EPMs, which can take several months or longer to 
implement, we thought that it was reasonable to delay EPM participant 
responsibility for repaying excess EPM-episode spending in performance 
year 1 to more strongly align EPM-participant incentives with care 
quality. Thus, similar to what we did for the CJR model, we proposed to 
phase-in this repayment responsibility beginning in the second quarter 
of EPM performance year 2 as displayed in Table 11 (81 FR 50844 through 
50845).

                          Table 11--Proposed Stop-Loss Thresholds and Discount Percentage Ranges for Medicare Repayments by PY
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    Performance year                            PY1          PY2 (NDR)     PY2 (DR) (%)       PY3 (%)         PY4 (%)         PY5 (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Stop-loss threshold.....................................  n/a as no downside risk in PY1               5              10              20              20
                                                              or first quarter of PY2
Discount percentage (range) for Repayment, Depending on                                          0.5-2.0         0.5-2.0         1.5-3.0         1.5-3.0
 Quality Category.......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Stop-loss thresholds for certain hospitals, including rural and sole-community hospitals are 3% for PY2 (DR) and 5% for PY3-PY5.

    We refer to section III.E.3.f. of this final rule for additional 
information on the effective discount factors used to calculate 
quality-adjusted target prices, as well as the quality categories that 
determine an EPM participant's effective discount factor that would be 
applied to the EPM benchmark episode price at reconciliation to 
calculate the repayment amount during the phase-in period under the 
models.
    We sought comment on this proposal. The following is a summary of 
the comments received and our responses.
    Comment: A number of commenters supported CMS' proposal to phase-in 
downside risk noting that doing so would allow providers with little or 
limited experience and who were not ready to take on risk additional 
time to prepare to do so. However, nearly all of the commenters on this 
proposal urged CMS to extend the period of time during which 
participants would not be subject to downside risk as 6 months would 
not be an adequate timeframe in which to begin managing episodes that 
will be subject to downside risk. A number of commenters noted that 
because of the way that episodes are defined during a performance year, 
participants would actually have only 6 months before episodes that 
will incur downside risk begin. This is because the models would begin 
on July 1, 2017 and downside risk would begin for episodes ending April 
1, 2018 and later. However, episodes that end April 1, 2018 would have 
begun over 90 days earlier, or prior to January 1, 2018. Therefore, 
participants would actually only have from July 1, 2017 until about 
January 1, 2018 before episodes that will incur downside begin.
    Most of the commenters requested a 12-month period during which 
participants would not be required to assume downside risk with some 
commenters requesting longer periods, for example, up to 2 years. In 
some cases, commenters requested that CMS delay the requirement to 
assume downside risk, but to allow participants flexibility to assume 
risk earlier if they wished to do so. A commenter requested that CMS 
stagger downside risk across the models, for example, allow a longer 
period without downside risk for AMI episodes than for CABG episodes as 
the commenter believed there was greater complexity and uncertainty 
associated with the former than the latter. Additionally, several 
commenters opposed the proposal to require downside risk altogether or 
asking that CMS make this requirement contingent upon also further 
risk-adjusting target prices and financial performance data.
    The reasons offered for delaying downside risk often paralleled 
those for delaying the models in general--that is, additional time is 
needed to develop infrastructure and expertise with the models. Some 
commenters raised concerns about the effects of the proposal on 
beneficiary access; particularly, for smaller hospitals and academic 
medical centers. As such, a commenter expressed support for CMS' plans 
to monitor access and recommended that CMS publish data and consider 
alternatives if this is found among complicated AMI or CABG cases.
    A commenter suggested that CMS completely waive downside risk for 
certain protected hospitals such as SCHs, MDHs, RRCs, and low-volume 
hospitals. Another commenter stated that participants should not have 
to take on additional risk given they are already facing payment 
reductions through other efforts such as those for the HRRP. If 
participants must face downside risk through the proposed models, the 
commenter requested that CMS exclude conditions under the model from 
the HRRP. Some commenters pointed to delays in receiving performance 
data from CMS as well as time need to review these data needed to 
assist them in assessing and adjusting care patterns. Commenters also 
noted that because not all participants have had experience with 
bundled payment models, they are likely not ready to assume downside 
risk.
    In addition to comments requesting that CMS delay downside risk, 
commenters also requested that EPM participants be permitted to 
voluntarily adopt downside risk sooner, for example, to fulfill one of 
the requirements to qualify as participating in an Advanced APM.
    Response: We appreciate comments supporting our proposal to phase-
in downside risk. We are also persuaded by commenters that delaying the 
date by which participants would be required to

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assume downside risk would improve participants' ability to 
successfully achieve the goals of the models. Accordingly, we are 
revising our proposal so that participants in the proposed models would 
not be required to assume downside risk until PY3--that is, episodes 
ending on or after January 1, 2019, with anchor discharges that occur 
on or after October 4, 2018. We believe that this delay period 
appropriately balances participants' desire for additional experience 
under the models in the absence of downside risk with our desire to 
establish appropriate incentives for improved care quality and cost 
control. Given we believe this delay period is sufficient for all 
models, we do not believe it necessary to stagger downside risk 
separately by model. We also disagree with comments opposing our 
proposal to require downside risk or asking that CMS make this 
requirement contingent upon our also further risk-adjusting target 
prices and financial performance data. First, we believe downside risk 
is necessary for purposes of establishing appropriate provider 
incentives. Second, as discussed in section III.D.4.b.(2). of this 
final rule, we plan to explore additional risk-adjustment options that 
could be implemented beginning in PY3 and would thus apply to episodes 
that would be subject to downside risk for all participants.
    While we are delaying the requirement to assume downside risk under 
the models, we have decided to allow EPM participants, including those 
seeking to qualify as participating in an Advanced APM, to voluntarily 
begin to assume downside risk for episodes ending on or after January 
1, 2018, with anchor discharges that occur on or after October 4, 2017. 
Table 12 presents our final policies for phasing-in downside risk for 
all participants, along with associated stop-loss limits and discount 
percentages, for participants that voluntarily assume risk on this 
accelerated schedule.
    We appreciate the concerns raised on the potential effects of our 
proposal on beneficiary access to care, and would note that we have 
made final a range of quality measures (see section III.E. of this 
final rule), monitoring activities (see section III.G. of this final 
rule), and compliance efforts (see section III.F. of this final rule) 
that would address beneficiary access issues. We disagree with the 
suggestions to waive downside risk for certain protected hospitals such 
as SCHs, MDHs, RRCs, and low-volume hospitals or given that hospitals 
are already facing payment reductions through other efforts. We believe 
that the additional protections we included, which limit total 
financial risk under the models for these protected hospitals, are 
sufficient (see section III.D.7.c.(2). of this final rule). We also 
recognize that while a participant could experience payment reductions 
under both the proposed models and the HRRP, we disagree that they 
should be held harmless from either of these potential reductions. The 
payment reductions participants would potentially face under the 
proposed models are not dissimilar to the potential reductions 
hospitals already simultaneously face for programs such as the HRRP, 
HAC, and EHR incentives without exemption.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to phase-
in downside risk. Accordingly, we are delaying the requirement to 
assume downside risk by 9 months so that episodes ending on or after 
January 1, 2019 would assume downside risk as compared to our proposal 
that would have required this for episodes that ended on or after April 
1, 2018 and beyond. Also, we are allowing participants to voluntarily 
elect downside risk for episodes ending on or after January 1, 2018. 
Table 12 presents our final policies on this in conjunction with 
modified stop-loss thresholds and discount percentages by performance 
year. These final policies are further discussed in sections 
III.D.7.b.(1), III.D.7.c.(1) and III.E.3.f of this final rule, 
respectively.

        Table 12--Final Stop-Loss Thresholds and Discount Percentage Ranges for Medicare Repayments by PY
----------------------------------------------------------------------------------------------------------------
                                        PY1           PY2 (%)         PY3 (%)         PY4 (%)         PY5 (%)
----------------------------------------------------------------------------------------------------------------
            Downside Risk for All Participants--DR effective for episodes ending on or after 1/1/2019
                               (anchor discharges occurring on or after 10/4/2018)
----------------------------------------------------------------------------------------------------------------
Stop-loss threshold.............  n/a as no downside risk in PY1               5              10              20
                                    and PY2 without election of
                                    voluntary downside risk for
                                                PY2
Stop-loss threshold for certain                                                3               5               5
 hospitals *....................
Discount percentage (range) for                                          0.5-2.0         0.5-2.0         1.5-3.0
 Repayment, Depending on Quality
 Category.......................
----------------------------------------------------------------------------------------------------------------
                 Voluntary Downside Risk--DR effective for episodes ending on or after 1/1/2018
                               (anchor discharges occurring on or after 10/4/2017)
----------------------------------------------------------------------------------------------------------------
Stop-loss threshold.............     n/a as no                 5               5              10              20
                                   downside risk
                                      in PY1
Stop-loss threshold for certain   ..............               3               3               5               5
 hospitals *....................
Discount percentage (range) for   ..............         0.5-2.0         0.5-2.0         0.5-2.0         1.5-3.0
 Repayment, Depending on Quality
 Category.......................
----------------------------------------------------------------------------------------------------------------
* Including rural and sole-community hospitals, rural referral centers, Medicare Dependent Hospitals and
  hospitals determined to be EPM volume protection hospitals within an EPM.


[[Page 295]]

3. Adjustments to Actual EPM-Episode Payments and to Historical Episode 
Payments Used To Set Episode Prices
a. Overview
    Using Medicare payments for Parts A and B claims for services 
included in the EPM episode definitions, we proposed to calculate 
historical episode payments (3 years of historical Medicare payment 
data grouped into EPM episodes), EPM-quality-adjusted target prices, 
and actual EPM-episode payments according to the EPM episode 
definitions as discussed in sections III.C.3. and III.C.4. of the 
proposed rule (81 FR 50829 through 50843) as we did for the CJR model. 
As was the case for the CJR model (80 FR 73330 through 73336), we also 
proposed to include certain payment adjustments in the EPMs for: (1) 
Special payment provisions under existing Medicare payment systems; (2) 
payments for services that straddle episodes; and (3) high payment 
episodes (81 FR 50846). We also proposed to additionally include an 
adjustment for reconciliation payments and Medicare repayments when 
updating EPM participant episode benchmark and quality-adjusted target 
prices (81 FR 50847). We refer to section III.D.6. of the proposed rule 
for discussion of adjustments for overlaps with other Innovation Center 
models and CMS programs (81 FR 50867 through 50872).
b. Special Payment Provisions
    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 HVBP Program, the Hospital-Acquired 
Condition (HAC) Reduction Program, and the HIQR Program and Outpatient 
Quality Reporting (OQR) Program. IPPS hospitals and CAHs are subject to 
the Medicare Electronic Health Record (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 Graduate Medical Education (GME) and Indirect Medical 
Education (IME). IPPS hospitals that meet certain requirements related 
to low volume Medicare discharges and distance from another hospital 
receive a low volume add-on payment. 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.  
419.43(g) and Sec.  412.108(g), respectively.
    Medicare payments to providers of post-acute care 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: Inpatient Rehabilitation Facility 
Quality Reporting Program (IRF QRP); Skilled Nursing Facility Quality 
Reporting Program (SNF QRP); Inpatient Psychiatric Facility Quality 
Reporting Program (IPF QRP); Home Health Quality Reporting Program (HH 
QRP); Long-Term Care Hospital Quality Reporting Program (LTCH QRP); and 
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 (ASCs) have their own Quality Reporting 
Program (ASC QRP). Physicians also have a set of special payment 
provisions based on quality and reporting: Medicare EHR Incentive 
Program for Eligible Professionals; Physician Quality Reporting System 
(PQRS); and Physician Value-based Modifier Program.
    Consistent with how we determine payments under the CJR model (80 
FR 73333), we proposed to adjust both the actual and historical EPM-
episode payments used to set EPM-episode benchmark and quality-adjusted 
target prices by excluding these special payments from EPM-episode 
calculations using the CMS Price Standardization methodology (81 FR 
50846). Our proposed rule noted our view that in applying this 
methodology to exclude these payments from our calculations, we would 
best maintain appropriate incentives for both the EPMs and the existing 
incentive programs. Also, not excluding add-on payments based on the 
characteristics of providers caring for EPM beneficiaries, such as more 
indigent patients, having low Medicare hospital volume, being located 
in a rural area, supporting greater levels of physician training, and 
having a greater proportion of beneficiaries with HIV, from actual EPM-
episode payments could inappropriately result in certain EPM 
participants that receive more add-on payments having worse episode 
payment performance compared to quality-adjusted target prices than 
what their performance would otherwise have been. Additionally, not 
excluding enhanced payments for MDHs and SCHs could result in higher or 
lower quality-adjusted target prices just because EPM participants 
received their enhanced payments in 1 historical year but not the 
other, regardless of actual utilization. We also noted that excluding 
special payments would ensure an EPM participant'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 were not intending to test under the 
models. In addition to the various incentives, enhanced payments, and 
add-on payments, we noted that 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.
    For more information on the CMS Price (Payment) Standardization 
Detailed Methodology, we referred to the QualityNet Web site at http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350 and to 80 FR 73331. Accordingly, we proposed to exclude these 
special payments from EPM-episode calculations using the CMS Price 
Standardization methodology at Sec.  512.300(e)(2). We sought comment 
on our proposal to exclude special payments using the CMS Price 
Standardization methodology.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters generally supported the proposal to adjust 
actual and target spending amounts for various special payments such as 
IME and DSH.
    Response: We appreciate the comments we received supporting our 
proposal to exclude special payments from EPM-episode calculations 
using the CMS Price Standardization methodology. We wish to clarify 
that like CJR, we will follow the CMS Price Standardization methodology 
with modifications as necessary to be consistent with our episode 
definition in section III.C of this final rule and to ensure timely 
reporting of reconciliation

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results, for the performance year reconciliations, which begin 2 months 
after the conclusion of a performance year. We will account for the 
information available at the time due to claims run-out, payment system 
updates, and the calculations necessary to fully implement the 
standardization methodology. We will utilize the methodology, 
consistent with our episode definition, for the target price 
calculations and subsequent reconciliation calculations 14 months after 
the conclusion of the performance year, in which we incorporate full 
claims run-out and further account for overlap with other models. This 
approach will provide feedback and reconciliation payments, as 
available, to hospitals in a timely manner and as accurately as 
feasible, while ensuring the standardization approach is utilized for 
the subsequent reconciliation calculation for a performance year.
    Comment: Commenters requested more clarity on whether IPPS capital 
payments are included, and requested that we exclude these costs. A 
commenter noted that these capital costs are not included under the 
BPCI models, hospitals need stability in capital cost reimbursement to 
plan for major capital expenditures, and thus these costs should not be 
placed at risk because of models affecting only cardiovascular and 
orthopedic services.
    Response: To clarify, as is the case with CJR, IPPS capital 
payments will be included in EPM-episode calculations. As we stated in 
the CJR Final Rule (80 FR 73333), these payments are included in 
Medicare FFS payments, which we use to calculate benchmark and actual 
expenditures. Further, including IPPS capital payments affords 
participants an opportunity to achieve greater reconciliation payments 
if they are able to achieve efficiencies for the costs that the capital 
portion of IPPS payments would cover, which may or may not actually be 
capital costs.
    Comment: A commenter requested that CMS exclude outlier payments 
EPM-episode calculations. The commenter expressed concern that because 
CMS proposed a limited risk-adjustment methodology, hospitals that 
treat the least healthy beneficiaries such as academic medical centers 
would be penalized for longer lengths of stay that result in receiving 
outlier payments for the index admission, particularly as financial 
targets transition to regional pricing.
    Response: We disagree that outlier payments should be excluded from 
our calculation. First, we expect the models to encourage more 
efficient care that should result in lower costs and potentially the 
frequency for which outlier payments are needed. Second, as discussed 
in section III.D.3.d. of this final rule, we are finalizing policies to 
cap high-cost episodes with payments 2 standard deviations or more 
above the mean calculated at the regional level for purposes of 
determining benchmark prices and actual expenditures, which should 
assist in protecting participants from higher costs associated with 
outlier payments. Third, as discussed in section III.D.4.b.(2). of this 
final rule, we will be exploring options to further risk-adjust costs 
and payments under the models with the goal of making them effective 
for episodes ending after January 1, 2019, with anchor discharges 
occurring on or after October 4, 2018. These further adjustments for 
risk would offer additional financial protections to participants with 
high-cost episodes.
    Comment: Several commenters recommended that costs for chronic care 
management, cardiac rehabilitation, and intensive cardiac 
rehabilitation services be excluded from payment calculations. With 
regard to the former, the commenter noted that chronic care management 
services were not paid under Medicare until January of 2015 and 
therefore was not a payable service during two of the years used to set 
target prices for the first two performance year. Further, in this 
commenter's view, many physicians currently are not billing for these 
services, but the commenter anticipates the volume will increase. With 
regard to the latter, commenters noted that if the proposed efforts to 
encourage CR utilization are successful, spending for CR/ICR services 
in AMI and CABG episodes would increase and could cause participants' 
spending to exceed their targets making them either ineligible to 
receive reconciliation payments or at risk for making Medicare 
repayments. As such, this would penalize hospitals for improving CR/ICR 
utilization, which would impede, if not completely defeat, CMS' efforts 
to encourage CR and ICR utilization. Accordingly, these commenters 
recommended that the cost of CR and ICR services be excluded from 
episode payment calculations.
    Response: As we noted in section III.C.3.b. of this final rule, we 
do not believe that it would be appropriate to exclude other specific 
Part B services, including chronic are management services, cardiac 
rehabilitation, intensive cardiac rehabilitation services that are 
related to the clinical conditions that are the basis for EPM episodes, 
just because they are underrepresented in the baseline period upon 
which benchmark episode prices are set. Likewise, we do not believe it 
is appropriate to exclude the costs of these included services from our 
financial calculations. To the extent that care redesign under the EPMs 
increases utilization of these services to improve episode quality and 
efficiency, periodic updates to the 3 years of historical data used to 
establish EPM-episode benchmark prices, as is discussed in section 
III.D.4.b.(3) of this final rule, would result in greater 
representation of these services that reflect more recent care 
patterns.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
exclude certain special payments from EPM-episode calculations using 
the CMS Price Standardization methodology. Our final policy for 
excluding special payments is included in Sec.  512.300(e)(2).
c. Services That Straddle Episodes
    A service that straddles an EPM episode is one that begins before 
the start of or continues beyond the end of an EPM episode that extends 
90 days post-hospital discharge. Under the CJR model, we prorate 
payments so that they include only the portion of the payment that is 
included in the CJR model episode, using separate approaches to prorate 
payments under each payment system, for example, IPPS, non-IPPS and 
other inpatient services, and home health services (80 FR 73333 through 
73335). We proposed to apply the CJR model methodologies for prorating 
payments when calculating actual EPM-episode payments and when 
calculating historical EPM-episode payments used to set EPM-episode 
benchmark and quality-adjusted target prices (81 FR 50846). We believed 
these methodologies would most accurately account for spending within 
EPM episodes under the EPMs. The methodologies for prorating payments 
under the EPMs were included in Sec.  512.300(f). We sought comment on 
our proposed methodologies for prorating payments.
    The following is a summary of the comments received and our 
responses.
    Comment: We received comments requesting greater clarity on how we 
would prorate payments for services that straddle episodes. We also 
received a comment requesting greater clarity for ``prorated'' payments 
for ``straddled'' episodes with the presence of an AMI diagnosis 
treated with CABG.
    Response: Following are the steps we use for the CJR model that we 
proposed to apply when prorating payments under the proposed EPMs, and 
that were specifically cited in our proposed rule (80 FR 73333 through 
73335).

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These steps have been updated to reflect our methodology as applied to 
an AMI episode involving a CABG.
    In general, assuming we have a beneficiary in an EPM episode who is 
admitted to a SNF for 15 days, beginning on Day 86 post-discharge from 
the anchor EPM hospitalization, the first 5 days of the admission would 
fall within the episode, while the subsequent 10 days would fall 
outside of the episode. Under our proposal, 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 
post-acute care (for example, SNF, IRF, LTCH, IPF) services, we would 
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.D.7.e. of this final rule. In the previous 
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, the payment 
proration would 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 EPM episode. 
Prorated payments would also be similarly allocated to the 30-day post-
episode payment calculation in section III.D.7.e. of this final rule. 
For example, if the patient started receiving services from an HHA on 
day 86 after discharge from the anchor 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 EPM episode. 
The resulting, prorated HHA claim payment amount would be considered 
part of the EPM episode. Services for the prorated HHA service would 
also span the entirety of the 30 days after the EPM 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 EPM episode start date, but end during the EPM 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 EPM episode, prorated payments for these services would not be 
included in the 30-day post-episode payment calculation discussed in 
section III.D.7.e. of this final 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 EPM 
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 EPM 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 would separately 
prorate the IPPS claim amount from episode target price and actual 
episode payment calculations as was made final in the final CJR rule 
(80 FR 73334 through 73335), called the normal MS-DRG payment amount 
for purposes of this final 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 post-acute care transfer policy at 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 post-acute care 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.D.7.e. of this 
final rule. The proposed approach for prorating the normal MS-DRG 
payment amount is consistent with the IPPS transfer per diem 
methodology.
    More specifically, if a beneficiary has a readmission for MS-DRG 
234--coronary bypass with cardiac catheterization without major 
complications or comorbidities--into an IPPS hospital on the 89th day 
after discharge from an EPM 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 5 of the IPPS/LTCH PPS Final Rule for FY 2017, the geometric mean 
for MS-DRG 234 is 8 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 234 
geometric mean of 8 days. Therefore, the normal MS-DRG payment amount 
associated with this readmission would be divided by 8 (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 remaining five-eighths would be captured 
in the post-episode spending calculation discussed in section 
III.D.7.e. of this final rule. If the readmission occurred on the 82nd 
day after discharge from the EPM anchor hospitalization, and the length 
of stay was 10 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 (9 days) is greater 
than or equal to the geometric mean (8 days) for the MS-DRG. We would 
also clarify that, consistent with how we would prorate payments for 
services that extend beyond the episode when establishing benchmark 
prices for an AMI episode without a CABG, in instances of an AMI 
episode with CABG readmissions, we would establish the benchmark price 
based on prorated amounts for both the AMI episode and the CABG 
readmission.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without

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modification, to prorate payments for services that straddle episodes. 
Our final policy for prorating payments is included in Sec.  
512.300(f).
d. High-Payment EPM Episodes
    For the CJR model, we defined a high-payment episode as an episode 
with payments 2 standard deviations or more above the mean calculated 
at the regional level (80 FR 73336 through 73337). As with the CJR 
model, we proposed to apply a high-payment episode ceiling when 
calculating actual EPM-episode payments and when calculating historical 
EPM-episode payments used to set EPM-episode benchmark and quality-
adjusted target prices (81 FR 50846). We proposed to apply the ceiling 
according to the following groupings that align with our proposed EPM 
price-setting methodology.
    First, for SHFFT model episodes, we proposed to calculate and apply 
the ceiling separately for each SHFFT price MS-DRG at the regional 
level.
    Second, for AMI model episodes with price MS-DRGs 280-282 or 246-
251 without readmission for CABG MS-DRGs, we proposed to calculate and 
apply the ceiling separately for each price MS-DRG at the regional 
level.
    Third, for CABG model episodes, we proposed to apply ceilings 
separately to the payments that occurred during the anchor 
hospitalization of the CABG model episode and to the payments that 
occurred after the anchor hospitalization. For the anchor 
hospitalization portion of CABG model episodes, we proposed to 
calculate and apply the ceiling separately by each price MS-DRG in 231-
236 at the regional level. For the post-anchor hospitalization portion, 
we proposed to calculate and apply the ceiling separately for the 
following groupings at the regional level:
     With AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG with major complication or comorbidity (231, 
233, or 235).
     With AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG without major complication or comorbidity (232, 
234, or 236).
     Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG with major complication or comorbidity (231, 
233, or 235).
     Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    Fourth, for AMI model episodes with price MS-DRG 231-236, we 
proposed to apply ceilings separately to the payments that occurred 
during the chained anchor hospitalization and to the payments that 
occurred after the chained anchor hospitalization. For the anchor 
hospitalization portion of the episode, we proposed to apply the 
regional level ceiling calculated for the anchor hospitalization 
portion of a CABG model episode for the corresponding price MS-DRG, as 
described previously. For the post-anchor hospitalization portion of 
the episode, we proposed to apply the regional level ceiling calculated 
for the post-anchor hospitalization portion of a CABG model episode for 
the corresponding price MS-DRG with AMI diagnosis.
    Fifth, for AMI model episodes with price MS-DRG 280-282 or 246-251 
and with readmission for CABG MS-DRGs, we proposed to apply the ceiling 
separately to the payments during the CABG readmission and all other 
payments during the episode. For payments during the CABG readmission 
portion of the AMI model episode we proposed to apply the regional 
level ceiling calculated for the anchor hospitalization portion of a 
CABG model episode for the corresponding CABG readmission MS-DRG, as 
described previously. For all other payments during the AMI model 
episode, we proposed to apply the regional level ceiling calculated for 
AMI model episodes with price MS-DRG 280-282 or 246-251 and without 
readmission for CABG MS-DRGs corresponding to the AMI price MS-DRG.
    We believed that the proposed ceiling would protect EPM 
participants from variable repayment risk for especially-high payment 
EPM episodes where the clinical scenarios for these cases each year may 
differ significantly and unpredictably.
    The proposal for capping high payment EPM episodes were included in 
Sec.  512.300(e)(1). We sought comment on our proposal to cap high 
payment EPM episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters supported the proposal for capping high payment 
episodes. A commenter noted that the proposal does not separately 
address an episode where Medicare accepts a beneficiary's appeal of 
Medicare Provider Non-Coverage after the discharging physician 
determined not to certify that patient for care. The commenter noted 
that under such a scenario, in contradiction with the hospital's 
clinical judgment on appropriate level of care, the proposed policy 
would not cap spending unless it reached the proposed threshold. The 
commenter recommended that CMS create additional flexibilities or 
protections for hospitals where a Medicare appeal overturns a 
hospital's decision that is based on clinically-directed, evidence-
based discharge criteria.
    Response: We appreciate comments in support of our proposal to cap 
high payment EPM episodes. We disagree with the suggestion to include 
protections in addition to what we have proposed to address scenarios 
where a Medicare appeal contradicting a hospital's discharge decision 
increases the costs of an episode. We believe our proposal offers 
sufficient protection under such circumstances. Further, if a 
hospital's discharge decision was overturned upon appeal, we would have 
to believe the final decision was correct and any additional costs that 
resulted from the appeal would be appropriately included as an episode 
cost.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to cap 
high payment EPM episodes. Specifically, we are not finalizing our 
proposal to apply ceilings separately to the payments that occurred 
during the chained anchor hospitalization and to the payments that 
occurred after the chained anchor hospitalization with respect to AMI 
model episodes with MS-DRG 231-236, and instead will simply apply 
ceilings separately for each MS-DRG at the regional level as we would 
with MS-DRGs 280-282 or 246-251 without readmission for CABG MS-DRGs. 
Our final policy for capping high payment EPM episodes is included in 
Sec.  512.300(e)(1).
e. Treatment of Reconciliation Payments and Medicare Repayments When 
Calculating Historical EPM-Episode Payments To Update EPM-Episode 
Benchmark and Quality-Adjusted Target Prices
    For the CJR model, we exclude CJR model reconciliation payments and 
Medicare repayments from the expenditure data used to update historical 
claims when calculating CJR model target prices, although we received 
comments on the proposed rule encouraging us to include these payments. 
For example, commenters supported their inclusion because CJR-
participating hospitals otherwise would be providing care coordination 
services that would not be paid directly or accounted for under 
applicable Medicare FFS payments systems and thus might be funded 
through reconciliation payments. Further, by

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excluding reconciliation payments from the calculations, commenters 
suggested that we may underestimate their actual resource costs when 
updating target prices for the care necessary during episodes. The CJR 
Final Rule discussed our view that including reconciliation payments 
would have the effect of Medicare paying CJR model participant 
hospitals their target prices, regardless of whether such participant 
was below, above, or met their episode target price. We also noted that 
we had not discussed any alternatives in the CJR model proposed rule, 
and that we might consider including these payments in updating 
historical claims through future rulemaking (80 FR 73332).
    After further consideration, we proposed to include both 
reconciliation payments and Medicare repayments when calculating 
historical EPM-episode payments to update EPM-episode benchmark and 
quality-adjusted target prices (81 FR 50847). We concurred with the 
views expressed by commenters on the CJR model proposed rule that 
including these payments would more fully recognize the total resource 
costs of care under an EPM than would their exclusion. As indicated in 
section V.B. of the proposed rule (81 FR 50950 through 50951), we also 
proposed to modify our policy for the CJR model to also include 
reconciliation payments and Medicare repayments when updating target 
prices under that model. We also considered an option where we would 
include only reconciliation payments when updating but not Medicare 
repayments; however, we believed this option would not achieve our 
intention of more fully capturing the costs of care under the EPM. We 
further noted that the inclusion of both reconciliation payments and 
Medicare repayments could have differential effects on an EPM 
participant's benchmark and quality-adjusted target prices based on 
whether or not it received a reconciliation payment or made a Medicare 
repayment. For example, all else equal, including an EPM reconciliation 
payment when updating an EPM participant's EPM-episode benchmark and 
quality-adjusted target prices would modestly increase the quality-
adjusted target prices in performance years 3 through 5 in comparison 
to not including the reconciliation payment. Conversely, all else 
equal, including a Medicare repayment when updating an EPM 
participant's EPM-episode benchmark and quality-adjusted target prices 
would reduce the next performance year's quality-adjusted target price 
in comparison to not including the Medicare repayment. Following 
analogous logic, we also proposed to include BPCI Net Payment 
Reconciliation Amounts in our calculations when updating EPM-episode 
benchmark and quality-adjusted target prices. We noted, however, that 
the effects of these proposals would largely be confined to PY3 of the 
EPMs and diminish as EPM-participant historical EPM-episode updates are 
eventually determined based on regional payments in subsequent years of 
the EPMs. This is because the net sum of EPM reconciliation payments, 
Medicare repayments, and BPCI Net Payment Reconciliation Amounts would 
represent a small portion of the total historical EPM-episode payments 
captured in regional pricing.
    When updating EPM-episode benchmark and quality adjusted target 
prices for CABG model episodes, we proposed to apportion EPM 
reconciliation payments and BPCI Net Reconciliation Payment Amounts 
proportionally to the anchor hospitalization and post-anchor 
hospitalization portions of CABG model historical episodes. We also 
proposed to calculate the proportions based on regional average 
historical episode payments that occurred during the anchor 
hospitalization portion of CABG model episodes and regional average 
historical episode payments that occurred during the post-anchor anchor 
hospitalization portion of CABG model episodes that were initiated 
during the 3 historical years. This aligns with the general proposal to 
calculate the CABG model-episode benchmark price as the sum of the 
corresponding CABG anchor hospitalization benchmark price and the 
corresponding CABG post-anchor hospitalization benchmark price, as 
discussed in III.D.4.b.(2)(ii) and III.D.4.d. of the proposed rule.
    The proposal to include both reconciliation payments and Medicare 
repayments when calculating historical EPM-episode payments to update 
EPM-episode benchmark and quality-adjusted target prices was included 
in Sec.  512.300(c)(8). We sought comment on our proposal to include 
both reconciliation payments and Medicare repayments when calculating 
historical EPM-episode payments to update EPM-episode benchmark and 
quality-adjusted target prices.
    The following is a summary of the comments received and our 
responses.
    Comment: Multiple commenters supported the proposal to include 
reconciliation payments when calculating target prices in order to more 
fully recognize the costs of care under the models. A number of 
commenters expressed the view that the proposal will help avoid 
participants from constantly competing against their prior success and 
better ensure that target prices decrease at a slower rate, which is 
critical for those providers that are already efficient, allow more 
viable financial targets for the participating providers that are 
better aligned with effective patient care. A commenter requested that 
CMS include these reconciliation payments and repayments in PY2 rather 
than PY3. Another commenter requested that CMS exclude Medicare 
repayments given that the targets would fall for hospitals that 
increased their spending to improve care, which then caused them to 
exceed their target prices.
    Response: We appreciate the comments supporting our proposal to 
include reconciliation and Medicare repayments when calculating 
historical EPM-episode payments to update EPM-episode benchmark and 
quality-adjusted target prices. We disagree with comments suggesting 
that we accelerate their inclusion to PY2 or to exclude Medicare 
repayments for these purposes. We would further note that since the 
historical data for determining PY1 and PY2 benchmarks is based on 2013 
to 2015 expenditure data, the effects of a reconciliation determination 
for PY1, which is based on 2017 expenditure data, would not pertain to 
the data used to determine target prices for PY2. Moreover, given that 
reconciliation determinations are made 2 months after the completion of 
a performance year, it would not be possible to apply the PY1 
reconciliation results to the PY2 benchmark data even if we were to 
adjust our timeframe for determining historical payments.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include both reconciliation payments and Medicare repayments when 
calculating historical EPM-episode payments to update EPM-episode 
benchmark and quality-adjusted target prices. The final policy for 
including reconciliation payments and Medicare repayments is included 
in Sec.  512.300(c)(8).
4. EPM-Episode Price-Setting Methodologies
a. Overview
    Whether an EPM participant receives a reconciliation payment or is 
made responsible to repay Medicare under the EPM is based on the EPM 
participant's actual EPM-episode payments relative to quality-adjusted 
target prices, as well

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as the EPM participant's eligibility for reconciliation payment based 
on acceptable, good, or excellent quality performance. While our 
proposals for relating EPM participant quality performance to EPM 
payments were further discussed in section III.E.3.f of the proposed 
rule (81 FR 50887 through 50893), this section of the proposed rule 
discussed the approach to establishing EPM-episode benchmark and 
quality-adjusted target prices (81 FR 50847 through 50864).
    For the purposes of price-setting, any references in our proposed 
rule to AMI ICD-CM diagnosis codes meant those ICD-9-CM and ICD-10-CM 
diagnosis codes for historical EPM episodes or ICD-10-CM diagnosis 
codes for EPM episodes during the EPM performance years that can be 
found in the specific EPM episode definitions parameters spreadsheet. 
Also, for the purposes of price-setting, any references in the proposed 
rule to intracardiac ICD-CM procedure codes meant those ICD-9-CM 
procedure codes for historical EPM episodes that can be found in the 
specific EPM episode definitions parameters spreadsheet. The EPM 
episode definitions parameters spreadsheets are posted on the CMS Web 
site at https://innovation.cms.gov/inititatives/epm.
    We proposed to establish EPM-episode benchmark and quality-adjusted 
target prices for each EPM participant based on the following MS-DRGs 
and diagnoses included in the AMI, CABG, and SHFFT models as discussed 
in sections III.C.3 and III.C.4. of the proposed rule:
(1) AMI model
     AMI MS-DRGs --
    ++ 280 (Acute myocardial infarction, discharged alive with MCC);
    ++ 281 (Acute myocardial infarction, discharged alive with CC);
    ++ 282 (Acute myocardial infarction, discharged alive without CC/
MCC); and
     PCI MS-DRGs, when the claim includes an AMI ICD-CM 
diagnosis code in the principal or secondary position on the inpatient 
claim and when the claim does not include an intracardiac ICD-CM 
procedure code in any position on the inpatient claim--
    ++ 246 (Perc cardiovasc proc with drug-eluting stent with MCC or 4+ 
vessels/stents);
    ++ 247 (Perc cardiovasc proc with drug-eluting stent without MCC);
    ++ 248 (Perc cardiovasc proc with non-drug-eluting stent with MCC 
or 4+ vessels/stents);
    ++ 249 (Perc cardiovasc proc with non-drug-eluting stent without 
MCC);
    ++ 250 (Perc cardiovasc proc without coronary artery stent with 
MCC); and
    ++ 251 (Perc cardiovasc proc without coronary artery stent without 
MCC).
(2) CABG model DRGs--
     231 (Coronary bypass with PTCA with MCC);
     232 (Coronary bypass with PTCA without MCC);
     233 (Coronary bypass with cardiac cath with MCC);
     234 (Coronary bypass with cardiac cath without MCC);
     235 (Coronary bypass without cardiac cath with MCC); and
     236 (Coronary bypass without cardiac cath without MCC).
(3) SHFFT model DRGs--
     480 (Hip and femur procedures except major joint with 
MCC);
     481 (Hip and femur procedures except major joint with CC); 
and
     482 (Hip and femur procedures except major joint without 
CC or MCC).
    We proposed to generally apply the CJR model methodology to set 
EPM-episode benchmark and quality-adjusted target prices (80 FR 73337 
through 73338), with the addition of some adjustments based on the 
specific clinical conditions and care patterns for EPM episodes 
included in the AMI, CABG, and SHFFT models. The price-setting 
methodology incorporated the following features:
     Set different EPM benchmark and quality-adjusted target 
prices for EPM episodes based on the assigned price MS-DRG in one of 
the included MS-DRGs to account for patient and clinical variations 
that impact EPM participants' costs of providing care. Inpatient claims 
with PCI MS-DRGs 246-251 that contain an intracardiac ICD-CM procedure 
code in any position would not anchor an historical episode, nor be 
considered when assigning a price MS-DRG. This is because beginning in 
FY 2016, inpatient claims containing an intracardiac ICD-10-CM 
procedure code in any position no longer map to MS-DRGs 246-251.
     Adjust EPM benchmark and quality-adjusted target prices 
for certain EPM episodes involving chained anchor hospitalizations, 
specific readmissions, or the presence of an AMI ICD-CM diagnosis code 
for CABG MS-DRGs.
     Use 3 years of historical Medicare FFS payment data 
grouped into EPM episodes according to the EPM episode definitions in 
sections III.C.3 and III.C.4. of the proposed rule, termed historical 
EPM episodes and historical EPM-episode payments. The specific set of 3 
historical years would be updated every other performance year.
     Apply Medicare payment system (for example, IPPS, OPPS, 
IRF PPS, SNF, MPFS.) updates to the historical EPM-episode data to 
ensure we incentivize EPM participants based on historical utilization 
and practice patterns, not Medicare payment system rate changes that 
are beyond such participants' control. Because different Medicare 
payment system updates become effective at two different times of the 
year, we would calculate one set of EPM-benchmark and quality-adjusted 
target prices for EPM episodes initiated between January 1 and 
September 30 and another set for EPM episodes initiated between October 
1 and December 31.
     Blend together EPM-participant hospital-specific and 
regional historical EPM-episode payments, transitioning from primarily 
hospital-specific to completely regional pricing over the course of the 
5 performance years, to incentivize both historically-efficient and 
less-efficient EPM participants to furnish high quality, efficient care 
in all years of the EPM Regions would be defined as each of the nine 
U.S. Census divisions.
     Normalize for hospital-specific wage-adjustment variations 
in Medicare payment systems when combining hospital-specific and 
regional historical EPM episodes.
     Pool together EPM episodes by groups of price MS-DRGs to 
allow a greater volume of historical cases and allow us to set more 
stable prices.
     Apply an effective discount factor on EPM-episode 
benchmark prices to serve as Medicare's portion of reduced expenditures 
from the EPM episode, with any remaining portion of reduced Medicare 
spending below the quality-adjusted target price potentially available 
as reconciliation payments to the EPM participant where the anchor 
hospitalization occurred.
     Further discussion on each of the features and sequential 
steps to calculate EPM-episode benchmark and quality-adjusted target 
prices can be found in sections III.D.4.b through e. of both our 
proposed rule and this final rule.
    We also proposed to calculate and communicate EPM-episode benchmark 
and quality-adjusted target prices to EPM participants prior to the 
performance period in which the prices apply (that is, prior to January 
1, 2018, for prices covering EPM episodes that start between January 1, 
2018, and September 30, 2018; prior to October 1, 2018, for prices 
covering EPM episodes that start between October 1, 2018, and December 
31, 2018). We stated our belief that prospectively communicating

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EPM-episode benchmark and quality-adjusted target prices to EPM 
participants would help them make infrastructure, care coordination and 
delivery, and financial refinements they may deem appropriate to 
prepare for the new episode target prices under the model.
    The proposal to prospectively communicate quality-adjusted target 
prices was included in Sec.  512.300(c)(9). We sought comment on our 
proposal to prospectively communicate these prices.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters supported the proposal to establish and 
prospectively communicate benchmark and quality-adjusted target prices. 
Commenters also expressed concerns about how far in advance the 
information would be made available and the level of detail that would 
be included in the information. Commenters indicated that knowing the 
target price prior to the relevant performance period is essential for 
participants to be able to implement efficient care redesigns linked 
explicitly to established payment rates. As such, commenters requested 
that CMS provide this information 60 to 90 days prior to the start of 
the relevant performance period. Other commenters requested that CMS 
make all of the components necessary to calculate the target price for 
both the CJR model and proposed EPMs available to participants so they 
can verify that CMS accurately calculated the target price as some CJR 
participants have reported an inability to replicate the target price 
calculation due to CMS' use of ``black box'' inputs for certain 
national factors.
    Response: We appreciate the comments and support we received for 
our proposal to prospectively communicate benchmark and quality-
adjusted target prices, agree with commenters on the importance of 
having this information in advance of each performance year, and intend 
to make as much information available as we deem appropriate to 
participants as far in advance of the models' implementation as is 
possible.
    Comment: Several commenters recommended that CMS annually 
reevaluate and update the price-setting assumptions through a notice 
and comment process. One of these commenters reported that the proposal 
to make historical claims data available before implementation of the 
models would still not give hospitals an opportunity to comment on 
problems with the methodology until after the models had begun. Another 
commenter based their request on significant and unexplained changes in 
prices reported under BPCI and the Pioneer ACO model.
    Response: We appreciate these comments and suggestions. We believe 
the information we provided in both our proposed and this final rule is 
sufficiently detailed for participants to understand our assumptions 
and methodology for setting target prices. In the event we intend to 
materially change our price-setting assumptions or methodology, we 
would make those proposed changes available through a notice and 
comment process.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
prospectively communicate quality-adjusted target prices.
b. EPM-Episode Benchmark and Quality-Adjusted Target Price Features
(1) Risk-Stratifying EPM-Episode Benchmark Prices Based on MS-DRG and 
Diagnosis
    To account for some of the clinical and resource variations that 
would be expected to occur under the EPMs, we proposed generally to 
apply the episode pricing methodology that was applied to the CJR model 
to develop the EPM-episode benchmark prices, which we referred to as 
the standard EPM-episode benchmark price (81 FR 50848). In addition, 
for each EPM participant, we proposed to risk-stratify and establish 
special EPM-episode benchmark prices for episodes in different pricing 
scenarios as described in this section, as well as sections III.D.4.c. 
through e. of the proposed rule (81 FR 50848 through 50864). For 
purposes of the proposed rule, risk-stratification meant the 
methodology for developing the EPM-episode benchmark price that 
accounts for clinical and resource variation in historical EPM episodes 
so that the quality-adjusted target price (calculated from the EPM-
episode benchmark price) can be compared to actual EPM episode payments 
for EPM beneficiaries with similar care needs to those in historical 
EPM episodes.
    For the SHFFT model, we proposed to set the price MS-DRG equal to 
the anchor MS-DRG. We proposed to calculate standard SHFFT model-
episode benchmark prices based on price MS-DRGs following the general 
payment methodology that was applied to the CJR model (80 FR 73337 
through 73358) with risk stratification according to the anchor MS-DRG.
    Similarly, for AMI model episodes without chained anchor 
hospitalizations and without readmissions for CABG MS-DRGs, we proposed 
to set the price MS-DRG equal to the anchor MS-DRG. We proposed to 
calculate standard AMI model-episode benchmark prices based on price 
MS-DRGs following the general payment methodology that was applied to 
the CJR model (80 FR 73337 through 73358) with risk stratification 
according to the anchor MS-DRG. We proposed to apply the CJR model 
payment methodology separately to AMI model episodes with anchor AMI 
MS-DRGs 280 through 282 and anchor PCI MS-DRGs 246 through 251 with a 
corresponding AMI ICD-CM diagnosis code on the inpatient claim for the 
anchor hospitalization and without an intracardiac ICD-CM procedure 
code in any position on the inpatient claim for the anchor 
hospitalization.
    For episodes in the AMI model with chained anchor hospitalizations 
and no readmissions for CABG MS-DRGs, we proposed to set the price MS-
DRG based on the hierarchy described in section III.D.4.b.(2)(a) and to 
calculate AMI model-episode benchmark prices based on price MS-DRGs as 
described in sections III.D.4.b.(2)(a) and III.D.4.c. of the proposed 
rule.
    For AMI model episodes without chained anchor hospitalizations and 
with readmissions for CABG MS-DRGs, we proposed to set the price MS-DRG 
as the anchor MS-DRG and to calculate CABG readmission AMI model-
episode benchmark prices as described in sections III.D.4.b.(2)(b), 
III.D.4.b.(2)(c), and III.D.4.e of the proposed rule.
    For AMI model episodes with chained anchor hospitalizations that do 
not include CABG MS-DRGs and with readmissions for CABG MS-DRGs, we 
proposed to set the price MS-DRG based on the hierarchy described in 
section III.D.4.b.(2)(a) and to calculate CABG readmission AMI model-
episode benchmark prices as described in sections III.D.4.b.(2)(b), 
III.D.4.b.(2)(c), and III.D.4.e. of the proposed rule.
    For CABG model episodes, we proposed to set the price MS-DRG as the 
anchor MS-DRG and to calculate CABG model-episode benchmark prices as 
the sum of the CABG anchor hospitalization portion price and the CABG 
post-anchor hospitalization portion price, which would be calculated by 
applying the general payment methodology that was applied to the CJR 
model (80 FR 73337 through 73358) separately to the expenditures that 
occurred during the anchor hospitalization of the CABG model episode 
and to the expenditures that occurred after the anchor hospitalization 
as discussed in sections III.D.4.b.(2)(b) and III.D.4.d. of the 
proposed rule.

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    Finally, we proposed that after assigning an EPM-episode benchmark 
price to each EPM episode, the EPM-episode quality-adjusted target 
price would be the EPM-episode benchmark price reduced by the effective 
discount factor for the corresponding EPM that corresponds to the EPM 
participant's quality category, as discussed in sections III.D.4.b.(10) 
and III.E.3.f. of the proposed rule.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter commended CMS for attempting to create a 
target price methodology that accounts for the variations in episode 
spending that are characteristic of these specific clinical scenarios 
while other commenters noted that the complexity of the proposals made 
it difficult to evaluate them. Several commenters disagreed with the 
proposal to base prices on MS-DRGs or anticipated that they could 
result in unintended consequences. For example, commenters noted 
concerns that it would be challenging to generate sufficient savings 
where a sizeable portion of episode costs are embedded in the MS-DRG 
costs attributed to the initial hospitalization and cannot be changed 
by hospitals' performance. Other commenters noted that the higher 
payments associated with higher-weighted MS-DRGs could serve as a 
disincentive to participants from making quality improvements or to 
reduce complications because they would be paid more when there are 
complications that raise the MS-DRG, but paid less when quality 
improvements they made resulted in a lower cost MS-DRG where only CMS 
rather than the hospital benefitted from the reduced costs. Likewise, 
several commenters claimed that participant coding behavior could 
result in similar unintended consequences. As such, several commenters 
recommended that CMS consider a price-setting methodology that removes 
the MS-DRG payment from the target price or mitigates coding effects 
from the calculations or differentially weights cost components that 
would be ``locked in'' to the episode spending.
    Response: The purpose of our models is to test EPMs within the 
existing parameters and payment systems of FFS Medicare. As we noted in 
section III.A.1.c. of this final rule, issues such as those commenters 
raised are generally present for every episode payment model that sets 
a price Medicare will pay for an episode-of-care. While our models are 
not intended to change these existing FFS payment systems, we intend 
that by incorporating both the MS-DRG payment and Part B services 
furnished during the anchor inpatient hospitalization, the EPMs will 
create incentives for increased care coordination and efficient care 
delivery from the time of inpatient admission through 90 days after 
discharge. Moreover, we hope the EPMs can identify the effectiveness of 
a bundled payment model within those parameters as well as the factors 
that could impede success. As discussed further in sections III.G.4. 
through III.G.6. of this final rule, we will monitor access to care, 
the quality of care, and delayed care under the EPMs and may take 
actions against EPM participants if we find evidence that supports 
concerns in these areas. In addition, the evaluation as discussed in 
section IV. of this final rule will analyze beneficiary outcomes and 
their relationship to clinical pathways under the EPMs.
    Comment: Several commenters addressed EPM payments under the SHFFT 
model. One commenter noted that the proposed SHFFT model would include 
beneficiaries discharged under hip and femur procedures except major 
joint replacement MS-DRGs (480-482), representing IPPS admissions for 
hip fixation procedures in the setting of hip fractures. As these 
procedures are emergent rather than elective, they would have more risk 
to manage than would an elective LEJR and would more often require a 
SNF stay and non-weight bearing status for weeks, which results in 
higher costs than for an elective procedure. The commenter questioned 
whether such non-elective procedures would have a higher benchmark 
price and expressed concerns that bundled payment models are 
potentially less successful for non-elective procedures which they 
believe require more time for planning and rehabilitation.
    Other commenters suggested that the differences in severity and 
fracture type for episodes under the SHFFT model are not adequately 
represented by the three MS-DRGs we proposed. One of these commenters 
requested additional separate target prices as CMS had done for the CJR 
model, which would serve as a rough form of risk-adjustment and would 
make it easier for hospitals to devise protocols and strategies best 
suited to fracture type. Another commenter suggested that since 
patients who experience SHFFT episodes often require lengthier and more 
complicated care, and typically require longer post-acute care than 
those receiving joint replacement, the calculation of target prices 
should also take into account the proportion of SHFFT episodes included 
in the bundle in order to most accurately capture the risk of SHFFT 
episodes. One commenter recommended that CMS adopt transfer mechanisms 
within the SHFFT model, including price adjustments, which are similar 
to those proposed for inpatient-to-inpatient hospital transfers under 
the AMI model but that the receiving hospital would bear the risk if a 
SHFFT patient is transferred to that hospital.
    Response: We proposed to set prices based on anchor MS-DRGs, which 
implicitly adjust payments based on their relative weights with respect 
to the IPPS resources required for that MS-DRG. For example, average 
episode expenditures for historical SHFFT episodes increases from 
roughly $36,000 in episodes with anchor MS-DRG 482 to more than $52,000 
for episodes with anchor MS-DRG 480.\77\ Further, our benchmark prices 
would reflect the historic costs of post-acute care associated with 
these MS-DRGs. If historic post-acute care costs for the emergent MS-
DRG are higher than those for a similar elective MS-DRG, then those 
higher resources would be reflected in and produce a larger increase in 
the benchmark amount than would be the case for the elective procedure. 
We would also note that as discussed in section III.D.4.b.(2) which 
follows, we will be exploring additional options to adjust benchmark 
prices and performance payments to better account for cost variation 
associated with risk. These adjustments, which we intend to be 
effective beginning in PY3, should further account for some of the 
potential variation in costs across episodes as has been highlighted. 
We disagree with the view that a bundled payment would be any less 
effective with an emergent than an elective procedure. Our proposed 
models are intended to encourage changes and improvements in 
participants' care practices, in general, with respect to the episodes 
covered under the models, which we believe would apply regardless of 
whether the episode is elective or emergent.
---------------------------------------------------------------------------

    \77\ Episodes for SHFFT model beneficiaries initiated by all 
U.S. IPPS hospitals and constructed using standardized Medicare FFS 
Parts A and B claims, as proposed in this rule that began in CYs 
2012-2014.
---------------------------------------------------------------------------

    As discussed in section III.D.4.b.2.(a), we are not finalizing our 
proposal with regard to inpatient-to-inpatient transfers for AMI 
episodes. For AMI model episodes alone, we will cancel the AMI episode 
that begins at the initial treating hospital when an inpatient-to-
inpatient transfer occurs during the anchor hospitalization. For CABG 
and SHFFT model episodes, once the episode begins and an inpatient-to-
inpatient transfer occurs, the episode will continue and

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the hospitalization at the transfer hospital will be included or 
excluded from the CABG or SHFFFT episode based on whether or not the 
MS-DRG for the admission at the transfer hospital is excluded from the 
CABG or SHFFT episode definition.
    Comment: One commenter stated that the proposed EPMs do not 
adequately account for research and teaching functions and that CMS 
should adjust payments to account for the overhead associated with 
these functions.
    Response: We disagree that our proposed models should include 
additional payment adjustments for research and teaching function 
beyond the payments Medicare already makes for these purposes under the 
IPPS. In contrast, we believe that participants should seek improved 
care quality and efficiencies as broadly as is possible, including any 
that can be attained with research or teaching activities.
    Comment: A commenter noted their view that all providers should 
have EHR capability, including the ability to share EHR data across 
sites of service in order to speed decision-making and eliminate 
duplication of effort. The commenter suggested that CMS include 
incentive funds to assist post-acute care providers in implementing a 
robust EHR system and tools to share the data with other providers. 
Similarly, a commenter suggested that the proposed models will require 
technology and services for monitoring care during a post-acute care 
stay, and that CMS should incentivize the use of such technology and 
services. The commenter recommended that CMS should pay for remote 
patient monitoring using the CPT-code 94040, which is similar to what 
is done in certain state models.
    Response: We agree that EHR capability and monitoring technologies 
can be useful tools toward improving care coordination and care 
quality; however, our models are based on incentives to improve care 
quality and efficiency, with a goal of improving control of cost 
growth. We do not believe that adding funding to encourage further 
adoption of technologies under the models is consistent with our goals. 
However, we would note that to the extent a participant establishes 
sharing arrangements with post-acute care collaborators under the 
models, those collaborators could choose to use such shared funds for 
purposes of improving their EHR or monitoring capacities.
    Comment: As discussed in section III.C.3.b. of this final rule, one 
commenter pointed to evidence demonstrating that the use of drug-
eluting stents (DESs) results in better long-term outcomes in many 
patients and fewer repeat procedures for in-stent restenosis than do 
less costly non-drug eluting stents. The commenter expressed concern 
that while the costs of these more expensive stents would be captured 
in the episode cost calculation, the long-term benefit for patients 
both in terms of outcomes and costs would not be fully captured in the 
90-day post-discharge episode period and hence discourage the 
appropriate use of DES by causing fewer patients to receive them, 
resulting in poorer outcomes and increased cost growth. The commenter 
requested that CMS consider various means so to ensure the 90-day post-
discharge episode target price does not discourage the longer term 
outcomes that are better for Medicare beneficiaries and potentially 
overall savings for CMS. Another commenter requested an adjustment or 
additional financial protection for costs associated with the 
implantation of an Implantable Cardioverter Defibrillator (ICD) given 
strong empirical support and its Class I recommendation for prevention 
of sudden cardiac death for certain patients.
    Similarly, another commenter recommended that CMS include a payment 
adjustment such as an additional outlier or add-on payment for using 
new technology, having higher cost cases, or adopting a breakthrough/
high cost treatment in advance of other providers.
    Finally, one commenter recommended that CMS coordinate with the 
device industry to create a process wherein the use and associated cost 
of new technologies can be added to episodes of care definitions on a 
routine basis and modify the proposal to ensure that providers have 
financial incentives to provide optimal care for high-risk patients 
with severe coronary artery disease even if the initial treatment 
episode has a higher cost. The commenter expressed concern that 
insufficient data were available at this time to inform a clinical 
guideline recommendation with regard to the optimal timing of non-
culprit vessel PCI, and the proposed payment bundles could encourage 
procedures that may not provide the best clinical outcomes for Medicare 
beneficiaries but instead have financial benefits with respect to the 
target price. As guidelines change based on available data, CMS should 
consider potential adjustments to reconciliation to the episodes 
quality adjusted target prices based on guideline changes.
    Response: As we noted in section III.C.3.b. of this final rule, 
Medicare payment for coronary stents, whether bare metal or DES, used 
during a PCI performed during a hospitalization are included in the 
IPPS payment for the inpatient hospitalization. While they are not paid 
separately by Medicare, payment for the required resources would be 
included in AMI episodes because the IPPS services for the anchor 
hospitalization are included in the episodes. We propose to risk-
stratify EPM-episode prices based on MS-DRG as discussed in section 
III.D.4.b.(1) of this final rule and there are separate MS-DRGs for 
PCIs that use DES (246 and 247) and non-DES (248 and 249) for which 
there would be separate AMI episode prices. Therefore, we do not 
believe that the financial incentives under the AMI model encourage the 
use of any specific coronary stent because the episode prices take into 
consideration the IPPS payment for the specific MS-DRG that applies to 
the AMI model beneficiary. We do not expect the AMI model to discourage 
the appropriate use of DES. We would also note, as stated in section 
III.D.4.b.(2), we will be exploring additional mechanisms to risk 
adjust payments that should become available beginning in PY3. We 
believe that these adjustments will provide participants further 
protections that should help mitigate the concerns commenters raised.
    Likewise, we do not agree with comments requesting payments in 
addition to those currently made available when participants adopt 
specific or new technologies, provide services for high-cost cases, or 
adopt breakthrough technologies. The purposes of the proposed models 
are to improve care quality and efficiency while better controlling 
Medicare cost growth within a FFS framework. As such, the models seek 
to achieve these goals to the greatest extent possible within the 
regulatory framework that applies within FFS Medicare, and are not 
intended to create new or substitute payment mechanisms or processes 
for establishing new payments under FFS Medicare.
    Comment: A commenter recommended that when establishing episode 
target payments, price calculations should incorporate clinical 
practice guidelines and appropriate use criteria that are endorsed by 
all stakeholders to ensure that patients are not receiving inadequate 
care.
    Response: We disagree with the recommendation that prices should 
include clinical practice guidelines as, to the contrary, they are 
based on Medicare FFS payments and their historical utilization for 
services included in the EPMs, and should not

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include specifications reflecting normative criteria regarding clinical 
practice guidelines, which could be overly prescriptive for EPM 
participants and provides and suppliers treating EPM beneficiaries. 
That said, we would assume that EPM participants would be following 
clinical practice guidelines as we would expect should also be the case 
for services and paid under the Medicare FFS program.
    Comment: We received a comment suggesting that CMS make payment 
adjustments for cases where a beneficiary receives the majority of 
their post-acute care in a different MSA from the MSA in which the 
anchor hospitalization occurred. The commenter presented an example 
where a beneficiary with an anchor hospitalization in Massachusetts 
receives post-acute care in Florida. In their view, the MSA in Florida 
could have higher service utilization and spending than the 
Massachusetts MSA given different care practices. Further, the 
commenter believed it was unlikely that the hospital in Massachusetts 
could have influence on a provider in another distant MSA. The 
commenter recommended a payment adjustment to both avoid penalizing 
hospitals in the initiating MSA and to help in not deterring tertiary 
care facilities from accepting patients that could not receive 
necessary care in their own distant MSA.
    Response: As noted in section III.C.4.a. of this final rule, we 
recognize that in occasional circumstances, EPM participants may have 
limited ability to coordinate care, but that we generally expect that 
much of the subsequent coordination of post-acute care services and 
other related services for EPM beneficiaries during the 90 days post-
discharge can be accomplished through telecommunications that do not 
require the patient to remain within the geographic proximity of the 
hospital responsible for the EPM episode. In that section, we also 
noted that the design of the EPMs does not preclude hospitals from 
coordinating care with other providers outside of their immediate 
service area, that most EPM participants have the tools to engage in 
effective remote care coordination that results in high quality episode 
care, and that we finalized several waivers of Medicare program rules, 
as discussed in section III.J. of this final rule, to facilitate 
efficient and effective episode care coordination for beneficiaries in 
remote or distant locations outside of the EPM participant's immediate 
community. We also finalized policies for financial arrangements in 
section III.I. of this final rule that allow EPM participants to share 
upside and downside financial risk with a variety of individuals and 
entities who collaborate with the EPM participant in redesigning care 
and caring for EPM beneficiaries, regardless of the geographic 
proximity of these individuals and entities to the EPM participant. 
Through financial arrangements, EPM participants could align the 
financial incentives of providers in the EPM beneficiary's home 
community with the goals of the EPM participant to improve the quality 
and reduce the cost of EPM episodes. Therefore, we do not believe it is 
necessary to make a payment adjustment when a beneficiary receives 
post-acute care in a different MSA from the MSA in which the anchor 
hospitalization occurred. However, we plan to monitor these occurrences 
and could consider modifying our policy should that be determined 
appropriate.
    Comment: Several commenters requested that CMS include more 
flexibility with respect to payments for post-acute care services under 
the models. For example, some commenters noted that while Medicare 
payments for inpatient rehabilitation facility or long-term care 
hospital services are based on a prospective amount, payments for 
skilled nursing facility services are less ``encompassing'' and are 
based on a per diem amount. Commenters suggested that these differences 
can create an unequal playing field and prevent efficiencies that are 
realized from being reflected in payments. As such, commenters 
requested that CMS identify flexibilities so that payments among a 
broader array of post-acute care providers could more closely reflect 
any efficiencies that are realized, for example, through payments on a 
per diem basis or at a reduced rate.
    Response: We appreciate the suggestions commenters offered to 
better align payments across post-acute care providers. We will not be 
adopting these suggestions for purposes of these models as, to the 
greatest extent possible, we want to test the effects of bundled 
payments within the existing FFS Medicare framework. We will consider 
the applicability of the suggestions offered, however, as we explore 
future models that involve payments for post-acute care services.
(2) Adjustments To Account for EPM-Episode Price Variation
    We also considered further adjustments to account for clinical and 
resource variation that could affect EPM participants' costs for EPM 
episodes. As was the case for the CJR model (80 FR 73338 through 
73339), we stated our belief that no standard risk adjustment approach 
that is widely-accepted throughout the nation exists for the proposed 
EPM episodes. Thus, we did not propose to make risk adjustments based 
on beneficiary-specific demographic characteristics or clinical 
indicators. Likewise, we questioned whether CMS Hierarchical Condition 
Categories (HCC) used to adjust for risk in the Medicare Advantage 
program would be appropriate for risk-adjusting EPM episodes as such 
categories are used to predict total Medicare expenditures in an 
upcoming year for MA plans and may not be appropriate for use in 
predicting expenditures over a shorter period of time, such as the EPM 
episodes. Further, the validity of HCC scores for predicting Medicare 
expenditures for shorter episodes-of-care or specifically for the AMI, 
CABG, and SHFFT model episodes that we are proposing has not been 
determined. Thus, we did not propose to risk-adjust EPM-episode 
benchmark or quality-adjusted target prices using HCC scores for the 
EPMs. We referred to the CJR Final Rule for additional discussion of 
our assessment of risk-adjustment options for the CJR model, which 
informed our views on their appropriateness for the EPMs (80 FR 73338 
through 73340).
    We also noted, however, that there are circumstances that could 
account for spending variation in EPM episodes where certain pricing 
adjustments could be appropriate. We identified several scenarios where 
increased EPM-episode efficiencies would be limited for certain groups 
of EPM beneficiaries and a standard EPM-episode benchmark price based 
on the anchor MS-DRG would, therefore, not account for circumstances 
where clinically-appropriate care could consistently result in higher 
EPM-episode payments. For example, as discussed in section 
III.C.4.a.(5) of the proposed rule, variation could arise from the 
asymmetric distribution of cardiac care across hospitals, which makes 
transfers, either from a hospitalization or from the emergency 
department (without inpatient admission) of one hospital to another, a 
common consideration in the treatment course for beneficiaries with an 
initial diagnosis of AMI, resulting in a chained anchor hospitalization 
for inpatient-to-inpatient transfers. We also recognized that certain 
episodes involving hospital readmissions for clinically-appropriate 
planned follow-up care may have higher episode spending than episodes 
with a single hospitalization or with chained anchor hospitalizations 
involving transfers that do not have any readmissions. Further, a 
beneficiary

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who has a CABG in the context of hospitalization for an AMI may have 
different spending in the 90 days post-hospital-discharge due to 
different health needs than a beneficiary who has an elective CABG. 
Accordingly, we proposed specific policies and payment adjustments in 
recognition of the systematic, consistent variation in EPM-episode 
spending that could result from such circumstances.
    The following is a summary of the comments received and our 
responses.
    Comment: While one commenter supported the proposal to risk-
stratify episode costs based largely on MS-DRGs with additional 
adjustments for scenarios including chained anchor hospitalizations, 
readmissions, and CABG, many commenters expressed concerns that no 
further risk-adjustment was proposed beyond the risk-stratification 
inherent in the MS-DRGs and CMS' proposed adjustments for such 
scenarios as chained anchor hospitalizations or episodes involving 
readmissions or CABG. These commenters noted their views that the 
absence of further risk-adjustment would penalize hospitals treating 
the sickest, most complicated, and most vulnerable patients for factors 
that are beyond the hospitals' control. One commenter reported that 
adequate risk-adjustment is especially important as CMS considers 
additional clinical groups for bundling programs, such as cardiac care 
or SHFFT patients, that are more clinically heterogeneous than CJR 
patients. MedPAC noted that it has ``consistently found that chronic 
conditions and advanced age play a major role in explaining variation 
in spending across beneficiaries. CMS proposes no further risk-
adjustments beyond the DRG/subgroups but provides no data to assess 
whether the proposed stratification is sufficient to adjust for 
differences in spending across beneficiaries within each episode type. 
The Commission urges CMS to evaluate whether additional risk adjustment 
strategies, such as comorbidities and age, would improve the accuracy 
of the benchmarks.''
    Many of the commenters pointed to a recent study noting that the 
use of region-based target pricing can lead to reduced reconciliation 
payments for hospitals.\78\ However, reconciliation payments would 
substantially increase for hospitals that treat patients with high 
complexity and be reduced for hospitals that treat patients with low 
complexity when CMS-HCC scores are applied. Some commenters cited 
additional data in support of their views that the absence of risk-
adjustment ignores the substantial variation in episode payments that 
exists, penalizes hospitals for assuming the risk of higher-cost/
higher-risk patients, or potentially impedes access to high quality 
care.
---------------------------------------------------------------------------

    \78\ Ellimoottil C, Ryan AM, Hou H, et al. Medicare's New 
Bundled Payment For Joint Replacement May Penalize Hospitals That 
Treat Medically Complex Patients. Health Affairs. 2016: 35(9):1651-
1657. doi: 10.1377/hlthaff.2016.0263.
---------------------------------------------------------------------------

    A number of commenters related the absence of further risk-
adjustment to concerns with the proposal to phase-in regionally 
determined target prices. For example, commenters noted that the use of 
a regional spending component will hold all hospitals in a region to 
the same target price, even though they would have different clinical 
capabilities and different risk profiles that results in their treating 
patient populations with differing levels of severity and costs, which 
further buttressed the view that substantial variation in episode 
payments exist within each target price category, not just between the 
target price categories. Some commenters expressed concerns that 
differences in clinical capabilities, and therefore, differing rates of 
more costly transfer episodes, could penalize smaller hospitals that do 
not have the most sophisticated cardiac care available.
    Some commenters expressed the view that the absence of risk 
adjustment would particularly affect hospitals that typically treat 
more complex patients, for example, tertiary hospitals or hospitals 
that are academic medical centers because the absence of risk 
adjustment would not account for the complexity of their patients, 
which often included multiple co-morbidities, longer lengths of stay, 
and higher costs. As hospitals could view these patients as increasing 
their financial risk under the EPMs, commenters expressed concerns that 
patients who suffer from multiple chronic conditions or comorbidities 
may find it more difficult to find participating hospitals willing to 
serve them.
    Other commenters expressed concern that hospitals serving 
communities with a high percentage of lower income patients could be 
adversely affected by the absence of risk-adjustment. Moreover, the 
lack of further risk-adjustment could create a risk-adverse environment 
with the possibility of withholding appropriate care to patients with 
moderate to high-risk profiles, for example to women, due to their 
older age at cardiac presentation and minorities due to increased 
frequency of clinical renal disorder. These commenters noted that such 
patients could have higher costs due to their age or presence of 
multiple co-morbidities. Further, by not providing an adjustment 
factor, there could be a greater chance of transfer abuse whereby 
smaller providers might shift risk for these patients to tertiary 
providers by transferring emergency room patients that are at greater 
risk for complications or readmissions.
    Commenters also noted that CMS appeared to be inconsistent and 
contradictory in not proposing to apply CMS-HCC scores for the proposed 
models or for the CJR model when it does so for similar programs and 
applications. Specifically, commenters observed that CMS-HCC scores are 
applied to quality measures such as Medicare Spending per Beneficiary 
(MSPB), 30-day mortality and readmission, as well as for the quality 
measures proposed to be included under the proposed models. Commenters 
remarked that this gives the impression of poor harmonization of 
efforts within CMS, which leads to fragmented programs.
    Thus, the commenters requested that CMS apply some kind of 
additional risk-adjustment to the proposed models and the CJR model at 
the latest before downside risk begins. One commenter noted that even 
if not ideal, further risk-adjustment would be at least as good as CMS' 
proposal, but simpler and easier to understand than the 75 different 
target prices CMS proposed. Other commenters recommended that CMS 
explore and incorporate additional risk- adjustment to address socio-
demographic factors, in addition to clinical factors, to more 
accurately reflect the level of risk associated with such beneficiary 
characteristics as income and employment status. Further, another 
commenter reported that socio-demographic factors such as the 
availability of primary care, physical therapy, easy access to 
medications and appropriate food, and other supportive services, which 
are beyond providers' control, affect hospitals' performance on outcome 
measures.
    Several commenters recommended that CMS apply the CMS-HCC scores. 
In their view, some benefits of these scores is that they capture the 
severity of a patient's level of underlying illness, better match 
hospital's payment to the complexity of their patients, appropriately 
account for the expected increase in utilization of health care 
services, reduce the likelihood of a Medicare repayment, and should be 
administratively simple to apply given their use for other efforts and 
programs under Medicare. One commenter offered that these codes could, 
at a minimum, serve as a basis for CMS to begin to construct an 
appropriate risk-

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adjustment for CJR episodes, as well as for SHFFT episodes if it re-
proposes their implementation in the future. Another commenter 
suggested that CMS identify a means to adjust the CMS-HCC codes so that 
they could better apply to a 90-day episode. Moreover, while 
encouraging further risk-adjustment as soon as possible within the 
period of the model, this commenter also suggested that the proposed 
models could be an opportunity to obtain the data needed to develop EPM 
risk-adjusters.
    One commenter encouraged the use of physician-defined patient 
condition categories to ensure effective risk stratification in 
condition-based payment models. This commenter reported that 
alternative payment models that are designed to control overuse need to 
incorporate effective risk adjustment or risk stratification components 
in order to protect patients against underuse and to avoid penalizing 
physicians for delivering and ordering services that patients need. In 
their view, CMS-HCCs and other claims-based regression models are not 
adequate for risk adjustment in condition-based payment models. Rather, 
condition-based payment models must be risk stratified based on the 
clinical characteristics and functional status of patients that are 
most relevant to the types of conditions being managed.
    Some commenters urged CMS to improve the risk-adjustment 
methodology by collaborating with the clinical community and relevant 
medical specialty societies such as the cardiovascular community that 
have experience with the different risks facing patients who will be 
treated within these episode models. Other commenters recommended that 
CMS review risk adjustment methodologies used by other's bundling 
models or to incorporate data from the STS Risk Calculator into the 
risk-adjustment methodology or to use multiple model to better predict 
the cost of care.
    Commenters requested that CMS expand risk-adjustment to other 
provider types or measures factors in addition to the patient alone. 
For example, one commenter expressed concern that CMS has no risk-
adjustment methodology in place for patients' transitions into the 
post-acute and long-term care sector and that many factors contribute 
to cost variation in these milieu are outside of the control of the 
facilities themselves. The commenter requested CMS to clearly define 
risk stratification indices and develop a cost-to-risk algorithm based 
on previous utilization data and incorporating specific, patient 
characteristics, including functional status, age, and frailty, to 
accurately evaluate EPM performance. Another commenter recommended that 
CMS examine whether the CMS-HCC model would be an appropriate way to 
measure the resource use of geriatricians as well as serve as a risk-
adjustment mechanism. Finally, one commenter urged CMS to modify the 
risk-adjustment policy to reflect the relative riskiness of the 
procedures as well as the beneficiary-specific demographic 
characteristics and clinical indicators.
    Response: We appreciate the comment supporting our proposal to 
risk-stratify episode costs based largely on MS-DRGs with additional 
adjustments for scenarios including chained anchor hospitalizations, 
readmissions, and CABG as well as the many comments expressing concerns 
about our proposal, data cited in support of these concerns, requests 
for additional measures to adjust for risk, and suggestions on 
approaches to consider for this purpose. We share commenters' interests 
in ensuring that payments under the models are well aligned with costs 
and adequately recognize cost variation associated with either the 
services provided or beneficiary characteristics so that participants 
are encouraged and able to be successful under the models, which 
includes providing access to high quality care to Medicare 
beneficiaries. In particular, we share commenters' concerns that 
episode payments be more closely aligned with costs when all EPM 
participants will assume downside risk and have their payments 
determined more fully based on regional pricing.
    Based on the comments we received, we are persuaded to explore 
additional measures with which we could adjust EPM episode payments for 
risk to complement our proposals to stratify and adjust episode 
payments based on type and combination of anchor MS-DRGs included in an 
episode. As such, we plan to examine a range of options such as CMS-HCC 
scores, beneficiary factors, clinical factors, pathways including 
planned readmissions after discharge for an acute cardiac event, and 
other measures that potentially further explain variation in costs, 
including socio-demographic factors such availability of primary care 
services. As discussed in section III.D.7.c.(2) of this final rule, CMS 
will also consider and potentially incorporate results from studies 
conducted under the Improving Medicare Post-Acute Care Transformation 
``IMPACT'' Act of 2014 (Pub. L. 113-183) with respect to factors, 
including socio-demographic factors, that could affect resource use 
under Medicare and the EPMs.
    While we are optimistic that we will be able to identify factors 
that explain more variation in episode expenditures than risk 
stratification alone, we acknowledge that no combination of adjustments 
will account for all variation in episode expenditures. Still, we 
intend to proceed with the models and as discussed elsewhere in this 
rule are finalizing other financial protections like an extended period 
of no downside risk (see section III.D. 2.c.), capping high payment 
episodes (see section III.D.3.d.), and more generous stop-loss 
protections for certain hospitals (see III.D.7.c.(1)). We also intend 
to engage with and seek input from stakeholders as we examine this 
range of options prior to rulemaking.
    Our goal is to make our refinements to the pricing methodology to 
reflect risk adjustment effective beginning in PY3, which we would 
establish based on a notice and comment rulemaking process. As such, 
the additional measures would apply to episodes ending on or after 
January 1, 2019 and that had anchor discharges occurring after October 
1, 2018 and thus be in place at the time downside risk is required.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
risk-stratify episodes based on adjustments to recognize the 
combination of MS-DRGs and pathways associated with an episode. We will 
also explore and plan to implement additional adjustments to account 
for risk through rulemaking to be effective in PY3.
(a) Adjustments for Certain AMI Model Episodes With Chained Anchor 
Hospitalizations
    In section III.C.4.a.(5) of the proposed rule, we stated that once 
an AMI model episode is initiated at an AMI model participant, the AMI 
model episode continues under the responsibility of that specific 
participant, regardless of whether the beneficiary is transferred to 
another hospital for further medical management of AMI or 
revascularization through PCI or CABG during a chained anchor 
hospitalization. Given there could be significant differences between 
the discharge MS-DRG from the hospital that initiates the AMI episode 
and the hospital to which a beneficiary is transferred, as well as the 
Medicare payment associated with these different MS-DRGs and the post-
discharge spending for these beneficiaries, we stated that it would be

[[Page 307]]

appropriate to adjust the AMI model-episode benchmark prices for 
certain AMI model episodes involving a chained anchor hospitalization. 
More specifically, we indicated that it would be appropriate to make an 
adjustment when a final hospital discharge MS-DRG in the chained anchor 
hospitalization is an anchor MS-DRG under either the AMI or CABG model. 
Thus, for episodes involving a chained anchor hospitalization with a 
final discharge diagnosis of any of AMI MS-DRG 280-282, PCI MS-DRG 246-
251 without an intracardiac ICD-CM procedure code in any position on 
the inpatient claim, or CABG MS-DRG 231-236, we proposed to set a 
chain-adjusted AMI model-episode benchmark price or ``price MS-DRG'' 
based on the AMI, PCI, or CABG MS-DRG in the chained anchor admission 
with the highest IPPS weight. If a CABG MS-DRG occurred in a chained 
anchor hospitalization that was initiated with an AMI MS-DRG or PCI MS-
DRG without an intracardiac ICD-CM procedure code in any position on 
the corresponding inpatient claim, we proposed that the AMI model 
episode would begin with and be attributed to the first hospital, and 
we proposed to set the price MS-DRG to the CABG MS-DRG in the chained 
anchor hospitalization with the highest IPPS weight.
    If the price MS-DRG was an AMI or PCI MS-DRG, we proposed to set 
the episode benchmark price as the standard AMI model-episode benchmark 
price for the price MS-DRG, subject to a possible adjustment for 
readmission for CABG MS-DRGs, as described in section III.D.4.b.(2)(c) 
of the proposed rule. If the price MS-DRG is a CABG MS-DRG, we proposed 
to set the AMI model-episode benchmark price as the CABG model-episode 
benchmark price for the corresponding CABG MS-DRG, with no further 
adjustment in the event of a readmission for CABG MS-DRGs.
    Table 13 displays the weights for CABG, PCI, and AMI MS-DRGs 
established in the FY 2016 IPPS final rule, which are subject to change 
each FY through the annual IPPS rulemaking (80 FR 49325 through 49886).

                    Table 13--FY 2016 IPPS Weights for MS-DRGS 231-236, 246-251, and 280-282
----------------------------------------------------------------------------------------------------------------
                    MS-DRG                                        MS-DRG title                        Weights
----------------------------------------------------------------------------------------------------------------
231...........................................  CORONARY BYPASS W PTCA W MCC....................          7.8056
232...........................................  CORONARY BYPASS W PTCA W/O MCC..................          5.7779
233...........................................  CORONARY BYPASS W CARDIAC CATH W MCC............          7.3581
234...........................................  CORONARY BYPASS W CARDIAC CATH W/O MCC..........          4.9076
235...........................................  CORONARY BYPASS W/O CARDIAC CATH W MCC..........          5.8103
236...........................................  CORONARY BYPASS W/O CARDIAC CATH W/O MCC........          3.8013
246...........................................  PERC CARDIOVASC PROC W DRUG-ELUTING STENT W MCC           3.2494
                                                 OR 4 + VESSELS/STENTS.
247...........................................  PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O             2.1307
                                                 MCC.
248...........................................  PERC CARDIOVASC PROC W NON-DRUG-ELUTING STENT W           3.0696
                                                 MCC OR 4 + VES/STENTS.
249...........................................  PERC CARDIOVASC PROC W NON-DRUG-ELUTING STENT W/          1.9140
                                                 O MCC.
250...........................................  PERC CARDIOVASC PROC W/O CORONARY ARTERY STENT W          2.6975
                                                 MCC.
251...........................................  PERC CARDIOVASC PROC W/O CORONARY ARTERY STENT W/         1.6863
                                                 O MCC.
280...........................................  ACUTE MYOCARDIAL INFARCTION, DISCHARGED ALIVE W           1.6971
                                                 MCC.
281...........................................  ACUTE MYOCARDIAL INFARCTION, DISCHARGED ALIVE W           1.0232
                                                 CC.
282...........................................  ACUTE MYOCARDIAL INFARCTION, DISCHARGED ALIVE W/          0.7557
                                                 O CC/MCC.
----------------------------------------------------------------------------------------------------------------

    We stated our belief that this proposal could minimize potential 
disincentives to AMI model participants from transferring patients when 
different or higher levels of care are needed. This is because the AMI 
model-episode benchmark prices we set would be more representative of 
the AMI spending based on the totality of care furnished during the 
chained anchor hospitalization and post-discharge period within the AMI 
model episode and for which the AMI model participants would be held 
accountable. We also stated our view that our proposal could encourage 
AMI model participants that frequently transfer patients after 
admission to improve their efficiency and the quality of care by 
transferring beneficiaries needing higher levels of care prior to 
hospital admission and managing those beneficiaries admitted to reduce 
the need for later transfers.
    As an alternative, we also considered an approach where we would 
set the target price taking into consideration IPPS payments for both 
the MS-DRG assigned to the first admission in the chained anchor 
hospitalization and the MS-DRG assigned to the final admission in the 
chained anchor hospitalization. We could apply this approach to all AMI 
model participant hospitals or to only a subset of hospitals based on 
special situations that could lead to more common transfer scenarios 
that are unavoidable, such as small bed-size, rural location, 
interventional or cardiac surgery capacity, or other characteristic of 
the hospitals. All AMI model episodes involving chained anchor 
hospitalizations would include at least two IPPS payments for the 
chained anchor hospitalization, compared to one IPPS payment for most 
AMI episodes with only an anchor hospitalization that does not result 
in an inpatient-to-inpatient transfer. In our view, the alternative 
approach would likely result in a higher AMI-model episode benchmark 
price than under our proposal for AMI model episodes including a 
chained anchor hospitalization. Therefore, we noted that this 
alternative approach could have the effect of further reducing 
potential disincentives to hospitals from transferring patients when 
different or a higher level of care is needed; however, we were not 
convinced this approach would ultimately improve care quality and 
efficiency under the AMI model.
    First, we were concerned that this alternative approach could serve 
as an incentive for hospitals to admit and then transfer patients when 
doing so might not be medically necessary, which would neither enhance 
care quality nor efficiency. A recent study showed that non-procedure 
hospitals, defined as hospitals that lack onsite cardiac 
catheterization and coronary revascularization facilities, vary 
substantially in their use of the transfer process for Medicare 
beneficiaries admitted with AMI.\79\ Beneficiaries

[[Page 308]]

transferred from hospitals that had a high transfer rate experienced 
greater use of invasive cardiac procedures after admission to the 
transfer hospital than beneficiaries transferred from hospitals with a 
low transfer rate. However, higher transfer rates were not associated 
with a significantly lower risk-standardized mortality rate at 30 days, 
and at one year, there was only a 1.1 percent mortality rate difference 
between hospitals with higher and lower transfer rates. As such, we 
believed this alternative approach could be appropriate for only a 
subset of AMI model participant hospitals based on specific hospital 
characteristics that could lead to a higher frequency of unavoidable 
transfers for AMI model beneficiaries rather than appropriate for 
hospitals overall. In addition, if we were to adopt this alternative 
approach, we believed it would also be necessary to incorporate methods 
for monitoring changes in the frequency of AMI model participant 
hospital patient transfers over the model's performance years, as well 
as assessing the appropriateness of those transfers. For example, to 
address changes in transfer frequency, we might compare how often an 
AMI model participant hospital transferred a beneficiary following an 
inpatient admission within each performance year relative to the 
frequency of transfers during its initial 3-year historical period. To 
address appropriateness of transfers, we might consider reviewing and 
comparing a sample of a hospital's transfers within a performance year 
as compared to the historical period. Furthermore, we might also 
propose future changes to this approach where changes in the frequency 
or appropriateness of transfers were identified.
---------------------------------------------------------------------------

    \79\ Barreto-Filho J, Wang Y, Rathore SS, et al. Transfer Rates 
From Nonprocedure Hospitals After Initial Admission and Outcomes 
Among Elderly Patients With Acute Myocardial Infarction. JAMA Intern 
Med. 2014;174(2):213-222. doi:10.1001/jamainternmed.2013.11944.
---------------------------------------------------------------------------

    Second, in contrast to our proposal, we believed that this 
alternative approach would not have the benefit of encouraging AMI 
model participant hospitals to make an early decision and transfer 
patients prior to rather than following inpatient admission when doing 
so prior to admission would be appropriate for the beneficiary's 
clinical circumstances and the hospital's capabilities. While we 
recognized that in some cases, an AMI model beneficiary admitted to the 
initial treating hospital may need to be transferred to a referral 
hospital that can provide a different or higher level of care, we noted 
our belief it is important that the AMI model's payment methodology 
support the goal of rapid decision-making by the AMI model participant 
hospital about the AMI model beneficiary's care pathway based on 
clinical guidelines that often incorporate a time dimension in the 
guidelines for care.
    Thus, on balance, we believed that our proposed methodology would 
best establish appropriate incentives to improve care quality and 
efficiency under the AMI model by encouraging timely decisions about 
admission to the initial treating hospital and incentivizing only those 
transfers that are necessary to meet AMI model beneficiary's health 
care during the course of their hospitalization. Our proposal would 
adjust the AMI model-episode benchmark price that applies to the 
episode when a chained anchor hospitalization occurs and results in 
more costly care at the transfer hospital than would be expected based 
on the anchor MS-DRG at the initial treating hospital who would be 
accountable for the episode under the AMI model, thus accounting for 
the care at the referral hospital.
    In contrast, some chained anchor hospitalizations could begin an 
episode based on an MS-DRG that anchors an episode in the model such as 
an AMI MS-DRGs that subsequently also includes an MS-DRG that does not 
anchor an episode under the model (for example, heart failure, renal 
failure, or cardiac valve replacement). Some of these non-anchor MS-
DRGs could be related to the AMI episode but are unavoidable, for 
example, cardiac valve surgery, while others could potentially reflect 
complications resulting from inadequate care management during the 
episode (for example, heart or renal failure).
    As discussed in section III.C.4.b. of the proposed rule, we 
proposed to cancel an AMI model episode when the final MS-DRG in a 
chained anchor hospitalization is from an MS-DRG that would not an 
anchor MS-DRG under the AMI or CABG model. We believed that, in tandem, 
these proposals would allow for appropriate pricing of AMI model 
episodes that continue and include chained anchor hospitalizations.
    The proposals to establish pricing for AMI model episodes involving 
chained anchor hospitalizations were included in Sec.  
512.300(c)(7)(i). We sought comment on our proposals for pricing AMI 
episodes involving chained anchor hospitalizations and the alternative 
proposals we considered. We also sought comment on the alternative 
considered that would account for both the MS-DRGs at the first and 
last hospitals caring for the AMI model beneficiary during the chained 
anchor hospitalization in setting the AMI-model episode benchmark price 
for episodes involving a chained anchor hospitalization. In particular, 
under such an alternative, we sought comment on the clinical 
circumstances in which inpatient-to-inpatient transfers are unavoidable 
and whether or not there are hospital characteristics that would lead 
us to expect higher frequencies of unavoidable inpatient-to-inpatient 
transfers for AMI model beneficiaries than hospitals overall. We also 
sought comment on how we could discourage unintended consequences under 
this alternative, such as less timely decisions about the most 
appropriate hospital to treat the beneficiary and increased beneficiary 
transfers that are unnecessary or inappropriate for improved quality of 
AMI model episode care.
    The following is a summary of the comments received and our 
responses.
    Comment: As discussed earlier in Section III.C.4.a. of this final 
rule, many commenters expressed concerns and opposed the proposal that 
once an AMI model episode is initiated at an AMI model participant, the 
AMI model episode continues under the responsibility of that specific 
participant, regardless of whether the beneficiary is transferred to 
another hospital for further medical management of AMI or 
revascularization through PCI or CABG during a chained anchor 
hospitalization. Similarly, many commenters expressed concerns with 
respect to the pricing of episodes in the case of these chained anchor 
hospitalizations that generally paralleled the comments discussed in 
section III.C.4.a. of this final rule.
    Response: As discussed in section III.C.4.a., we were persuaded by 
commenters to not finalize our proposal that once an AMI model episode 
is initiated at an AMI model participant, the AMI model episode would 
continue under the responsibility of that specific participant when a 
beneficiary is transferred to another hospital for further medical 
management of AMI or revascularization through PCI or CABG during a 
chained anchor hospitalization. Instead, we are finalizing a policy 
that for an episode involving an inpatient-to-inpatient transfer, the 
episode would be attributed to the transfer hospital rather than the 
initial hospital.
    Accordingly, we are also not finalizing our proposed pricing 
methodology for these episodes, which would have set a chain-adjusted 
AMI model-episode benchmark price or ``price MS-DRG'' based on the AMI, 
PCI, or CABG MS-DRG in the chained-

[[Page 309]]

anchor admission with the highest IPPS weight. Instead, we are 
finalizing a policy where an episode's price will be determined only by 
the anchor MS-DRG for the AMI or CABG model episode as determined by 
the transfer hospital in the same manner as we would for any other AMI 
episode that does not involve a transfer.
    Since we are not finalizing our original proposal, we also will not 
be finalizing the terms ``chained anchor hospitalization'' or ``price 
MS-DRG'' as all episodes under the model will be priced based on their 
assigned anchor MS-DRG. Accordingly, we will be deleting these terms 
from our proposed regulations.
    Final Decision: After consideration of the public comments 
received, we are not finalizing the proposal to make payment 
adjustments for AMI episodes involving a chained anchor 
hospitalization, but will instead attribute the episode to the final 
hospital and calculate prices for these episodes based on the anchor 
MS-DRG for that episode determined by the transfer hospital. As such, 
we are replacing the term ``price MS-DRG'' with ``MS-DRG'' and deleting 
references to ``chained-anchor hospitalizations.'' Also as discussed in 
section III.C.4.a.(5) of this final rule, given our concerns about the 
potential missed opportunities and unintended consequences due to the 
final AMI model transfer episode initiation and attribution policy, we 
will be examining AMI transfers to and from AMI model participants very 
closely through our monitoring and evaluation activities as discussed 
in sections III.G.4. through 6. and IV. of this final rule, both of 
beneficiaries that ultimately are included in AMI episodes and those 
that are not. We may revisit the transfer policy or propose payment 
adjustments through future rulemaking if we see reduced AMI transfer 
efficiency, opportunities to increase transfer efficiency, 
disproportionate transfers of complex AMI beneficiaries or those with 
potentially avoidable complications suggesting that AMI model 
participants are engaging in adverse patient selection or providing 
poor quality care, inordinate loss of beneficiaries from the AMI model 
due to transfer outside of the MSAs where the AMI and CABG models are 
being tested, or other patterns of concern.
(b) Adjustments for CABG Model Episodes
    Among Medicare beneficiaries historically discharged under a CABG 
MS-DRG, average episode spending was substantially higher for those 
beneficiaries who also had AMI ICD-CM diagnosis codes on their 
inpatient claims ($57,000) than those who did not ($44,000).\80\ About 
30 percent of CABG beneficiaries had AMI ICD-CM diagnosis codes on 
their claims, while about 70 percent did not, and this percentage of 
CABG beneficiaries with AMI varied substantially across IPPS hospitals 
furnishing CABG procedures.\81\ While average spending, in total, was 
substantially higher for CABG beneficiaries with AMI than without AMI, 
average spending during the anchor hospitalization was not 
substantially higher. Rather, much of this variation in CABG model 
episode spending occurred after discharge from the anchor 
hospitalization and correlated both with the presence of AMI and 
whether the CABG beneficiary was discharged from the anchor 
hospitalization in a CABG MS-DRG with major complication or comorbidity 
(MS-DRGs 231, 233, or 235) as opposed to a CABG MS-DRG without major 
complication or comorbidity (MS-DRGs 232, 234, or 236). Specifically, 
we found that average CABG episode spending after discharge from the 
anchor hospitalization was--
---------------------------------------------------------------------------

    \80\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, that began in CYs 2012-
2014.
    \81\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, that began in CYs 2012-
2014.
---------------------------------------------------------------------------

     $9,000 for non-AMI CABG beneficiaries discharged from MS-
DRGs 232, 234, or 236;
     $11,000 for CABG beneficiaries with AMI discharged from 
MS-DRGs 232, 234, or 236;
     $16,000 for non-AMI CABG beneficiaries discharged from MS-
DRGs 231, 233, or 235; and
     $20,000 for CABG beneficiaries with AMI discharged from 
MS-DRGs 231, 233, or 235.\82\
---------------------------------------------------------------------------

    \82\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule that began in CYs 2012-
2014.
---------------------------------------------------------------------------

    Thus, for CABG model episodes, we proposed to set CABG model-
episode benchmark prices by first splitting historical CABG model-
episode expenditures into expenditures that occurred during anchor 
hospitalizations and expenditures that occurred after discharge from 
the anchor hospitalizations.
    We proposed to calculate the CABG anchor hospitalization benchmark 
price by following the general payment methodology that was applied to 
the CJR model (80 FR 73337 through 73358), with expenditures limited to 
those that occurred during the anchor hospitalization and risk 
stratification according to the price CABG MS-DRG.
    We also proposed to calculate the CABG post-anchor hospitalization 
benchmark price by following the general payment methodology that was 
applied to the CJR model (80 FR 73337 through 73358), with expenditures 
limited to those that occurred after the anchor hospitalization and 
risk-stratification according to the presence of an AMI ICD-CM 
diagnosis code on the anchor inpatient claim and whether the price MS-
DRG is a CABG MS-DRG with major complication or comorbidity (231, 233, 
or 235) or a CABG MS-DRG without major complication or comorbidity 
(232, 234, or 236).
    We proposed that the CABG model-episode benchmark price for an 
episode would be the sum of the corresponding CABG anchor 
hospitalization benchmark price and the corresponding CABG post-anchor 
hospitalization benchmark price, as discussed in this section and in 
III.D.4.d. of the proposed rule.
    The proposals to establish pricing for CABG model episodes were 
included in Sec.  512.300(c)(7)(ii). We sought comment on our proposals 
to establish pricing for CABG model episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenters suggested that CMS create a separate target 
price for CABG episodes where a patient has a previous history of CABG.
    Response: We appreciate the commenter's suggestion, but believe the 
existing MS-DRGs that apply under the IPPS, which similarly do not 
distinguish CABG MS-DRG discharges based on whether or not a 
beneficiary had a previous history of CABG, our proposed pricing 
adjustments for CABG episodes, and additional risk-adjustments that we 
anticipate will be effective in PY3 should appropriately recognize the 
potential costs for beneficiaries within CABG episodes whether or not 
they had a previous history of CABG.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
establish pricing for CABG model episodes. Our final policy for 
establishing CABG model episodes is included in Sec.  512.300(c)(7)(i).
(c) Adjustments for Certain AMI Model Episodes With CABG Readmissions
    In section III.C.4.b of the proposed rule, we discussed AMI model 
episodes where a beneficiary is discharged from an AMI model 
participant under an AMI

[[Page 310]]

MS-DRG and is later readmitted for a CABG. In that section, we did not 
propose to cancel the AMI model episode altogether for a CABG 
readmission during the 90-day post-hospital discharge period or cancel 
the AMI model episode and initiate a CABG model episode because planned 
CABG readmission following an anchor hospitalization that initiates an 
AMI episode may be an appropriate clinical pathway for certain 
beneficiaries. For example, we noted that historically approximately 10 
percent of those AMI beneficiaries who received CABGs during AMI 
episodes would receive the CABG between 2 and 90 days post-discharge 
from the anchor hospitalization, and most of those readmissions did not 
occur through hospital emergency departments. Even though CABG 
readmissions are not excluded from AMI model episodes (because they are 
clinically-related to the AMI model episode), we proposed to provide an 
adjusted AMI model-episode benchmark price in such circumstances so as 
not to financially penalize AMI model participants for relatively 
uncommon, costly, clinically-appropriate care patterns for AMI model 
beneficiaries. Accordingly, we proposed to establish an adjusted CABG-
readmission AMI model-benchmark episode price for AMI model episodes 
with a price MS-DRG of 280-282 or 246-251 that have readmission for a 
CABG MS-DRG 231-236.
    Specifically, if a CABG readmission occurs during an AMI model 
episode with a price MS-DRG of 280-282 or 246-251, we proposed to 
calculate a CABG-readmission AMI model-episode benchmark price equal to 
the sum of the standard AMI model-episode benchmark price corresponding 
to the price MS-DRG (AMI MS-DRGs 280-282 or PCI MS-DRGs 246-251) and 
the CABG anchor hospitalization benchmark price corresponding to the 
MS-DRG of the CABG readmission. Because the adjustment would be based 
on the anchor hospitalization benchmark price, which does not include 
costs associated with the post-discharge period for CABG, this 
adjustment approach would avoid ``double counting'' post-discharge 
costs. Because adjusting for spending that occurred during a CABG 
readmission accounts for most of the spending variation between AMI 
model episodes with a CABG readmission and AMI model episodes without a 
CABG readmission, we proposed no additional adjustment to the price for 
AMI model episodes with a CABG readmission.
    In the event of any other readmission other than CABG during an AMI 
model episode that is not excluded from the AMI model episode 
definition, we would apply the usual rules of EPM-episode pricing that 
would include the spending for the related readmission in the actual 
AMI model-episode spending, without other adjustments. Fewer than 3 
percent of those AMI model beneficiaries who receive inpatient or 
outpatient PCIs during AMI episodes receive the PCIs between 2 and 90 
days post-discharge from the anchor or chained anchor hospitalizations, 
and we did not propose to make a pricing adjustment for PCIs that occur 
later in the AMI model episodes after discharge from the anchor or 
chained anchor hospitalizations. Since a PCI for an AMI typically is 
provided during the anchor or chained anchor hospitalization and most 
PCIs later in an episode occur in the context of a beneficiary 
presenting through the emergency department, we believe that the 
beneficiary likely has experienced a complication of care resulting in 
a PCI that may potentially be avoided through care management during 
the AMI model episode. Given that our intention is to offer appropriate 
incentives for care quality and efficiency by holding AMI model 
participants accountable for readmissions that could be related to the 
quality of care provided prior to the readmission, we believe that an 
adjustment other than for a CABG readmission would not be appropriate.
    The proposal for adjusting episodes involving CABG readmissions was 
included in Sec.  512.300(c)(7)(iii). We sought comment on our proposal 
for adjusting episodes involving CABG readmissions.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concerns about the proposal 
for adjusting episodes involving CABG readmissions--specifically, that 
the proposal does not sufficiently account for the increased post-acute 
care that a beneficiary typically receives after a CABG, but which they 
would not receive after only an AMI. One of the commenters presented 
data supporting their concern suggesting that post-discharge spending 
for certain MS-DRGs with a CABG readmission was substantially higher 
than for those same MS-DRGs without a CABG readmission. The commenters 
requested that CMS modify the methodology to account for the increased 
post-acute care that a beneficiary typically receives after a CABG.
    Response: We appreciate the concerns raised by the commenters and 
have conducted further analysis of our proposal with respect to how 
well our proposal would account for post-acute care costs for AMI 
episodes involving CABG readmissions. While we agree that spending 
after discharge from the anchor stay for AMI episodes with CABG 
readmissions is substantially higher than for episodes without these 
readmissions, we disagree with suggestions that our proposal 
inadequately adjusts for these differences. Rather, based on our 
analysis, on average, the proposed adjustments account for the 
overwhelming majority of additional spending that occurs in AMI 
episodes with CABG readmissions relative to episodes without CABG 
readmissions. Additionally, the number of episodes for many of the 
affected MS-DRGs is relatively small, which we believe would impede our 
ability to establish reliable prices that would be an improvement over 
our current proposal in terms of payment accuracy. Accordingly, we are 
not persuaded to modify our proposal.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
adjust episodes with CABG readmissions. Our final policy for adjusting 
episodes with CABG readmissions is included in Sec.  512.300(c)(7)(ii).
(d) Potential Future Approaches To Setting Target Prices for AMI and 
Hip Fracture Episodes
    As previously described, our proposed approach for pricing AMI and 
CABG model episodes for beneficiaries with AMI set different episode 
target prices depending upon whether the beneficiary is managed 
medically, undergoes PCI, or undergoes CABG during the acute phase of 
the episode, as well as whether the episode involved a chained anchor 
hospitalization or CABG readmission. Similarly, the target price set 
for beneficiaries experiencing hip fracture would depend on whether the 
patient undergoes hip fixation (and therefore initiates a SHFFT model 
episode) or hip arthroplasty (and therefore initiates a CJR model 
episode). We believed that this would be a prudent approach that both 
recognizes the resource costs of services provided while encouraging 
care redesign during the portions of these episodes that we believe 
present the greatest opportunities to improve the quality and 
efficiency of the care delivered. However, we noted that the general 
principle guiding our payment reform efforts is that the payment system 
should hold providers accountable for the overall quality and cost of 
the care their beneficiaries receive rather than

[[Page 311]]

setting their payment based on the specific services delivered or 
settings in which they are delivered. We indicated that this approach 
would give providers maximum flexibility to redesign care in ways that 
both produce the best outcomes for patients and controls the growth in 
spending for these services.
    For this reason, we expressed interest in exploring future 
approaches to episode payment that would set an inclusive target price 
for episodes for beneficiaries with AMI that does not depend on whether 
the beneficiary is managed medically or receives PCI or CABG during the 
acute portion of the episode and, similarly, future approaches that 
would set prices for episodes for beneficiaries with hip fracture that 
do not depend on whether the beneficiary undergoes hip fixation or hip 
arthroplasty. While we believe that the choice of treatment during the 
acute phase of these episodes may be determined predominantly by 
clinical factors such that financial factors may play a smaller role in 
shaping episode care redesign than they do following hospital 
discharge, we nevertheless believe it would be valuable to consider 
testing an inclusive episode payment model. Providers may be able to 
redesign and implement care pathways that we might not have otherwise 
anticipated, especially as the evidence-base for AMI and hip fracture 
treatment continues to grow and evolve.
    We sought comment on this type of approach to setting an inclusive 
episode target price and on any episode payment model design features 
that would be needed to make such an approach successful. In 
particular, we sought comment on potential approaches to risk-
adjustment aimed at ensuring that providers are appropriately paid for 
caring for high-complexity episode beneficiaries in the context of this 
alternative approach. We would seek to ensure that all providers caring 
for these episode beneficiaries, including those providers for which we 
proposed additional protections and those that serve a high percentage 
of potentially vulnerable populations of medically and socially complex 
patients as discussed in section III.D.7.c. of the proposed rule, would 
not bear undue financial risk and to mitigate any incentives to avoid 
caring for high-complexity patients. In addition, we sought comment on 
whether and how our methodology linking quality performance to payment 
under the EPMs and the CJR model might need to be modified in the 
context of this alternative approach that would set an inclusive 
episode target price, in order to appropriately incentivize the 
delivery of high-quality care and discourage stinting on appropriate 
care.
    The following is a summary of the comments received and our 
responses. The comments we received typically recommended that we 
consider either population-based models or capitated models, which we 
have addressed in section III.D.2.b. of this final rule; however, we 
are providing some specific examples that were recommended in the 
following comments.
    Comment: A commenter recommended that we consider a population-
based model that was tied to an ``event'' such as a beneficiary's 
initial Medicare enrollment in a selected geographic area such as a 
county or MSA; however, we should exclude Medicare Advantage enrollees 
or enrollees participating in other Medicare payment reform efforts. 
The model would include multiple quality measures reflecting both a 
clinical perspective and a beneficiary perspective. The model could 
include two tracks: Full financial accountability and partial financial 
accountability. Under the first track, we would pay participating 
providers a monthly, all-inclusive, beneficiary-risk-adjusted premium 
based on regional historical expenditures and the provider would assume 
full risk for all Part A and Part B expenditures. Under the partial 
financial accountability track, we would continue to provide the plan 
administration (allowing provider organizations without claims-payment 
and risk-assumption capabilities the opportunity to participate). Model 
participants would receive a monthly, beneficiary-risk-adjusted target 
budget for Medicare Part A and Part B services and their actual 
expenditures would be compared against their target budget at the end 
of each year for reconciliation. If costs exceeded the target, then the 
participant would repay CMS an agreed upon amount. If costs were below 
the target, then CMS would pay the participant an agreed upon amount. 
Both tracks could be eligible for Advanced APM designation under the 
Quality Payment Program, if they had a certified Electronic Health 
Record technology requirement for participants.
    Another commenter, who had suggested that CMS adopt a model 
including prospective negotiated rates rather than retrospective 
reconciliation of fee-for-service claims, suggested that a capitated 
model would allow providers to experiment with services, in addition to 
telehealth consultations, that do not generate a fee-for-service claim. 
In their view, hospitals and surgeons have more opportunity to innovate 
in how they deploy professional staff, choose technology, and engage 
with outpatient and home-based services when they have full flexibility 
within a budgeted payment amount, and would encourage collaboration 
between all clinicians involved in patient care as well as provide 
predictable pricing. Also, the commenter believes that using 
prospectively determined negotiated rates or competitive bids would 
result in a more rapid transformation in cost and resource use. In 
their view, using target prices based on a provider's historical costs 
or the region's average costs is inconsistent with the goal of 
implementing innovative payment models. Moreover, current practice 
patterns should not be used to set a total cost for care, given the 
unnecessary care, excessive costs and cost variations that result from 
this payment approach. As such, this commenter recommend that providers 
competitively bid their episode price to encourage competition among 
providers to achieve the best outcomes for the lowest cost.
    A commenter recommended that CMS design EPMs that would allow 
providers two options; specifically to (1) organize themselves in the 
manner most efficient to accept a prospective bundled payment from 
Medicare, and allocate it among the participating providers or (2) if 
other providers find it easier to continue billing under current 
payment systems, then retrospectively reconcile those payments against 
a prospectively defined budget. In this commenter's view, jointly-
governed teams should have the flexibility to determine which 
organizational approach and retrospective or prospectively-determined 
payment model best works for their particular circumstances.
    Another commenter suggested that CMS consider a model that pays 
specialists for management of specific conditions and combinations of 
conditions using the same payment model concepts being used with 
primary care physicians in the Comprehensive Primary Care Plus 
initiative. Under this model, CMS should focus accountability on 
services directly related to the condition, rather than total spending 
on all of the patients' health care needs and for which the physician 
may be unable to control. Further, the model would encourage the use of 
physician-defined patient condition categories to ensure effective risk 
stratification in condition-based payment models. These models would be 
risk stratified based on the clinical characteristics and functional 
status of patients that are most relevant to the types of conditions 
being

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managed. Patients could designate the physician who would be managing 
care for their condition(s) but would be required to use the team of 
providers chosen by that physician for delivery of services related to 
the condition(s). Further, target spending amounts would be set for 
condition-based payments and episode payments prior to the beginning of 
the performance period. Finally, physicians and other providers could 
be for high-value services that are not currently billable as part of 
condition-based and episode-based payment models that use retrospective 
reconciliation.
    Another commenter noted that while not recommending a specific 
framework, CMS should consider additional geographic-based models that 
include other costly procedures that vary in total episode costs, for 
example, spine surgery.
    Response: We appreciate the comments and suggestions that were 
offered and that while not adopting these suggestions for these models, 
we will take them into consideration as we explore similar models in 
the future.
(e) Summary of Final Pricing Methodologies for AMI, CABG, and SHFFT 
Model Episode Scenarios
    Tables 14 through 16 summarize our final standard pricing 
methodologies and the adjustments that will occur that are in sections 
III.D.4.b.(1) and (2) of this final rule for AMI, CABG, and SHFFT model 
episodes.

                  Table 14--AMI Model Pricing Scenarios
------------------------------------------------------------------------
          AMI pricing scenario                        Price
------------------------------------------------------------------------
Single hospital AMI MS-DRG or PCI MS-    Episode benchmark price is
 DRG (with AMI diagnosis).                standard episode benchmark
                                          price based on anchor MS-DRG.
An AMI MS-DRG or PCI MS-DRG (with AMI    Episode benchmark price is the
 diagnosis) anchored episode with CABG    sum of the standard episode
 readmission.                             benchmark price corresponding
                                          to the anchor MS-DRG and the
                                          CABG anchor hospitalization
                                          benchmark price corresponding
                                          to the CABG readmission MS-
                                          DRG.
------------------------------------------------------------------------


                 Table 15--CABG Model Pricing Scenarios
------------------------------------------------------------------------
         CABG pricing scenario                        Price
------------------------------------------------------------------------
Single hospital CABG MS-DRG with AMI     Episode benchmark price is the
 diagnosis.                               sum of the CABG anchor
                                          hospitalization benchmark
                                          price for the MS-DRG and the
                                          CABG post-anchor
                                          hospitalization benchmark
                                          price based on the presence of
                                          an AMI ICD-CM diagnosis code
                                          and whether the anchor MS-DRG
                                          is w/MCC or w/o MCC.
Single hospital CABG MS-DRG without AMI  Episode benchmark price is the
 diagnosis.                               sum of the CABG anchor
                                          hospitalization benchmark
                                          price for the MS-DRG and the
                                          CABG post-anchor
                                          hospitalization benchmark
                                          price based on no AMI ICD-CM
                                          diagnosis code and whether the
                                          anchor MS-DRG is w/MCC or w/o
                                          MCC.
------------------------------------------------------------------------


                 Table 16--SHFFT Model Pricing Scenarios
------------------------------------------------------------------------
         SHFFT pricing scenario                       Price
------------------------------------------------------------------------
SHFFT MS-DRG...........................  Episode benchmark price is
                                          standard episode benchmark
                                          price based on anchor MS-DRG
                                          (which is the price MS-DRG).
------------------------------------------------------------------------

(3) Three Years of Historical Data
    As was the case for the CJR model (80 FR 73340 through 73341), we 
proposed to use 3 years of historical EPM episodes for calculating EPM 
participants' EPM-episode benchmark prices, with each set of historical 
episodes updated every other year (81 FR 50854). Under our proposal, 
each of the first 2 years of historical data would be trended to the 
most recent of the 3 years, based on national trend factors for each 
combination of price MS-DRGs and payments would be updated for each 
payment system (for example, IPPS, PFS, etc.) based on annual changes 
in input costs (see sections III.D.4.b (4) and III.D.4.b (5) of the 
proposed rule). Under our proposal, we would establish historical EPM-
episode payments based on episodes that started between--
     January 1, 2013 and December 31, 2015 for performance 
years 1 and 2;
     January 1, 2015 and December 31, 2017 for performance 
years 3 and 4; and
     January 1, 2017 and December 31, 2019 for performance year 
5.
    We believe that 3 years of historical EPM-episode data should 
provide sufficient historical episode volume to reliably calculate EPM-
episode benchmark prices, and that updating these data every other year 
would allow us to make the most current claims data available in a way 
that incorporates the effects of regular Medicare payment system 
updates and changes in utilization without creating uncertainty in 
pricing for EPM participants. We would further note that the effects of 
updating EPM-participant hospital-specific data on an EPM-episode's 
benchmark prices would diminish over time as the contribution of 
regional pricing on EPM benchmark prices will increase from one-third 
for performance years 1 and 2 to two-thirds in performance year 3, and 
100 percent in performance years 4 and 5.
    The proposal for 3 years of historical data updated every other 
year under the EPMs was included in Sec.  512.300(c)(1).
    We sought comment on our proposal for 3 years of historical data 
updated every other year.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters requested that CMS apply more trend data 
than the 3 years we proposed. A commenter expressed concern that in the 
absence of several years of historical data, target setting would not 
fully reflect case mix and behavior changes in addition to historical 
claims patterns.

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Further, an impact of a focus on short-term costs may be a shift away 
from new technologies proven to improve outcomes and reduce costs. 
Another commenter requested an additional 2 years of trend data for 
Program Year 1, to bring the data up from 2015 to the 2017 program 
level and another 3 years of trend data to bring the 2015 claims up to 
the 2018 level. A commenter requested that the process be open and 
transparent so as to insure that all impacted collaborators are given 
the information and opportunity to comment and adjust.
    Response: We continue to believe our proposed period for 3 years of 
historical data updated every other year is appropriate for the models. 
We disagree that including additional years of data beyond those we 
proposed would be necessary or helpful. Instead, rather than improving 
our historical data, the request for additional years of data could 
result in more heterogeneous historical data that is less reflective of 
a participant's most recent performance.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to use 3 
years of historical EPM episodes for calculating EPM participants' EPM-
episode benchmark prices, with each set of historical episodes updated 
every other year. The final policy for using 3 years of historical EPM 
episodes for calculating benchmark prices is included in Sec.  
512.300(c)(1).
(4) Trending Historical Data to the Most Recent Year
    We recognize that some payment variation could exist in the 3 years 
of historical EPM-episode data due to annual Medicare payment system 
updates (for example, IPPS, OPPS, IRF PPS, SNF PPS) and national 
changes in utilization patterns. Thus, EPM episodes in the third year 
of the 3 historical years might have higher average payments than those 
from the earlier 2 years, in part due to Medicare payment rate 
increases over the course of the 3-year period. Also, EPM-episode 
payments could change over time due to national trends reflecting 
changes in industry-wide practice patterns. For example, readmissions 
for all patients, including those in CABG model episodes, may decrease 
nationally due to improved industry-wide surgical protocols that reduce 
the chance of infections. We do not intend for the incentives under the 
EPMs to be affected by Medicare payment system rate changes that are 
beyond EPM participants' control or to provide reconciliation payments 
to (or require repayments from) EPM participants for achieving lower 
(or higher) Medicare expenditures solely because they followed national 
changes in practice patterns. Instead, we aim to incentivize EPM 
participants to improve care quality and efficiency based on their 
hospital-specific inpatient and post-discharge care practices under the 
EPMs.
    To mitigate the effects of Medicare payment system updates and 
changes in national utilization practice patterns on the 3 years of 
historical episode data, we proposed to apply a national trend factor 
to each of the years of historical EPM-episode payments (81 FR 50855) 
as we do with the CJR model (80 FR 73341 through 73342). Specifically, 
we proposed to inflate the 2 oldest years of historical EPM-episode 
payments for EPM episodes to the most recent year of the 3 historical 
years using changes in the national EPM-episode payments for each 
different type of EPM episode. That is, we proposed to apply separate 
national trend factors for the following pricing scenarios:
     SHFFT model episodes, separately by each price MS-DRG in 
480-482.
     AMI model episodes without CABG readmissions, separately 
by each price MS-DRG in 280-282 and 246-251; and
     The anchor hospitalization portion of CABG model episodes, 
separately by each price MS-DRG in 231-236.
     The post-anchor hospitalization portion of CABG model 
episodes, separately for:
    ++ With AMI ICD-CM diagnosis code on the anchor inpatient claim and 
CABG price MS-DRG with major complication or comorbidity (231, 233, or 
235);
    ++ With AMI ICD-CM diagnosis code on the anchor inpatient claim and 
CABG price MS-DRG without major complication or comorbidity (232, 234, 
or 236);
    ++ Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235); and
    ++ Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    For example, when using Calendar Year (CY) 2013 through 2015 
historical EPM-episode data to establish EPM-episode benchmark prices 
for performance years 1 and 2, we would calculate an aggregate national 
average SHFFT model episode payment in historical episodes with price 
MS-DRG 480 for each of the 3 historical years. To trend historical 
payments to the most recent year in an historical window, we would 
create a ratio based on national average historical EPM-episode payment 
for that episode type in a previous year and for the most recent year. 
Thus, in this example, we would create a ratio of national average 
SHFFT model historical episode payment with price MS-DRG 480 in CY 2015 
as compared to that national average SHFFT model historical episode 
payment in CY 2013 in order to trend the CY 2013 historical SHFFT model 
episode payments to CY 2015. Similarly, we would determine the ratio of 
the national average SHFFT model historical episode payment for CY 2015 
to national average SHFFT model historical episode payment in CY 2014 
to trend 2014 SHFFT model episode payments to CY 2015. This process 
would be repeated for each pricing scenario previously listed.
    We noted our belief that this method for trending data would 
capture updates in Medicare payment systems as well as national 
utilization pattern changes that might have occurred within that 3-year 
period. Moreover, as with the CJR model, we believed that adjusting for 
national rather than regional trends in utilization would be most 
appropriate as any Medicare payment system updates and significant 
changes in utilization practice patterns would not be region-specific 
but rather be reflected nationally.
    The proposal for trending historical data was included in Sec.  
512.300(c) (11). We sought comment on our proposal for trending 
historical data.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters addressed the use and trending of 
historical data. A commenter expressed their general agreement with the 
proposed trending methodology, but recommended that CMS update prices 
every other year rather than annually to limit the extent that 
participants would face increasingly more difficult targets. Another 
commenter recommended that CMS trend the initial 3 years of historical 
data for the full five years of the models. A commenter suggested that 
CMS apply more trend data to each performance year and expressed 
concerns that while CMS would trend data to the end of the benchmark 3-
year period, CMS would not be trending data from the end of the 
benchmark period to match the time period for which the prices will be 
applied to pay providers.
    Response: We appreciate the comments we received on our proposal to 
trend data and would like to clarify that their application would be on 
a semi-annual basis when we update target prices rather than annually. 
We disagree with the suggestion to apply

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the 3 initial years of trend data to all five performance years as our 
intention is to establish target prices for the models using more 
recent performance data so as to maintain incentives for participants 
to continuously improve. Similarly, we disagree with the suggestion to 
expand the number of years used to trend data or to permanently relate 
trend data for a given performance year to those data for the initial 
3-year benchmark period as doing so would result in data that are less 
representative of a participant's most recent performance.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
trend data. Our final policy for trending data is included in Sec.  
512.300(c) (11).
(5) Update Historical EPM-Episode Payments To Account for Ongoing 
Payment System Updates
    As previously mentioned, we proposed to prospectively update the 
historical EPM- episode payments to account for ongoing updates to 
Medicare payment systems (for example, IPPS, OPPS, IRF PPS, SNF, PFS, 
etc.) in order to ensure we incentivize EPM participants based on 
historical utilization and practice patterns, not Medicare payment 
system rate changes that are beyond hospitals' control. Under our 
proposal (81 FR 50855), we would apply the same methodology developed 
for the CJR model to incorporate Medicare payment updates (80 FR 73342 
through 73446).
    Because Medicare payment systems rates are not updated at the same 
time during the year--for example, rates under the IPPS, IRF PPS, and 
SNF payment systems are updated effective October 1, while the hospital 
OPPS and MPFS rates are updated annually effective January 1--we 
proposed to generally update historical EPM-episode payments and 
calculate EPM-episode benchmark prices separately for EPM episodes 
initiated between January 1 and September 30 versus October 1 and 
December 31 of each performance year, and at other intervals if 
determined necessary. The EPM-episode benchmark price in effect as of 
the day the EPM episode is initiated would be the EPM-episode benchmark 
price for the whole EPM episode. Note that for performance year 5, the 
second set of EPM-episode benchmark prices would be for EPM episodes 
that start and end between and including October 1 and December 31 
because the fifth performance period of the SHFFT, CABG, and AMI models 
would end on December 31, 2021. Also, an EPM episode benchmark price 
for a given EPM performance year could be applied to EPM episodes 
included in another performance year. For example, an EPM episode 
initiated in November 2017, and ending in February 2018 would have an 
EPM-episode benchmark price based on the second set of 2017 EPM-episode 
benchmark prices (for EPM episodes initiated between October 1, 2017, 
and December 31, 2017), and it would be captured in the CY 2018 EPM 
performance year (performance year 2) because it ended between January 
1, 2018, and December 31, 2018. We refer to section III.D.2.a. of this 
final rule for further discussion on the definition of EPM performance 
years.
    We proposed to update historical EPM-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 EPM 
participant's historical EPM-episode payments:
     Inpatient acute.
     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 EPM episodes 
each EPM performance year. The six update factors for each of the 
previously stated components would be EPM-participant hospital-specific 
and would be weighted by the percent of the Medicare payment for which 
each of the six components accounts in the EPM participant's historical 
EPM episodes. The weighted update factors would be applied to 
historical EPM-participant-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 EPM participant's historical EPM-episode payments 
the component represents, and summing together the results. Each of an 
EPM participant's six update factors would be based on how inputs have 
changed in the various Medicare payment systems for the specific EPM 
participant.
    As an example, we would assume for purposes of this example that 50 
percent of an EPM participant's historical EPM-episode payments were 
for inpatient acute care services, 15 percent were for physician 
services, 35 percent were for SNF services, and 0.0 percent were for 
the remaining services. We would also assume for purposes of 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 
EPM participant in this example would have its historical average EPM-
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 sections III.D.4.c through d. of 
the proposed rule. Also, as discussed further in sections III.D.4.c. 
through d. of the proposed rule, the update factors would vary by price 
MS-DRG. For example, in CABG model episodes, the update factors would 
be calculated separately for the anchor hospitalization portion of 
episodes and the post-anchor hospitalization portion of episodes, as 
described in section III.D.4.d. of the proposed rule.
    Region-specific update factors for each of the previously stated 
components and weighted update factors would also be calculated in the 
same manner as the EPM-participant-specific update factors. Instead of 
using historical EPM episodes attributed to a specific hospital, 
region-specific update factors would be based on all historical EPM 
episodes initiated at any IPPS hospital within the region with 
historical EPM episodes, regardless of whether or not the MSAs in which 
the hospitals are located were selected for inclusion in the models. We 
referred to the CJR Final Rule (80 FR 73342 through 73446) for further 
discussion of our specific methodology and considerations for adopting 
this methodology for updating historical EPM-episode payments for 
ongoing payment system updates.
    The proposal for updating episode payments for ongoing annual 
Medicare payment updates was included in Sec.  512.300(c)(10). We 
sought comment on our proposal for updating episodes payments for 
ongoing annual Medicare payment updates. We received no specific 
comments on our proposal for updating historical EPM-episode payments 
to account for ongoing payment system updates. However, we wish to 
highlight that, as we do for the CJR model (80 FR 73343 through 73344), 
where an equation is used to calculate update factors for payment 
systems that apply annual updates to their rates effective October 1 of 
each year such as for inpatient acute, SNF, and IRF services, in lieu 
of calculating the update factors using the values applicable at the 
end of the latest historical year used to calculate target prices, we 
use a blend of the values applicable during the latest historical

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year. This blend is intended to account for the payment systems that 
update payment rates on a fiscal year cycle, and ensure we are 
calculating update factors based on the payment rates that apply to a 
given period to the extent feasible, and result in more accurate target 
price calculations.
    Final Decision: We are finalizing the proposal, without 
modification, to update episode payments for ongoing annual Medicare 
payment updates. The final policy for updating episode payments for 
ongoing annual Medicare payment updates is included in Sec.  
512.300(c)(10).
(6) Blend Hospital-Specific and Regional Historical Data
    We proposed to calculate EPM-episode benchmark prices using a blend 
of EPM-participant-specific and regional historical average EPM-episode 
payments, including historical EPM-episode payments for all IPPS 
hospitals that are in the same U.S. Census division, which was 
discussed further in section III.D.4.b.(7) of the proposed rule (81 FR 
50856). Specifically, we proposed to blend two-thirds of the EPM-
participant-specific historical EPM-episode payments and one-third of 
the regional historical EPM-episode payments to set an EPM 
participant's EPM-episode benchmark prices for the first 2 performance 
years of the EPMs (CYs 2017 and 2018). For performance year 3 of the 
EPMs (CY 2019), we proposed to adjust the proportion of the EPM-
participant-specific and regional historical EPM-episode payments used 
to calculate the EPM-episode benchmark prices from two-thirds EPM 
participant-specific and one-third regional to one-third EPM 
participant-specific and two-thirds regional. Finally, we proposed to 
use only regional historical EPM-episode payments for performance years 
4 and 5 of the EPMs (CYs 2020 and 2021) to set an EPM participant's EPM 
episode-benchmark prices, rather than a blend between the participant-
specific and regional historical EPM episode payments.
    Consistent with our methodology for the CJR model (80 FR 73544), we 
proposed two exceptions. First, we proposed to use only regional 
historical EPM-episode payments to calculate EPM episode-benchmark 
prices for EPM participants with low historic EPM-episode volume). For 
SHFFT model episodes, this exception applies to SHFFT model 
participants with fewer than 50 historical SHFFT model episodes in 
total across the 3 historical years. For AMI model episodes anchored by 
MS-DRGs 280-282, this exception applies to AMI model participants with 
fewer than 75 of these particular AMI model historical episodes in 
total across the 3 historical years. For AMI model episodes anchored by 
PCI MS-DRGs 246-251, this exception applies to AMI model participants 
with fewer than 125 of this particular AMI model historical episodes in 
total across the 3 historical years. For CABG model episodes, this 
exception applies to CABG model participants with fewer than 50 
historical CABG model episodes in total across the 3 historical years. 
The thresholds for low historic volume in this final rule are higher 
than the CJR model threshold for low historical LEJR episode volume of 
20 episodes in total across the 3 historical years. The higher 
thresholds are based on the volume thresholds from the BPCI Model 2 
Risk Track B for 90-day episodes, which increase when the ratio of 
within-hospital episode spending variation to between-hospital episode 
spending variation increases. That is, as EPM episode payment variation 
increases within a hospital relative to EPM-episode payment variation 
between hospitals, it is necessary to have more EPM episodes at that 
hospital to estimate a stable EPM-episode benchmark price using data 
from only that hospital. We proposed to set higher thresholds for the 
SHFFT, AMI, and CABG models based on internal analysis from BPCI 
episode data that shows higher within-hospital episode spending 
variation relative to between-hospital episode spending variation for 
episodes anchored by the EPM MS-DRGs, compared to episodes anchored by 
MS-DRGs 469 and 470 included in the CJR model.\83\
---------------------------------------------------------------------------

    \83\ BPCI Model 2 Baseline Price Common Template calculations 
for 90-day episodes in Risk Track B calculates BPCI volume 
thresholds based on the ratio of within-hospital episode spending 
variation and between-hospital episode spending variation for BPCI 
Clinical Episodes, based on episodes that met BPCI eligibility 
criteria and that began in July 1, 2009-June 30, 2012.
---------------------------------------------------------------------------

    Second, in the case of an EPM participant that has undergone a 
merger, consolidation, spin-off, or other reorganization that results 
in a new hospital entity without 3 full years of historical claims 
data, we proposed that EPM participant hospital-specific historical 
EPM-episode payments would be determined using the historical EPM 
episode payments attributed to their predecessor(s), as in the CJR 
model (80 FR 73544).
    The aforementioned proposals align with our method for blending EPM 
participant hospital-specific and regional data under the CJR model. We 
referred to the CJR model Final Rule (80 FR 73346 through 73349) for 
further discussion on alternatives to and reasons for adopting this 
methodology for the CJR model, which informed our proposal with respect 
to the EPMs.
    The proposal for blending payments when establishing participants' 
benchmark and quality-adjusted targets and certain exceptions was 
included in Sec.  512.300(c)(2), (3), and (4). We note that the 
specific order of steps, and how this step fits in with others, is 
discussed further in section III.D.4.c. of this final rule. We sought 
comment on our proposal for blending payments when establishing 
participants' benchmark and quality-adjusted targets as well as the 
exceptions.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters expressed different views on the proposal to 
base prices initially on a blend of participant-specific and regional 
historical data, while phasing in full regional pricing. Their 
perspective commonly related to the proposal to determine regional 
prices based on U.S. Census Divisions, which is discussed in section 
III.D.4.b.(7) that immediately follows. Some commenters appreciated the 
proposal of moving to regional pricing because it would help attenuate 
the effect of participants having to compete against their own best 
performance and where the most efficient participants in a region could 
be rewarded. Moreover, some of these commenters recommended that CMS 
even accelerate regional pricing or allow efficient participants the 
option to transition from historic to regional target prices at an 
accelerated rate. A commenter viewed the proposal as a way to 
incentivize both historically efficient and less efficient hospitals to 
provide high quality, efficient care.
    Response: We appreciate the comments supporting our proposal to 
blend payments when establishing participants' benchmark and quality-
adjusted targets and agree with their perceived benefits of the 
proposal. We do not agree with suggestions to accelerate regional 
pricing or allowing flexibility for hospitals to accelerate their 
transition to regional prices. We continue to believe our proposed 
phase-in period for regional pricing would generally be most protective 
of participants as they adjust to the models because their performance 
would be compared to their own historical performance rather than 
hospitals in their region. We are also concerned that allowing certain 
hospitals the option to accelerate toward regional pricing as was 
suggested could affect our estimates

[[Page 316]]

and possibly generate inflated reconciliation payments due to potential 
selection issues if historically efficient hospitals were to opt 
earlier for a more generous regional price. Allowing certain hospitals 
the option to select regional pricing earlier would also increase 
administrative complexity under the models.
    Comment: Several commenters opposed proposed regional pricing 
policy, asking that CMS slow its phase-in period, asking that CMS 
phase-in regional prices to something less than 100 percent, for 
example, to only a 50-50 blend of participant-specific and regional 
pricing, or relying solely on participant-specific performance data. 
Some commenters suggested that hospitals might not be prepared to 
compete relative to regional pricing while others expressed concern 
that hospitals would be penalized for factors beyond their control, for 
example, hospitals with a disproportionately large population of high-
cost or vulnerable beneficiaries. Thus, several commenters suggested 
that CMS also account for these factors.
    Response: As we stated in the CJR Final Rule (80 FR 73348), we 
believe that only using participant-specific pricing would not reward 
already efficient participants for maintaining high performance and 
participants already delivering high quality and efficient care would 
find it challenging to improve upon their own historical performance to 
quality for reconciliation payments. We appreciate the concerns raised 
about participants being penalized for factors beyond their control 
once regional prices are phased-in. As discussed earlier in section 
III.D.4.b.(2) of this final rule, we will be exploring additional 
methods for further risk-adjusting episodes under the models that we 
intend to make effective by PY3. We believe that these additional 
adjustments in tandem with our general methodology for risk 
stratification, caps on high-payment episodes, and limits on Medicare 
repayments will offer sufficient protections to participants so that 
they are not penalized once regional pricing is phased-in.
    Comment: Some commenters noted that even when regional pricing is 
fully phased-in, CMS and participants will see diminishing returns over 
time, beginning with providers in low-spending areas where more limited 
opportunities for additional gains in efficiency exist and target 
prices could not be further constrained without putting the quality of 
care at risk. Thus, these commenters requested that CMS use the higher 
of national or regional historical episode payments when calculating 
the target price to help ensure that appropriate incentives are 
provided to participants in both high- and low-spending areas. A 
commenter recommended that CMS vary pricing based on whether the 
participants is in a MSA with higher or lower than average historical 
prices. For example, for participants in MSAs with costs well above the 
national average, target prices would be based on a blend of 
participant-specific data and MSA historical data to help level the 
playing field while continuing to allow program savings. For 
participants in MSAs already below the national average, CMS should use 
a 5-state regional benchmark that would allow high performing MSAs to 
drive improvement and achieve savings for CMS and providers. 
Alternatively, some commenters recommended that CMS adopt a bifurcated 
transition whereby it uses a lower weight for the participants 
determined to have spending higher than their region similar to the 
Shared Savings Program.
    Response: As we stated in the CJR Final Rule (80 FR 73348), we 
believe that using the higher of regional and participant-specific 
prices would not sufficiently incentivize inefficient participants to 
become more efficient. That is, participants with historically high 
episode expenditures would have less of an incentive to become more 
efficient over the course of a model if they can quality for 
reconciliation payments by improving only slightly relative to their 
own performance while still being less efficient than their regional 
peers.
    We appreciate the suggestions to adopt a bifurcated transition or 
to vary pricing based on whether the participant is in a MSA with 
higher or lower than average historical prices--that is, to base target 
prices on a blend of participant-specific data and MSA historical data 
in MSAs with higher than average costs and a 5-state regional benchmark 
for hospitals in MSAs with lower than average costs, but do not believe 
these would materially improve upon our proposed methodology. We 
believe the protections we are offering participants are sufficient and 
obviate further adjustments such as the ``bifurcated'' transition or 
weighting adjustments recently adopted for the Shared Savings Program. 
Further, we believe the latter proposal would decrease incentives for 
all participants by potentially making it too difficult to achieve 
success for participants in higher-spending regions while relaxing 
standards for those in lower spending regions.
    Comment: Some commenters recommended that, in lieu of regional 
pricing targets, CMS adopt national targets. In its comments, MedPAC 
noted that national prices are used in other Medicare FFS payment 
systems and that it believes the EPMs should transition to national 
prices. Further, in 2013, MedPAC reported that risk-adjusted spending 
on post-acute care and readmissions varied about 30 percent between 
high- and low-spending MSAs for SHFFT episodes. Transitioning to 
regionally-based benchmarks, as opposed to nationally-based benchmarks, 
will continue to allow large differences in spending across the 
country. In markets with long-term care hospitals (LTCH) and inpatient 
rehabilitation facilities (IRF), these high-cost settings will raise 
the participants' benchmarks. In markets without these providers, on 
the other hand, post-acute care is delivered in lower-cost settings and 
participants' benchmarks will be lower. MedPAC recommended that CMS 
ultimately transition to national benchmarks to exert pressure on high-
cost regions to bring their spending in line with spending in other 
markets. Another commenter seemed to suggest that applying nationally-
based benchmarks would help in addressing their concern with disparate 
device costs depending on whether a participant was in a rural or 
metropolitan area. In their view, participants in rural areas would be 
disadvantaged by higher costs for these items.
    Response: We agree with MedPAC on the benefits of national prices 
as well as their view that national prices should ultimately be adopted 
if the EPMs were fully integrated into Medicare on a national basis. We 
also continue to believe that our proposal to phase-in regional pricing 
from participant-specific prices offers the most appropriate balance of 
incentives and protections for purposes of testing the proposed EPMs. 
In particular, we are concerned that immediately moving toward national 
pricing could impede the chances for success among participants in high 
cost regions. As a result, we are reluctant to adopt national pricing 
at this time. We also do not agree with the suggestion that moving 
toward national pricing would benefit participants in rural areas with 
respect to device costs. This is because financial performance, 
including spending on devices, during the performance years would be 
generally compared to a participant's historical costs or to the 
historical costs of providers in their region. In either case, the 
costs for

[[Page 317]]

devices should be relatively more comparable than if comparisons were 
made to a national measure.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
blend payments when establishing participants' benchmark and quality-
adjusted targets. We would note that our final policy would also 
include Sec.  512.300(c)(5) in conjunction with Sec.  512.300(c)(2), 
(3), and (4). Thus, the final policy for blending payments when 
establishing benchmark and quality-adjusted targets is included in 
Sec.  512.300(c)(2), (3), (4), and (5).
(7) Define Regions as U.S. Census Divisions
    As we did for the CJR model (80 FR 73349 through 73350), for all 5 
performance years, we defined ''region'' as one of the nine U.S. Census 
divisions \84\ in Figure 1 (81 FR 50857).
---------------------------------------------------------------------------

    \84\ 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.
    \85\ http://www.eia.gov/consumption/commercial/census_maps.cfm.
    [GRAPHIC] [TIFF OMITTED] TR03JA17.000
    
    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 participant-specific utilization 
patterns. Our proposed rule also clarified that we would ascribe the 
same regional component of EPM-episode benchmark prices for EPM 
participants in MSAs that span U.S. Census divisions. That is, selected 
MSAs that span U.S. Census divisions would be attributed to one U.S. 
Census division for purposes of calculating the regional component of 
an EPM-episode benchmark price. Specifically, we would attribute an MSA 
to the U.S. Census division in which the majority of people in the MSA 
reside.
    The proposal to define a region as one of the nine U.S. Census 
divisions was included in Sec.  512.300(c)(2). We sought comment on our 
proposal to define region in this manner.
    The following is a summary of the comments received and our 
responses.
    Comment: Many of the commenters on the proposed regional definition 
expressed concerns about the proposal to blend participant-specific and 
regional pricing. In general, the commenters expressed concerns that, 
given the size and diversity of the proposed U.S. Census divisions with 
respect to health conditions and costs, a single regional price would 
potentially not be an accurate measure of a participant's costs. As a 
result, those participants that treated sicker patients would be 
penalized in particularly large and diverse regions. Thus, many of 
these commenters requested that CMS set prices based on a narrower and 
more cohesive geographic area, for example, at the MSA level, IPPS wage 
index level, or based on MAC regions. A commenter recommended that CMS 
not base benchmark prices fully on a regional average but consider 
taking into account a participant's relative mix of patients with 
respect to CCs and MCCs.
    Another commenter suggested that while some financial risk is 
captured based on CMS-HCC scores, the best way to remove unintended 
consequence is by comparing participants with similar patient 
populations, instead of using Census Divisions to calculate target 
prices. In their view, using Census Divisions to set target prices 
penalizes high acuity hospitals for existing in the same multi[hyphen] 
state ``region'' as lower[hyphen]acuity hospitals, even if those 
hospitals are more capable at caring for sicker patients. As such, many 
hospitals are funneled the most complex AMI, CABG, or fracture cases, 
which may increase average costs in a way that is consistent with 
providing the highest[hyphen]quality care. As such, this commenter 
recommended that CMS instead compare hospitals against other hospitals 
with similar patient populations for the purpose of calculating target 
prices. As high[hyphen]acuity

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referral centers are most at[hyphen]risk given that they treat the most 
ill patients in the nation for all of the proposed EPMs, the commenter 
recommended that CMS group together such high[hyphen]acuity referral 
centers and treat them as their own ``Peer group'' cohort rather than 
by region or within each region for the purpose of calculating target 
price. This would ensure that locations systematically treating the 
most complex cases are being compared appropriately. Another commenter 
suggested this concept be expanded more broadly so that peer groups 
might be formed around characteristics such as urban teaching 
hospitals, suburban hospitals, or small rural hospitals.
    Response: We appreciate the comments and concerns raised on our 
proposal to base regional pricing on U.S. Census Divisions as well as 
the suggested alternatives. Our proposal intended to balance our goal 
of identifying relatively cohesive, homogeneous, and meaningful groups 
for purposes of establishing benchmark prices with what was 
administratively feasible. While we appreciate the suggested 
alternatives that were offered and could consider them for future 
models, we continue to believe, as we stated in the CJR Final Rule (80 
FR 73350), that 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. We would also note that as discussed earlier in section 
III.D.4.b.(2), we will be exploring additional methods for further 
risk-adjusting episodes under the models that we intend to make 
effective by PY3. We believe that these additional adjustments will 
make comparisons of financial performance among participants more 
comparable regardless of a region's diversity.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
define a region as one of the nine U.S. Census divisions. Our final 
policy for defining regions is included in Sec.  512.300(c)(2).
(8) Normalize for Provider-Specific Wage Adjustment Variations
    Some variation in historical EPM-episode payments across hospitals 
in a region may be due to wage adjustment differences in Medicare 
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) that reflects the relative wage level in the 
geographic area of the facility or practitioner (or the beneficiary's 
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 another hospital's EPM 
episode-benchmark price with a different level would introduce 
unintended pricing distortion not based on utilization pattern 
differences.
    To preserve how wage levels affect provider payment amounts, while 
minimizing the distortions introduced when calculating the regional-
component of blended EPM-episode benchmark prices, we proposed to 
normalize for wage indices at the claim level for both historical EPM-
episode payments and actual EPM-episode payments (81 FR 50858). As 
discussed in section III.D.3.b. of the proposed rule (81 FR 50845 
through 50846), we utilize the CMS Price (Payment) Standardization 
Detailed Methodology to calculate EPM-episode benchmark and quality-
adjusted target prices and actual EPM-episode spending. This 
methodology removes wage level differences in calculating standardized 
payment amounts.
    We believe it is important to reintroduce wage index variations 
near the end of the EPM-episode price-setting methodology and when 
calculating actual EPM-episode payments during an EPM performance year, 
to account for the differences in cost for care redesign across 
different geographic areas of the country. For example, hiring 
additional hospital staff to aid in patient follow-up during the post-
discharge period of an AMI model episode would be significantly more 
costly in San Francisco than in rural Idaho. If we do not reintroduce 
wage index variations into EPM-episode benchmark price and actual EPM-
episode payment calculations, we would calculate reconciliation and 
repayment amounts that would not capture labor cost variation 
throughout the country, and EPM participants in certain regions may see 
less opportunity and financial incentive to invest in care redesign. 
Thus, when setting EPM-episode benchmark prices and calculating actual 
EPM-episode payments, we proposed to reintroduce the participant-
specific wage variations by multiplying EPM-episode payments by the 
wage normalization factor when calculating the EPM-episode benchmark 
prices and actual EPM-episode payments for each EPM participant, as 
described in section III.D.4.c. of the proposed rule.
    We proposed to use the following algorithm to create a wage 
normalization factor: 0.7 * IPPS wage index + 0.3. The 0.7 approximates 
the labor share in IPPS, IRF PPS, SNF, and HHA Medicare payments. The 
specific order of steps, and how this step fits in with others, is 
discussed further in section III.D.4.c. through III.D.4.e. of the 
proposed rule (81 FR 50862 through 50864). We also referred to the CJR 
model Final Rule for more detailed information on our normalization 
process adopted for the CJR model (80 FR 73350 through 73352).
    The proposal to normalize for provider-specific wage adjustment 
variations was included in Sec.  512.300(c)(12). We sought comment on 
our proposal to normalize for these variations.
    We received no specific comments on our proposal to normalize for 
provider-specific wage adjustment variations other than one in support 
of the proposal.
    Final Decision: We are finalizing the proposal, without 
modification, to normalize for provider-specific wage adjustment 
variations. Our final policy for normalizing provider-specific wage 
adjustment variations is included in Sec.  512.300(c)(12).
(9) Combining Episodes to Set Stable Benchmark and Quality-Adjusted 
Target Prices
    For the purposes of having sufficient episode volume to set stable 
EPM-episode benchmark and quality-adjusted target prices, we proposed 
generally to follow the process from the CJR model (80 FR 73352 and 
73353) to calculate severity factors, EPM participant-specific weights, 
and region-specific weights that allow us to surmount issues of low 
volume for EPM episodes with particular characteristics by aggregating 
EPM episodes and portions of EPM episodes across dimensions that 
include anchor MS-DRGs, the presence of AMI ICD-CM diagnosis code on 
the anchor inpatient claim, and the presence of a major complication or 
comorbidity for anchor CABG MS-DRGs (81 FR 50858 through 50861). Where 
the CJR Final Rule referred to anchor factors, however, for the 
purposes of the proposed rule, we referred to severity factors to avoid 
confusion when performing calculations pertaining to expenditures that 
occurred during the anchor hospitalization and after the anchor 
hospitalization in CABG model episodes.

[[Page 319]]

    For SHFFT model episodes, we proposed to combine episodes with 
price MS-DRGs 480-482 to use a greater historical episode volume to set 
more stable SHFFT episode benchmark and quality-adjusted target prices. 
To do so, we proposed to calculate severity factors for episodes with 
price MS-DRGs 480 and 481 equal to--
[GRAPHIC] [TIFF OMITTED] TR03JA17.001

The national average would be based on SHFFT model episodes attributed 
to any IPPS hospital. The resulting severity factors would be the same 
for all SHFFT model participants. For each SHFFT model participant, a 
hospital weight would be calculated using the following formula, where 
SHFFT model episode counts are SHFFT-model-participant hospital-
specific and based on the SHFFT model episodes in the 3 historical 
years used in SHFFT model episode benchmark and quality-adjusted target 
price calculations:
[GRAPHIC] [TIFF OMITTED] TR03JA17.002

    A SHFFT model participant's specific average episode payment would 
be calculated by multiplying such participant's weight by its combined 
historical average episode payment (sum of historical episode payments 
for historical episodes with price MS-DRGs 480-482 divided by the 
number of historical episodes with price MS-DRGs 480-482). The 
calculation of the participant weights and the participant-specific 
pooled historical average episode payments would be comparable to how 
case-mix indices are used to generate case-mix adjusted Medicare 
payments. The participant weight essentially would count each episode 
with price MS-DRGs 480 and 481 as more than one episode (assuming 
episodes with price MS- DRGs 480 and 481 have higher average payments 
than episodes with price MS-DRG 482) so that the pooled historical 
average episode payment, and subsequently the SHFFT model episode 
benchmark and quality-adjusted target prices, are not skewed by the 
SHFFT model participant's relative breakdown of historical episodes 
with price MS-DRGs 480 and 481 versus historical episodes with price 
MS-DRG 482.
    We would calculate region-specific weights and region-specific 
pooled historical average payments following the same steps as for 
hospital-specific weights and hospital-specific pooled average 
payments. Instead of grouping episodes by the attributed hospital as 
for hospital-specific calculations, region-specific calculations would 
group together SHFFT model episodes that were attributed to any IPPS 
hospital located within the region. The participant-specific and 
region-specific pooled historical average payments would be blended 
together as discussed in section III.D.4.b.(6) of the proposed rule. 
The specific order of steps, and how this step fits in with others, is 
discussed further in section III.D.4.c. of the proposed rule.
    Afterwards, the blended pooled calculations would be ``unpooled'' 
by setting the episode benchmark price for episodes with price MS-DRG 
482 to the resulting calculation, and by multiplying the resulting 
calculation by the severity factors to produce the episode benchmark 
prices for episodes with price MS-DRGs 480 and 481. Applying the 
discount factor as discussed in III.D.4.b.(10) and III.D.4.c. of the 
proposed rule would result in the SHFFT model quality-adjusted target 
prices for episodes with price MS-DRGs 480-482.
    For episodes in the AMI model with price MS-DRGs in 280-282 or 246-
251 and without readmissions for CABG MS-DRGs, we proposed to follow an 
analogous procedure to the SHFFT model with the following 
modifications. First we proposed to group episodes with price MS-DRGs 
280-282 separately from episodes with price MS-DRGs 246-251 for the 
calculations. Second, we proposed to calculate severity factors for 
episodes with price MS-DRGs 280-282 as--
[GRAPHIC] [TIFF OMITTED] TR03JA17.003

    Third, we proposed to calculate hospital-specific weights and 
region-specific weights for episodes with price MS-DRGs 280-282 as--

[[Page 320]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.004

Fourth, we proposed to calculate severity factors for episodes with 
price MS-DRG 246-251 as--
[GRAPHIC] [TIFF OMITTED] TR03JA17.005

    Fifth, we proposed to calculate hospital-specific weights and 
region-specific weights for episodes with price MS-DRG 246-251 as--
[GRAPHIC] [TIFF OMITTED] TR03JA17.006

    After blending historical and regional pooled episode payments for 
episodes with price MS-DRGs 280-282, the blended pooled calculations 
would be ``unpooled'' by setting the episode benchmark price for price 
MS-DRG 282 to the resulting calculation, and by multiplying the 
resulting calculation by the severity factors to produce the episode 
benchmark prices for price MS-DRGs 280 and 281.
    After blending historical and regional pooled episode payments for 
episodes with price MS-DRGs 246-251, the blended pooled calculations 
would be ``unpooled'' by setting the episode benchmark price for price 
MS-DRG to the resulting calculation, and by multiplying the resulting 
calculation by the severity factors to produce the episode benchmark 
prices for price MS-DRGs 246-251.
    Applying the discount factor as discussed in III.D.4.b.(10) and 
III.D.4.c of the proposed rule would result in the quality-adjusted 
target prices for price MS-DRGs 280-282 and 246-251.
    For episodes in the CABG model with price MS-DRGs in 231-236, we 
proposed to calculate severity factors, hospital-specific weights, and 
region-specific weights separately for the anchor hospitalization 
portion of CABG model episodes and the post-anchor hospitalization 
portion of CABG model episodes.
    For the anchor hospitalization portion of CABG model episodes, we 
proposed to follow an analogous procedure to the SHFFT model with the 
anchor hospitalization portion of CABG model episodes grouped by the 
price MS-DRG. Specifically, we proposed to calculate anchor 
hospitalization severity factors for price MS-DRGs 231-235 as--

[[Page 321]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.007

    We also proposed to calculate participant-specific weights and 
region-specific weights for the anchor hospitalization portion of CABG 
model episodes as--
[GRAPHIC] [TIFF OMITTED] TR03JA17.008

    After blending historical and regional pooled anchor 
hospitalization payments for the CABG model episodes, the blended 
pooled calculations would be ``unpooled'' by setting the price MS-DRG 
236 anchor hospitalization benchmark price to the resulting 
calculation, and by multiplying the resulting calculation by the 
severity factors to produce the anchor hospitalization benchmark prices 
for price MS-DRGs 231-235.
    For the post-anchor hospitalization portion of CABG model episodes, 
we proposed to follow an analogous procedure to the SHFFT model with 
the post-anchor hospitalization portion of CABG model episodes grouped 
in the following manner--
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG with major complication or comorbidity (231, 233, or 235)
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG without major complication or comorbidity (232, 234, or 236)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG with major complication or comorbidity (231, 233, or 235)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG without major complication or comorbidity (232, 234, or 
236)

Specifically, we proposed to calculate post-anchor hospitalization 
severity factors as--

[[Page 322]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.009

    We also proposed to calculate hospital-specific weights and region-
specific weights for the post-anchor hospitalization portion of CABG 
model episodes as--
[GRAPHIC] [TIFF OMITTED] TR03JA17.010

    After blending historical and regional pooled post-anchor 
hospitalization payments for the CABG model episodes, the blended 
pooled calculations would be ``unpooled'' by setting the without AMI 
ICD-CM diagnosis code on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236) post-
anchor hospitalization benchmark price to the resulting calculation, 
and by multiplying the resulting calculation by the severity factors to 
produce the post-anchor hospitalization benchmark prices for:
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG with major complication or comorbidity (231, 233, or 235)
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG without major complication or comorbidity (232, 234, or 236)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG with major complication or comorbidity (231, 233, or 235)
    We proposed to calculate episode benchmark prices for CABG model 
episodes by summing combinations of CABG anchor hospitalization 
benchmark prices and CABG post-anchor hospitalization benchmark prices. 
Applying the discount factor as discussed in III.D.4.b.(10) and 
III.D.4.d of the proposed rule would result in the quality-adjusted 
target prices for CABG model episodes.
    For episodes in the AMI model with CABG readmissions, we proposed 
to perform no additional blending of participant-specific and regional-
specific episode payments. We proposed to calculate the AMI model 
episode benchmark and quality-adjusted target prices for such episodes 
as described in section III.D.4.e. of the proposed rule.
    The proposals to combine episodes to set stable benchmark and 
quality-adjusted target prices were included in Sec.  512.300(c)(13). 
We sought comment on our proposals for combining episodes for these 
purposes.
    We received no comments on our proposals for combining episodes.
    Final Decision: We are finalizing the proposal, without 
modification, to combine prices for episodes. Our final policy for 
combining episodes is included in Sec.  512.300(c)(13). We would note 
that since we did not finalize our proposal for price MS-DRGs, the term 
price MS-DRG is excluded and replaced with the term anchor MS-DRG.
(10) Effective Discount Factor
    As discussed in section III.D.2.c. of the proposed rule, we 
proposed to make EPM participants partly or fully accountable for EPM-
episode payments in relationship to the EPM quality-adjusted target 
price (81 FR 50844). As part of this, in setting an episode quality-
adjusted target price for an EPM participant, we proposed to apply an 
effective discount factor to an EPM participant's participant-specific 
and regional blended historical EPM-episode payments for a performance 
period. We expect EPM participants to have a significant opportunity to 
improve the quality and efficiency of care furnished during episodes in 
comparison with historical practice, because the EPMs would facilitate 
the alignment of financial incentives among providers caring for EPM 
beneficiaries. Our proposed effective discount factors were intended to 
serve as Medicare's portion of reduced expenditures from an EPM episode 
with any EPM-episode expenditures below the quality-adjusted target 
price potentially available as reconciliation payments to the EPM 
participant where the anchor hospitalization occurred.

[[Page 323]]

    For the EPMs, we proposed to establish a 3 percent effective 
discount factor to calculate the quality-adjusted target prices for EPM 
participants in the below acceptable and acceptable quality categories, 
as discussed in section III.E.3.f. of the proposed rule (81 FR 50887 
through 50893) and similar to the CJR model (80 FR 73355). The 
effective discount factor to calculate the quality-adjusted target 
price for EPM participants in the good and excellent quality categories 
would be 2 percent and 1.5 percent, respectively.
    As discussed in section III.D.2.c. of the proposed rule (81 FR 
50844), because of the proposed phase-in of repayment responsibility 
with no responsibility in either performance year 1 or performance year 
2 (NDR) and only partial repayment responsibility in performance year 2 
(DR) and all of performance year 3, an EPM participant with actual EPM-
episode payments that exceeded the quality-adjusted target prices 
multiplied by the EPM participant's number of EPM episodes to which 
each quality-adjusted target price would apply in performance year 2 
(DR) and performance year 3 would owe Medicare less than would 
otherwise result from this calculation.
    Also, as discussed in section III.E.3.f of the proposed rule (81 FR 
50801), we proposed to apply an ``applicable discount factor'' to 
repayment amounts in performance years 2 and 3 while this repayment 
responsibility was being phased-in. We refer to section III.E.1. and 
specifically Tables 20 through 28 in our proposed rule for further 
illustration of the discount percentages that would apply for 
reconciliation payment and Medicare repayment over the 5 EPM 
performance years (81 FR 50888 through 50892). We believe this 
methodology offers EPM participants an opportunity to create savings 
for themselves and Medicare, while also maintaining or improving 
quality of care for EPM model beneficiaries.
    The proposal to establish discount factors that would apply to the 
quality categories was included in Sec.  512.300(d). We sought comment 
on our proposal to establish discount factors that apply to the quality 
categories.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters suggested that the ability to achieve 
savings under the proposed models (most notably for the cardiac models 
and the CABG model in particular) was more limited than for the CJR 
model, and that these limitations would become more significant as 
target prices decline further over time. For example, commenters opined 
that while about half of CJR episode spending is attributable to the 
initial hospitalization, CMS noted that about three-quarters of CABG 
episode spending is attributable to the initial hospitalization. As 
such, there are fewer opportunities to achieve efficiencies within the 
inpatient hospital payment amount because it is a predetermined per-
discharge payment based primarily on the patient's condition, not on 
services provided. Further, some portion of CABG and AMI costs outside 
the initial hospitalization is attributable to readmissions; however, 
these costs are already declining due to hospitals' responses to the 
HRRP and any remaining readmissions are more likely to be clinically 
appropriate and necessary. As such, it would be difficult to achieve 
efficiencies within the remaining percentage of spending that occurs 
outside the initial hospitalization. Thus, commenters requested that 
CMS implement a smaller discount factor than what was proposed--
typically a 1 percentage point reduction.
    Response: We appreciate the comments and concerns raised with 
respect to our proposed discount factor. We recognize that, as compared 
to episodes under the CJR model, opportunities to achieve improved 
efficiencies under the proposed models would be different and 
potentially more challenging for participants under the proposed 
models. However, we do not believe the increased efficiencies needed to 
be successful as was proposed under the models are unattainable. Given 
our policy to phase-in full regional pricing over time, participants' 
performance will increasingly be compared to that of peers within their 
region; thus, for the more efficient participants, target pricing would 
likely be higher than if we relied on participant-specific pricing 
alone. Further, as discussed in section III.D.4.b.(2), we plan to 
explore and implement additional adjustments for risk beginning in PY3, 
which should facilitate successful participants' ability to achieve 
savings under the models. We would also note that our final policy to 
include reconciliation payments when updating target prices for 
successful participants under the models should ease the decline in 
pricing over time, which should facilitate their ability to be rewarded 
for improved efficiencies.
    Comment: A commenter encouraged CMS to provide participants with 
protection against having to make repayments that result from adverse 
events beyond their control, similar to the protections offered under 
the Medicare Shared Savings Program. Specifically, during risk-bearing 
periods of the program, instead of setting a repayment target price 
equal to historical payments minus some percentage, the commenters 
recommended that CMS should instead set a symmetric target price equal 
to historical payments plus or minus some percentage. Under this 
proposal, participants with historical payments falling between, for 
example, 97 percent and 103 percent of historical payments would 
neither receive reconciliation payments nor be held responsible for 
repaying Medicare.
    Response: We appreciate the suggested alternative the commenter 
offered, but would note that the proposed models are intended to test a 
bundled payment rather than a shared savings model, which is being 
tested through Innovation Center and Shared Savings Program ACO 
efforts.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
establish discount factors that would apply to the quality categories. 
Specifically, for repayment amounts in performance year 2, our final 
applicable discount factor would apply only to participants that 
elected downside risk in that year. Also, in conformance with our final 
policy for phasing-in repayment responsibility, the applicable discount 
factor is extended so that it will apply to all EPM participants in 
performance year 4. Our final policy for the discount factor is 
included in Sec.  512.300(d).
c. Approach To Combine Pricing Features for All SHFFT Model Episodes 
and AMI Model Episodes Without CABG Readmissions
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b. of the proposed rule 
with respect to SHFFT model episodes and AMI model episodes without a 
CABG readmission (81 FR 50862 and 50863).
     Step 1--Calculate historical EPM-episode payments for 
episodes that were initiated during the 3-historical-years of each 
applicable EPM (that is, individually for each of the SHFFT and AMI 
models) (section III.D.4.b.(3) of the proposed rule) for all IPPS 
hospitals for all Medicare Part A and B services included in the EPM 
episodes. Limit the potential AMI model episodes to those episodes with 
price MS-DRGs in 280-282 or 246-251 and without readmissions for CABG 
MS-DRGs. We note that specific PBPM payments may be excluded from 
historical EPM-episode payment calculations as

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discussed in section III.D.6.d. of the proposed rule.
     Step 2--Remove the effects of special payment provisions 
(section III.D.3.b. of the proposed rule) and normalize for wage index 
differences (section III.D.4.b.(8). of the proposed rule) by 
standardizing Medicare FFS payments at the claim-level.
     Step 3--Prorate Medicare payments for included episode 
services that span a period of care that extends beyond the episode 
(section III.D.3.c. of the proposed rule.).
     Step 4--Trend forward the 2 oldest historical years of 
data to the most recent year of historical data (section III.D.4.b.(4) 
of the proposed rule). Separate national trend factors would be applied 
for each combination of price MS-DRGs.
     Step 5--Cap high episode payment episodes with a region- 
and price-MS-DRG-specific high payment ceiling (section III.D.3.d. of 
the proposed rule), using the episode output from the previous step.
     Step 6--Group episodes based on price MS-DRGs (SHFFT MS-
DRGs 480-482; AMI MS-DRGs 280-282; PCI MS-DRGs 246-251). Within each 
group of episodes, calculate severity factors and EPM participant-
specific weights (section III.D.4.b.(9) of the proposed rule) using the 
episode output from the previous step to pool together episodes in each 
group of price MS-DRGs, resulting in EPM participant-specific pooled 
historical average episode payments for each group of price MS-DRGs. 
Similarly, calculate region-specific weights to calculate region-
specific pooled historical average episode payments for each group of 
price MS-DRGs.
     Step 7--Calculate EPM participant-specific and region-
specific weighted update factors (section III.D.4.b.(5). of the 
proposed rule). Multiply each EPM participant-specific and region-
specific pooled historical average episode payment by its corresponding 
EPM participant-specific and region-specific weighted update factors to 
calculate EPM participant-specific and region-specific updated, pooled, 
historical average episode payments.
     Step 8--Blend together each EPM-participant-specific 
updated, pooled, historical average episode payment with the 
corresponding region-specific updated, pooled, historical average 
episode payment according to the proportions for the EPM performance 
year (III.D.4.b.(6) of the proposed rule). EPM participants 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.
     Step 9--Multiply the outputs of step (8) by the wage 
normalization factor described in section III.D.4.b.(8) of this final 
rule to reintroduce geographic variation. For purposes of the proposed 
rule, we defined the three outputs of this step as the standard episode 
benchmark price for--

++ SHFFT model episodes with price MS-DRG 482
++ AMI model episodes with price MS-DRG 282 without readmission for 
CABG, and
++ AMI model episodes with price MS-DRG 251 without readmission for 
CABG.
     Step 10--Multiply the output of step (9) by the 
appropriate severity factors (step (6) of this calculation process and 
detailed in section III.D.4.b.(9) of the proposed rule) to calculate 
the standard episode benchmark prices for--

++ SHFFT model episodes with price MS-DRGs 480-481
++ AMI model episodes with price MS-DRGs 280-281 without readmission 
for CABG
++ AMI model episodes with price MS-DRGs 246-250 without readmission 
for CABG
     Step 11--Multiply the outputs of step (9) and (10) by 1 
minus the applicable effective discount factor based on the EPM 
participant's quality category as described in sections III.D.4.b.(10) 
and III.E.3.f. of the proposed rule. For purposes of the proposed rule, 
we defined the outputs of this step as the episode quality-adjusted 
target prices for:
++ SHFFT model episodes with price MS-DRGs 480-482
++ AMI model episodes with price MS-DRGs 280-282 without readmission 
for CABG, and
++ AMI model episodes with price MS-DRGs 246-251 without readmission 
for CABG
    We would note that because our final policy for inpatient-to-
inpatient hospital transfers for AMI episodes does not include chained 
anchor hospitalizations, the one change to our proposed approach for 
combining pricing features for all SHFFT model episodes and AMI model 
episodes without CABG readmissions is to replace the term price MS-DRG 
with the term anchor MS-DRG.
d. Approach To Combine Pricing Features for CABG Model Episodes
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b of the proposed rule 
with respect to CABG model episodes (81 FR 50863 through 50864).
(1) Anchor Hospitalization Portion of CABG Model Episodes
     Step 1--Calculate historical episode payments that 
occurred during the anchor hospitalization of CABG model episodes that 
were initiated during the 3 historical years (section III.D.4.b.(2). of 
the proposed rule) for all IPPS hospitals for all Medicare Part A and B 
services included in the episodes. We note that specific PBPM payments 
may be excluded from historical episode payment calculations as 
discussed in section III.D.6. of the proposed rule.
     Step 2--Apply steps III.D.4.c.(2) through (4) to the 
results of step (1) with trend factors calculated based on the anchor 
hospitalization portion of CABG model episodes with price MS-DRGs 231-
236.
     Step 3--Group the anchor hospitalization portion of 
episodes based on price MS-DRGs 231-236 and apply steps III.D.4.c.(6) 
through (10) to the anchor hospitalization portion of the CABG model 
episodes with severity factors, hospital-specific weighted update 
factors, and region-specific weighted update factors calculated to 
apply based only on the anchor hospitalization portion of CABG model 
episodes with price MS-DRGs 231-236. For purposes of the proposed rule, 
we defined the output of this step as CABG anchor hospitalization 
benchmark prices for CABG model episodes with price MS-DRGs 231-236.

We would note that because our final policy for inpatient-to-inpatient 
hospital transfers for AMI episodes does not include chained anchor 
hospitalizations, the one change to our approach for combining pricing 
features for CABG model episodes is to replace the term price MS-DRG 
with the term anchor MS-DRG.
(2) Approach To Combine Pricing Features for Post-Anchor 
Hospitalization Portion of CABG Model Episodes
     Step 1--Calculate historical episode payments that 
occurred after the anchor hospitalization for CABG model episodes that 
were initiated during the 3 historical years (section III.D.4.b.(2) of 
the proposed rule) for all IPPS hospitals for all Medicare Parts A and 
B services included in the episodes. We note that specific PBPM 
payments may be excluded from historical episode payment calculations 
as discussed in section III.D.6. of the proposed rule.
     Step 2--Apply steps III.D.4.c.(2) through (4) to the 
results of step (1) with

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trend factors calculated based on the post-anchor hospitalization 
portion of CABG model episodes with price MS-DRGs 231-236, as described 
in section III.D.4.b.(4) of the proposed rule.
     Step 3--Group the post-anchor hospitalization portion of 
episodes based on--

++ With AMI diagnosis on the anchor inpatient claim and price MS-DRG 
with major complication or comorbidity (231, 233, or 235)
++ With AMI diagnosis on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236)
++ Without AMI diagnosis on the anchor inpatient claim and price MS-DRG 
with major complication or comorbidity (231, 233, or 235)
++ Without AMI diagnosis on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236).
    Then apply steps III.D.4.c.(6)-(10) to the post-anchor 
hospitalization portion of the CABG model episodes with severity 
factors, hospital-specific weights, and region-specific weights 
calculated to apply based on the groups previously described in this 
step. For purposes of the proposed rule, we defined the output of this 
step as CABG post-anchor hospitalization benchmark prices for CABG 
model episodes corresponding to the groups described in this step.
    We would note that because our final policy for inpatient-to-
inpatient hospital transfers for AMI episodes does not include chained 
anchor hospitalizations, the one change to our approach for combining 
pricing features for the post-anchor hospitalization portion of CABG 
model episodes is to replace the term price MS-DRG with the term anchor 
MS-DRG.
(3) Combine CABG Anchor Hospitalization Benchmark Price and CABG Post-
Anchor Hospitalization Benchmark Price
     Step 1--Sum the CABG anchor hospitalization benchmark 
price corresponding to each price CABG MS-DRG and the CABG post-anchor 
hospitalization price corresponding to each of the post-anchor 
hospitalization groupings described in III.D.4.d.(2) of the proposed 
rule. For purposes of the proposed rule, we defined the outputs of 
those calculations to be CABG model episode benchmark prices for--
++ CABG model episodes with price MS-DRG 231 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 232 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 233 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 234 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 235 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 236 and with AMI diagnosis;
++ CABG model episodes with price MS-DRG 231 and without AMI diagnosis;
++ CABG model episodes with price MS-DRG 232 and without AMI diagnosis;
++ CABG model episodes with price MS-DRG 233 and without AMI diagnosis;
++ CABG model episodes with price MS-DRG 234 and without AMI diagnosis;
++ CABG model episodes with price MS-DRG 235 and without AMI diagnosis; 
and
    ++ CABG model episodes with price MS-DRG 236 and without AMI 
diagnosis.
    The CABG episode benchmark prices for each price CABG MS-DRG with 
AMI diagnosis would also apply as AMI model episode benchmark prices 
for AMI model episodes with price MS-DRGs 231-236.
     Step 2--Multiply the results of step 1 by the appropriate 
effective discount factor that reflects the EPM participant's quality 
category as described in sections III.D.4.b.(10) and III.E.3.f. of the 
proposed rule. For purposes of the proposed rule, we defined the 
outputs of this step to be CABG model episode quality-adjusted target 
prices for--
    ++ CABG model episodes with price MS-DRG 231 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 232 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 233 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 234 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 235 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 236 and with AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 231 and without AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 232 and without AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 233 and without AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 234 and without AMI 
diagnosis;
    ++ CABG model episodes with price MS-DRG 235 and without AMI 
diagnosis; and
    ++ CABG model episodes with price MS-DRG 236 and without AMI 
diagnosis.
    The episode quality-adjusted target prices for each anchor CABG MS-
DRG with AMI diagnosis would also apply as AMI model episode quality-
adjusted target prices for AMI model episodes with price MS-DRGs 231-
236. The effective discount factor applied to calculate the AMI model 
episode quality-adjusted target prices for AMI model episodes with 
price MS-DRGs 231-236 could differ from the effective discount factor 
applied to calculate CABG model episode quality-adjusted target prices 
for CABG model episodes if the participant had different levels of 
quality performance on the AMI and CABG model composite quality scores 
that determine the discount factor for the quality-adjusted target 
prices.
    We would note that because our final policy for inpatient-to-
inpatient hospital transfers for AMI episodes does not include chained 
anchor hospitalizations, the one change to our approach for combining 
CABG anchor hospitalization benchmark prices and CABG post-anchor 
hospitalization benchmark prices is to replace the term price MS-DRG 
with the term anchor MS-DRG.
e. Approach To Combine Pricing Features for AMI Model Episodes With 
CABG Readmissions
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b of the proposed rule 
with respect to AMI model episodes with a CABG readmission (81 FR 
50864).
    In general, the AMI model episode benchmark price for AMI model 
episodes with CABG readmission is the sum of the applicable standard 
AMI model episode benchmark price for an AMI episode without 
readmission corresponding to the AMI price MS-DRG and the applicable 
CABG anchor hospitalization benchmark price for a CABG model episode 
corresponding to the CABG readmission MS-DRG in the AMI model.
     Step 1--For each combination of AMI price MS-DRG and CABG 
readmission MS-DRG, sum the corresponding AMI model episode benchmark 
price and CABG anchor hospitalization benchmark price. This results in 
54 possible CABG readmission AMI model episode benchmark prices, 
corresponding to--
    ++ Price MS-DRG 280; Readmission MS-DRG 231;

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    ++ Price MS-DRG 280; Readmission MS-DRG 232;
    ++ Price MS-DRG 280; Readmission MS-DRG 233;
    ++ Price MS-DRG 280; Readmission MS-DRG 234;
    ++ Price MS-DRG 280; Readmission MS-DRG 235;
    ++ Price MS-DRG 280; Readmission MS-DRG 236;
    ++ Price MS-DRG 281; Readmission MS-DRG 231;
    ++ Price MS-DRG 281; Readmission MS-DRG 232;
    ++ Price MS-DRG 281; Readmission MS-DRG 233;
    ++ Price MS-DRG 281; Readmission MS-DRG 234;
    ++ Price MS-DRG 281; Readmission MS-DRG 235;
    ++ Price MS-DRG 281; Readmission MS-DRG 236;
    ++ Price MS-DRG 282; Readmission MS-DRG 231;
    ++ Price MS-DRG 282; Readmission MS-DRG 232;
    ++ Price MS-DRG 282; Readmission MS-DRG 233;
    ++ Price MS-DRG 282; Readmission MS-DRG 234;
    ++ Price MS-DRG 282; Readmission MS-DRG 235;
    ++ Price MS-DRG 282; Readmission MS-DRG 236;
    ++ Price MS-DRG 246; Readmission MS-DRG 231;
    ++ Price MS-DRG 246; Readmission MS-DRG 232;
    ++ Price MS-DRG 246; Readmission MS-DRG 233;
    ++ Price MS-DRG 246; Readmission MS-DRG 234;
    ++ Price MS-DRG 246; Readmission MS-DRG 235;
    ++ Price MS-DRG 246; Readmission MS-DRG 236;
    ++ Price MS-DRG 247; Readmission MS-DRG 231;
    ++ Price MS-DRG 247; Readmission MS-DRG 232;
    ++ Price MS-DRG 247; Readmission MS-DRG 233;
    ++ Price MS-DRG 247; Readmission MS-DRG 234;
    ++ Price MS-DRG 247; Readmission MS-DRG 235;
    ++ Price MS-DRG 247; Readmission MS-DRG 236;
    ++ Price MS-DRG 248; Readmission MS-DRG 231;
    ++ Price MS-DRG 248; Readmission MS-DRG 232;
    ++ Price MS-DRG 248; Readmission MS-DRG 233;
    ++ Price MS-DRG 248; Readmission MS-DRG 234;
    ++ Price MS-DRG 248; Readmission MS-DRG 235;
    ++ Price MS-DRG 248; Readmission MS-DRG 236;
    ++ Price MS-DRG 249; Readmission MS-DRG 231;
    ++ Price MS-DRG 249; Readmission MS-DRG 232;
    ++ Price MS-DRG 249; Readmission MS-DRG 233;
    ++ Price MS-DRG 249; Readmission MS-DRG 234;
    ++ Price MS-DRG 249; Readmission MS-DRG 235;
    ++ Price MS-DRG 249; Readmission MS-DRG 236;
    ++ Price MS-DRG 250; Readmission MS-DRG 231;
    ++ Price MS-DRG 250; Readmission MS-DRG 232;
    ++ Price MS-DRG 250; Readmission MS-DRG 233;
    ++ Price MS-DRG 250; Readmission MS-DRG 234;
    ++ Price MS-DRG 250; Readmission MS-DRG 235;
    ++ Price MS-DRG 250; Readmission MS-DRG 236;
    ++ Price MS-DRG 251; Readmission MS-DRG 231;
    ++ Price MS-DRG 251; Readmission MS-DRG 232;
    ++ Price MS-DRG 251; Readmission MS-DRG 233;
    ++ Price MS-DRG 251; Readmission MS-DRG 234;
    ++ Price MS-DRG 251; Readmission MS-DRG 235; and
    ++ Price MS-DRG 251; Readmission MS-DRG 236.
     Step 2--Multiply the results of step 1 by the effective 
discount factor that reflects the EPM participant's quality category, 
as described in sections III.D.4.b.(10) and III.E.3.f. of the proposed 
rule. For purposes of the proposed rule, we defined the outputs of this 
step to be AMI model episode quality-adjusted target prices for the 
same combinations of AMI price MS-DRG and readmission MS-DRG in step 
(1).
    We would note that because our final policy for inpatient-to-
inpatient hospital transfers for AMI episodes does not include chained 
anchor hospitalizations, the one change to our approach for combining 
pricing features for AMI model episodes with CABG readmissions is to 
replace the term price MS-DRG with the term anchor MS-DRG.
5. Process for Reconciliation
a. Net Payment Reconciliation Amount (NPRA)
    Consistent with the CJR model (80 FR 73381 through 73383), we 
proposed to conduct reconciliation for each EPM by calculating an EPM-
specific NPRA for each EPM participant (81 FR 50864 through 50865). 
After the completion of an EPM performance year, we proposed to 
retrospectively calculate an EPM participant's actual EPM-episode 
payments based on the EPM episode definitions as discussed in sections 
III.C.3. and III.C.4. of the proposed rule and the payment policies 
applicable to calculating actual EPM-episode payments as discussed in 
the subsections of section III.D.3 of the proposed rule.
    We proposed to compare each EPM participant's actual EPM episode 
payments to its quality-adjusted target prices. We proposed, as 
discussed in section III.D.4. of the proposed rule, that an EPM 
participant would have multiple quality-adjusted target prices for EPM 
episodes ending in a given performance year, based on the anchor MS-DRG 
for the EPM episode, whether the EPM episode included a chained anchor 
hospitalization; whether the EPM episode included readmission for CABG 
MS-DRGs; whether the EPM episode included an AMI ICD-CM diagnosis code 
on the anchor inpatient claim; the performance year when the EPM 
episode was initiated; when the EPM 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 
the potential effective discount factors. The difference between each 
EPM episode's actual EPM episode payment and the relevant quality-
adjusted target price under the EPM (calculated as quality-adjusted 
target price subtracted by actual EPM episode payment) would be 
aggregated for all EPM episodes in each EPM for an EPM participant 
within the performance year, representing the NPRA. For performance 
year 2, we would perform two separate aggregations in order to create 
two NPRAs--one reflecting episodes that ended during performance year 2 
(NDR), and a second for episodes that ended during performance year 2 
(DR).
    We proposed to not include any reconciliation payments or 
repayments to Medicare under the EPMs for a given performance year when 
calculating actual episode spending and, therefore the NPRA for a 
subsequent performance year. We want to incentivize providers to 
provide high-quality and efficient care in all years of the EPMs. If 
reconciliation payments for a performance year were counted as Medicare 
expenditures in a subsequent performance year, an EPM participant would 
experience higher Medicare expenditures in the subsequent performance 
year as a consequence of

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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 proposed to not have the NPRA for a given performance 
year be impacted by EPM repayments or reconciliation payments made in a 
prior performance year. For example, if an EPM participant receives a 
$10,000 reconciliation payment in the second quarter of 2018 for 
achieving episode spending below the quality-adjusted target price for 
performance year 1, that $10,000 reconciliation payment amount would 
not be included in the performance year 2 calculations of actual EPM-
episode payments.
    The NPRA would be subject to the stop-loss and stop-gain limits 
described in section III.D.7.b. and III.D.7.c.(1) of the proposed rule.
b. Payment Reconciliation
    We proposed to retrospectively reconcile an EPM participant's 
actual EPM-episode payments against the quality-adjusted target prices 
2 months after the end of the performance year (81 FR 50865 through 
50867). 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 an EPM reconciliation 
payment or hold participants responsible for repayment, as applicable, 
in quarter 2 of that calendar year.
    We also proposed that during the following performance year's 
reconciliation process, we would calculate the prior performance year's 
actual EPM episode payments a second time to account for final claims 
run-out and any canceled EPM episodes, due to overlap with other models 
or other reasons as specified in section III.C.4.b of the proposed 
rule. This calculation, termed the subsequent reconciliation, would 
occur approximately 14 months after the end of the prior performance 
year. As discussed later in that section, the amount from this 
calculation, if different from zero, would be applied to the NPRA for 
the subsequent performance year, as well as the post-episode spending 
and ACO overlap calculation in order to determine the amount of the 
payment Medicare would make to the EPM participant or such 
participant's repayment amount. We note that the subsequent 
reconciliation calculation would be combined with the previous 
calculation of NPRA for a performance year to ensure the stop-loss and 
stop-gain limits discussed in section III.D.7.b. and III.D.7.c.(1) of 
the proposed rule are not exceeded for a given performance year.
    For the performance year 1 reconciliation process, we would 
calculate an EPM participant's NPRA as previously described, and if 
positive, such participant would receive the amount as a reconciliation 
payment from Medicare, subject to the stop-gain limit for performance 
year 1. If negative, the EPM participant would not be responsible for 
repayment to Medicare, consistent with our proposal to phase in 
financial responsibility beginning in the second quarter of performance 
year 2.
    For the performance year 2 reconciliation process, we would 
calculate two separate NPRAs for an EPM participant--one for episodes 
that ended during performance year 2 (NDR) and a second for episodes 
that ended during performance year 2 (DR). While these NPRAs would be 
separately determined for each of these two periods, whether an EPM 
participant receives a Medicare reconciliation payment or makes a 
Medicare repayment in performance year 2 would be determined based on 
the sum of these two separately determined NPRAs. The NPRA for both 
performance year 2 (NDR) and performance year 2 (DR) would be subject 
to the same stop-gain limit of 5 percent, but because EPM participants 
would only have repayment responsibility for negative NPRA in 
performance year 2 (DR), the stop-loss limit of 5 percent would only 
apply to performance year 2 (DR). Thus, if an EPM participant's NPRA 
for the first quarter of performance year 2 is positive, that amount 
would be counted toward a reconciliation payment from Medicare, subject 
to the stop-gain limit for performance year 2. If negative, the EPM 
participant would not be responsible for repayment to Medicare of the 
amount determined for performance year 2 (NDR). If an EPM participant's 
NPRA is positive for episodes ending during performance year 2 (DR), 
that amount would be counted toward a reconciliation payment from 
Medicare, subject to the stop-gain limit for performance year 2. If 
negative, the EPM participant would be responsible for repayment to 
Medicare of the amount determined for episodes ending during 
performance year 2 (DR), subject to the stop loss limits for 
performance year 2 (DR). During the subsequent reconciliation process 
for performance year 2, we would also calculate the prior performance 
year's actual EPM episode payments a second time separately for 
episodes that ended during performance year 2 (NDR) and for episodes 
that ended during performance year 2 (DR).
    Also, starting with the EPM reconciliation process for performance 
year 2, in order to determine the reconciliation or repayment amount, 
the amount from the subsequent reconciliation calculation would be 
combined with the NPRA for that subsequent year. The result of the 
post-episode spending calculation for performance year 1, as discussed 
in section III.D.7.e. of the proposed rule, and the dollar amount of 
the EPM discount percentage that was paid out as shared savings to an 
ACO during the prior year as specified in section III.D.6.b. of the 
proposed rule, would also be added to the NPRA and subsequent 
reconciliation calculation in order to create the reconciliation 
payment or repayment amount. If the amount is positive, and if the EPM 
participant is in the acceptable or better quality category for the EPM 
(discussed further in section III.E.3.f of the proposed rule), the EPM 
participant would receive the amount as a reconciliation payment from 
Medicare. If the amount is negative, Medicare would hold the EPM 
participant responsible for repaying the absolute value of the 
repayment amount following the rules and processes for all other 
Medicare debts. For example, when we conduct reconciliation for 
performance year 2 in early 2019, we would calculate the performance 
year 2 NPRA and the subsequent reconciliation calculation, post-episode 
spending, and ACO overlap calculation for performance year 1. These 
amounts would be added together to create the reconciliation payment or 
repayment amount.
    Note that given our proposal to not hold EPM participants 
financially responsible for repayment for the first performance year, 
during the reconciliation process for performance year 2, the 
subsequent reconciliation 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. 
Likewise given our proposal to not hold EPM participants financially 
responsible for repayment for episodes ending during performance year 2 
(NDR), during the reconciliation process for performance year 3, the 
subsequent reconciliation calculation amount for performance year 2 
(NDR) would be compared against the performance year 2 (NDR) NPRA to 
ensure that the sum of the NPRA calculated for performance year 2 (NDR) 
and the subsequent reconciliation calculation for performance year 2 
(NDR) is not less than zero.

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    For performance year 2 (DR) and performance years 3 through 5, 
though, we proposed that Medicare would hold the participant 
responsible for repaying part or all of the absolute value of the 
repayment amount, as proposed in section III.D.2.c. of the proposed 
rule, following the rules and processes for all other Medicare debts. 
Table 17 illustrates a simplified example of how the subsequent 
reconciliation calculation may affect the following year's 
reconciliation payment. Note that this example assumes the EPM 
participant is not responsible for post-episode spending or ACO overlap 
for performance year 1.

                                                         TABLE 17--Sample Reconciliation Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Difference
                                                                          Performance year 1      between PY1                           Reconciliation
                                                      Performance year 1      subsequent          subsequent      Performance year 2    payment made to
                                                          (2017)  NPRA      reconciliation      reconciliation       (2018)  NPRA*      EPM participant
                                                                              calculation       calculation and                        in quarter 2 2019
                                                                                                     NPRA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Participant A.......................................            $50,000             $40,000           ($10,000)             $25,000             $15,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note the calculation of NPRA for performance year 2 represents the combined amounts of the NPRA for performance year 2 (NDR) and performance year 2
  (DR).

    The second column represents the NPRA calculated for performance 
year 1, meaning that EPM participant A's aggregated episode payment was 
$50,000 below the sum of quality-adjusted target prices for all of 
Participant A's EPM episodes. The third column represents the 
subsequent reconciliation calculation, indicating that when calculating 
actual EPM-episode payments during performance year 1 a second time, we 
determined that Participant A's aggregated EPM-episode payment was 
$40,000 below the sum of quality-adjusted target prices for all of 
Hospital A's EPM episodes, due to claims run out, accounting for model 
overlap, or other reasons. The fourth column represents the difference 
between the subsequent reconciliation calculation and the raw NPRA 
calculated for performance year 1. This difference is then combined 
with the amount in the fifth column to create the reconciliation 
payment amount for PY2, which is reflected in the sixth column.
    This reconciliation process would account for overlap between the 
EPMs and other CMS models and programs as discussed in section 
III.D.6.b of the proposed rule, and would also involve updating 
performance year EPM-episode claims data. We also noted that in cases 
where an EPM participant has appealed one or more of its EPM quality 
measure results through the HIQR Program appeal process (which is not 
part of the proposed EPM appeals process), where such HIQR Program 
appeal findings would result in a different effective discount factor 
for the EPM participant to calculate the quality-adjusted target prices 
from EPM-episode benchmark prices, the subsequent reconciliation 
calculation would account for these changes as well.
    For example, for performance year 1 for these EPMs in 2017, we 
would capture claims submitted by March 1, 2018, and reconcile payments 
for EPM participants approximately 6 months after the end of the 
performance year 1 in quarter 2 of calendar year 2018. We would carry 
out the subsequent reconciliation calculation in the following year in 
quarter 2 of calendar 2019, simultaneously with the reconciliation 
process for the second performance year, 2018. Table 18 displays the 
reconciliation timeframes for the EPMs.

                                                     Table 18--Timeframe for Reconciliation for EPMs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  Calculation amounts
                         EPM performance      Reconciliation claims                                Second reconciliation, ACO         included in
 EPM performance year         period              submitted by              NPRA calculation        overlap, and post-episode    reconciliation payment
                                                                                                      spending calculations      and  repayment amounts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 1*...............  Episodes           March 1, 2018.............  Q2 2018...................  March 1, 2019.............  Q2 2019
                         beginning on or
                         after July 1,
                         2016 and ending
                         through December
                         31, 2017.
Year 2................  Episodes ending    March 1, 2019.............  Q2 2019...................  March 1, 2020.............  Q2 2020
                         January 1, 2018
                         through December
                         31, 2018.
Year 3................  Episodes ending    March 1, 2020.............  Q2 2020...................  March 2, 2021.............  Q2 2021
                         January 1, 2019
                         through December
                         31, 2019.
Year 4................  Episodes ending    March 2, 2021.............  Q2 2021...................  March 1, 2021.............  Q2 2021
                         January 1, 2020
                         through December
                         31, 2020.
Year 5................  Episodes ending    March 1, 2022.............  Q2 2022...................  March 1, 2023.............  Q2 2023
                         January 1, 2021
                         through December
                         31, 2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note that the reconciliation for Year 1 would not include repayment responsibility from EPM participants.

    We proposed this approach in order to balance our goals of 
providing reconciliation payments in a reasonable timeframe, while 
being able to account for overlap and all Medicare claims attributable 
to EPM episodes. We believe that beginning to pull claims 2 months 
after the end of the performance year would provide sufficient claims 
run-out to conduct the reconciliation in a timely manner, given that 
our performance year includes EPM episodes ending, not beginning, by 
December 31st. We noted 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 also noted our 
recognition that by

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pulling claims 2 months after the end of the performance year to 
conduct reconciliation, we would not have complete claims run-out. 
However, we believed that the 2 months of claims run-out would be an 
accurate reflection of EPM-episode payments and consistent with the 
claims run-out timeframes used for reconciliation in other payment 
models, such as BPCI Models 2 and 3 and the CJR model. Otherwise, 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 were 
concerned that this approach would significantly delay earned 
reconciliation payments under the EPMs.
    However, we proposed to conduct a subsequent reconciliation 
calculation 14 months after the end of a performance year to account 
for canceled episodes, post-episode spending, overlap with other CMS 
models and programs, and any remaining claims available at that time. 
The proposals for the annual reconciliation and subsequent 
reconciliation calculation were included in Sec.  512.305 and Sec.  
512.307. We sought comment on these proposals for an annual 
reconciliation and subsequent calculation.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters supported the proposal for 
reconciliation payments, including the waiver of deductibles and copays 
with respect to reconciliation payments and Medicare repayments. While 
one commenter indicated that the proposed timeframes for reconciliation 
were reasonable, most of the commenters requested that CMS provide 
reconciliation payments or estimates of what reconciliation payments 
would be on a more frequent basis than annually. In most cases, these 
commenters recommended reconciliation payments on a quarterly basis 
(some noted this would be similar to BPCI and recommended the BPCI 
true-up process whereby we would make an initial reconciliation with 
three revisions (or ``true-ups'') in order to include additional claims 
run outs and any other changes that might have occurred with the third 
(final) true-up occurring 9 months after the initial reconciliation 
rather than 12 months later than the subsequent reconciliation as is 
the case for the EPMs and CJR. Another commenter recommended quarterly 
reconciliation determination with the option of an annual 
reconciliation for those hospitals preferring such while another 
recommended the opposite. Commenters favoring more frequent 
reconciliations suggested that doing so would provide hospitals with 
better cash flow that could be used to invest in the changes needed to 
be successful as well as more immediate feedback that would enable 
participants to better assess their performance and determine which of 
their approaches are effective as well as what changes might be needed 
to improve their performance. Further, if hospitals had more up front 
funding, they could in turn provide more frequent financial rewards to 
downstream collaborating providers, which would better maintain 
incentives on a more consistent basis to promote care coordination, 
with improved quality and efficiencies. One commenter suggested that 
the proposed annual reconciliation payment schedule could impede care 
redesign efforts and undermine gainsharing.
    In addition to comments on the frequency of reconciliation, a 
commenter recommended that reconciliation occur at the beneficiary 
episode level rather than in aggregate across beneficiary episodes, as 
we proposed, because the former would better focus financial incentives 
on each episode as hospitals would recognize that they bear risk for 
every episode individually rather than in aggregate. In this 
commenter's view, CMS' proposal will more likely encourage gaming 
across episodes where a hospital tries to offset losses from one 
episode through savings on another.
    Response: We appreciate the comments we received supporting our 
proposal for an annual reconciliation with subsequent calculation as 
well as the suggestions for more frequent reconciliations or estimated 
reconciliation amounts. We are not persuaded to make reconciliation 
payments or estimated payment amounts available more frequently than on 
an annual basis. We are concerned that, particularly for small 
hospitals, the number of cases included in quarterly data would limit 
the representativeness of the data, which could produce somewhat 
misleading results. For similar reasons, do not believe that making 
more frequent reconciliation payments available than annually would 
advantage participants based on the expectation that additional 
resources would enhance their ability to develop infrastructure or 
gainsharing arrangements. Last, we are not persuaded to adopt the 
suggestion to determine reconciliations at the episode level. The 
commenter suggested that the proposed policy will result in hospitals 
``gaming'' payments by offsetting losses for one episode with savings 
in another; however, we question this view. Rather, we believe the 
issue raised in this comment and our proposal for determining 
reconciliation payments under the models is similar and analogous to 
the basis under which Medicare makes payments under its FFS prospective 
systems in general. That is, for Medicare FFS prospective payments, an 
``average'' payment is typically determined for a specific procedure or 
set of services where participants might ``gain'' or ``lose'' for a 
specific case but, on average and in aggregate across all cases, are 
paid that average amount. Given their recognition of this, we would not 
anticipate that Medicare providers and suppliers ``game'' their 
payments to offset losses on a case-by-case basis. Likewise, we would 
not expect that EPM participants would be any more or less encouraged 
to ``game'' episode payments depending on whether they received 
reconciliation payments at the episode level or in aggregate across all 
episodes.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to make 
an annual reconciliation with subsequent calculation. Our final 
policies for an annual reconciliation and subsequent calculation are 
included in Sec.  512.305 and Sec.  512.307.
    We would also note that since we have delayed the requirement to 
assume downside risk to performance year 3, except for participants 
that elect downside risk in performance year 2, we will not be 
performing two separate aggregations, as we had proposed, to separately 
create one NPRA for the period in performance year 2 without downside 
risk and another NPRA for the period where downside risk would apply.
    Thus, in contrast to our proposal, unless the EPM participant 
elected downside risk in performance year 2, we would calculate an EPM 
participant's NPRA for the performance year 1 and 2 reconciliation 
processes, and if positive, such participant would receive the amount 
as a reconciliation payment from Medicare, subject to the stop-gain 
limit for performance year 1 or performance year 2.
    Also, starting with the EPM reconciliation process for performance 
year 2, in order to determine the reconciliation or repayment amount, 
the amount from the subsequent reconciliation calculation would be 
combined with the NPRA for that subsequent year. The result of the 
post-episode spending calculation for performance year 1, as discussed 
in section III.D.7.e. of the proposed rule, and the dollar amount of 
the EPM discount percentage that was paid out as

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shared savings to an ACO during the prior year as specified in section 
III.D.6.b. of the proposed rule, would also be added to the NPRA and 
subsequent reconciliation calculation in order to create the 
reconciliation payment or repayment amount. If the amount is positive, 
and if the EPM participant is in the acceptable or better quality 
category for the EPM (discussed further in section III.E.3.f of the 
proposed rule), the EPM participant would receive the amount as a 
reconciliation payment from Medicare. If the amount is negative, 
Medicare would hold the EPM participant responsible for repaying the 
absolute value of the repayment amount following the rules and 
processes for all other Medicare debts. Though the NPRA for performance 
year 2 will be subject to a stop-loss limit of 0 percent, except for 
EPM participants that elected downside risk in performance year 2, it 
is still possible that EPM participants not electing downside risk for 
performance year 2 could owe a repayment amount because of the 
subsequent reconciliation calculation, post-episode spending 
calculation, and ACO overlap calculation for performance year 1. For 
example, when we conduct reconciliation for performance year 3 in early 
2020, we would calculate the performance year 3 NPRA and the subsequent 
reconciliation calculation, post-episode spending, and ACO overlap 
calculation for performance year 2. These amounts would be added 
together to create the reconciliation payment or repayment amount.
    Note that given our proposal to not hold EPM participants 
financially responsible for repayment for the first performance year 
and the stop-loss limit of 0 percent for NPRA for the second 
performance year (except for EPM participants that otherwise elected 
downside risk),during the reconciliation process for performance year 
3, the subsequent reconciliation calculation amount (for performance 
year 2) would be compared against the performance year 2 NPRA to ensure 
that the sum of the NPRA calculated for performance year 2 and the 
subsequent reconciliation calculation for year 2 is not less than zero.
    For an EPM participant that elected downside risk in performance 
year 2 and all participants in performance years 3 through 5, Medicare 
would hold the participant responsible for repaying part or all of the 
absolute value of the repayment amount, as proposed in section 
III.D.2.c. of the proposed rule, following the rules and processes for 
all other Medicare debts.
    Also, we would note that this final rule corrects proposed Sec.  
512.305(d)(iii) so that it refers to Sec.  512.460(b) rather than Sec.  
512.460(b)(5).
c. Reconciliation Report
    For EPM participants to receive timely and meaningful feedback on 
their performance under the models as well as better understand the 
basis of their reconciliation payment or Medicare repayment for a given 
performance year, if any, we proposed to annually issue to EPM 
participants a reconciliation report (81 FR 50867), similar to the CJR 
Reconciliation Report we make available to CJR participants (80 FR 
73408). We proposed that these reports would contain the following 
information:
     Information on the EPM participant's composite quality 
score described in section III.E.3.a. through III.E.3.e of this final 
rule.
     The total actual episode payments for the EPM participant.
     The NPRA.
     Whether the EPM participant is eligible for a 
reconciliation payment or must make a repayment to Medicare.
     The NPRA and subsequent reconciliation calculation amount 
for the previous performance year, as applicable.
     The post-episode spending amount and ACO overlap 
calculation for the previous performance year, as applicable.
     The reconciliation payment or repayment amount.
    For performance year 2, we proposed that the reconciliation report 
would include information separately for the performance year 2 (NDR) 
and performance year 2 (DR) portions of that year.
    As discussed in section III.D.8 of the proposed rule, EPM 
participants would review their reconciliation report and would 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 EPM participant provides such notice, the reconciliation 
report would be deemed final within 45 calendar days after it is 
issued, and CMS would proceed with payment or repayment. The proposal 
to issue a reconciliation report was included in Sec.  512.305(f). We 
sought comments on our proposal to issue a reconciliation report to EPM 
participants and what other information, if any, would be helpful to 
include in this report.
    The following is a summary of the comments received and our 
responses.
    Comment: As noted previously in section III.D.5.a. and b. of this 
final rule, some commenters requested that reconciliation payments or 
estimates of what reconciliation payments would be more frequently than 
on an annual basis. A commenter requested that, given the many 
adjustments to costs, including various value-based payments such as 
HRRP, CMS make publicly available and to the CJR model participant 
hospitals and EPM participants documentation of the various adjustments 
that would allow participants to verify or validate the adjustments and 
calculations. This commenter was concerned that providers who are 
taking on risk could otherwise be penalized multiple times for 
readmissions in the bundled payment program as well as other value-
based payment programs.
    Response: For the reasons previously articulated in this comment 
and response section, we are not persuaded to make reconciliation 
reports available for frequently than on an annual basis.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
annually issue a reconciliation report. Our final policy for issuing a 
reconciliation report is included in Sec.  512.305(f).
6. Adjustments for Overlaps With Other Innovation Center Models and CMS 
Programs
a. Overview
    Three issues may arise in overlap situations that must be addressed 
under EPM. First, we acknowledge that there may be circumstances where 
a hospital in a geographic area selected for the AMI, CABG or SHFFT 
model is also participating in BPCI for the same episode. We refer to 
this as ``provider overlap.'' Second, there may be situations where a 
Medicare beneficiary receives care that could potentially be counted 
under more than one episode or total cost of care payment model. We 
refer to this as ``beneficiary overlap.'' Finally, EPM reconciliation 
payments and Medicare repayments made under Parts 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 
beneficiary's cost of care under Medicare. Therefore, a payment 
reconciliation policy is necessary in order to credit the entity that 
is closest to that care for the episode of care in terms of time, 
location, and care management responsibility.
    We established our proposal for provider overlap at Sec.  
512.100(b) and Sec.  512.230(g). We established our proposal for 
beneficiary overlap at

[[Page 331]]

Sec.  512.230(f), Sec.  512.230(h), and Sec.  512.230(i). We 
established our proposal for payment reconciliation at Sec.  512.210 
and Sec.  512.305. We sought comment on our proposals to account for 
overlap between EPMs and other CMS models or programs.
    The following is a summary of the comments received and our 
responses.
    Comment: We received numerous comments related to overlap between 
EPMs and other CMS models or programs.
    Response: For further discussion of comments related to model and 
program overlap, we refer readers to the specific sections later in 
this section of this final rule.
b. Provider Overlap
(1) BPCI Participant Hospitals in Geographic Areas Selected for EPMs
    Provider overlap exists when a hospital in a geographic area 
selected for the AMI, CABG or SHFFT model is also an episode initiator 
in BPCI for an episode anchored by that EPM's DRG. BPCI is an episode 
payment model testing AMI, CABG, SHFFT, and 45 other episodes in acute 
care, post-acute care, or both acute care and post-acute care settings.
    Similar to CJR, we proposed for the EPMs that in the geographic 
areas where the AMI, CABG and SHFFT models will be implemented, an 
acute care hospital participating in BPCI Model 2 or 4 will participate 
in an EPM for episodes anchored by EPM MS-DRGs that are not covered 
under the hospital's current BPCI agreement. If a BPCI hospital in an 
EPM-selected area withdraws from BPCI episodes anchored by EPM MS-DRGs, 
the BPCI hospital will participate in the EPMs from which it was 
previously excluded. As we stated in the proposed rule, we believe this 
proposal promotes accountable care by ensuring beneficiary coverage by 
BPCI or an EPM in selected areas.
    We established the proposal for hospitals in geographic areas 
selected for EPMs that are also participating in BPCI episodes anchored 
by EPM DRGs at Sec.  512.100(b). We sought comment on this proposal. 
The following is a summary of the comments received and our responses.
    Comment: Overall, we received considerable support from commenters 
for our proposal to continue to give precedence to existing BPCI models 
where the EPM participant was also participating in a BPCI model that 
overlapped with a SHFFT, AMI, or CABG EPM. Several commenters requested 
that existing precedence rules should continue for any similar 
voluntary models implemented after September 2018 when the current BPCI 
model is scheduled to end.
    Response: We appreciate the many comments of support received for 
this aspect of the model. We wish to clarify that the current order of 
precedence for model overlaps pertains only to the currently existing 
models. CMS shall evaluate how to handle model overlaps for any future 
models at the time of implementation based on experience and knowledge 
gained through previous models.
    We also recognize that this policy could indirectly impact 
clinicians with financial arrangements with an EPM participant, 
therefore, we refer to section III.A.2 for discussions of the ability 
for eligible clinicians to become qualifying APM participants (QP) as 
affiliated practitioners of EPMs that meet the Advanced APM criteria 
under the Quality Payment Program. Specifically, we are referring to 
the policy that eligible clinicians can meet program thresholds through 
participation in multiple Advanced APMs. We further discuss the 
considerations for a new alternative bundled payment model, and in 
particular the consideration for such a program to qualify as an 
Advanced APM, in section III.A.3.
    Comment: Several commenters recommended that in order to minimize 
overlap with existing BPCI models, CMS exclude MSAs where there are 
existing BPCI models. A commenter recommended that BPCI participating 
hospitals be exempt from having to participate in multiple models even 
if there were no overlap in the episodes covered under each model. For 
example, a hospital participating in BPCI for SHFFT episodes would be 
exempt from having to participate in CABG or AMI EPMs.
    Response: In identifying eligible MSAs where the EPMs could be 
implemented, we proposed to explicitly factor in the number of non-BPCI 
eligible cases when considering the relevant minimum volume of cases in 
an MSA. We refer readers to sections III.B.4., ``Geographic Unit of 
Selection and Exclusion of Selected Hospitals'' and IIII.B.5., 
``Overview and Options for Geographic Area Selection for AMI and CABG 
Episodes'' of this final rule for a more detailed discussion of the 
factors considered in the selection of MSAs for EPMs. We do not believe 
it is appropriate to exempt hospitals from participating in EPMs solely 
because they are participating in a BPCI model for another non-
overlapping episode. To do so would limit the potential volume of cases 
for evaluation purposes and could lead to patient steerage in areas 
where some hospitals in the same market may be participating in the EPM 
and others may not. Moreover, while we acknowledge the potential for 
some operational differences for those hospitals implementing multiple 
models, hospitals already participating in BPCI may, in fact, already 
have some of the infrastructure in place and be well positioned to 
succeed in implementing EPMs as well.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for 
handling overlap situations between EPM and BPCI participating 
hospitals. That is, in the geographic areas where the AMI, CABG and 
SHFFT models will be implemented, an acute care hospital participating 
in BPCI Model 2 or 4 will participate in an EPM only for episodes 
anchored by EPM MS-DRGs that would not otherwise be a BPCI episode. 
BPCI episodes would take precedence over EPM episodes.
(2) BPCI Physician Group Practice (PGP) Episode Initiators in Hospitals 
Participating in EPMs
    It is possible that a physician in a BPCI PGP may treat a Medicare 
beneficiary in a hospital participating in one or more EPMs. We 
proposed that if a beneficiary is admitted to an EPM participant for an 
episode anchored by EPM MS-DRGs that is also covered under the PGP's 
BPCI agreement and the attending or operating physician on the 
admission's inpatient claim is a member of the BPCI PGP, the BPCI 
episode will take precedence over the EPM episode for which the 
hospital would otherwise be the accountable entity. In other words, if, 
for any portion of the EPM episode, a beneficiary would also be in a 
BPCI PGP episode, we will cancel an episode that has already been 
initiated or never initiate the EPM episode in the first place. For 
example:
     A beneficiary is admitted for a CABG to an EPM participant 
in the CABG model. The attending or operating physician on the 
inpatient claim for the admission is in a BPCI Model 2 PGP 
participating in CABG. The episode is initiated under BPCI; an EPM 
episode does not initiate.
     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. The beneficiary receives a PCI while hospitalized. 
The attending or operating physician on the inpatient claim for the 
admission is in a BPCI Model 2 PGP participating in PCI episodes but 
not medical AMI episodes. A PCI episode is initiated under BPCI; an EPM 
episode does not initiate.

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     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. A PCI was not part of the beneficiary's treatment. 
The attending or operating physician on the inpatient claim for the 
admission is in a BPCI Model 2 PGP participating in PCI episodes only. 
The episode is initiated under the AMI model. A PCI episode under BPCI 
Model 2 would not initiate unless a PCI were performed on the 
beneficiary, and
     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. A CABG was not part of the beneficiary's treatment. 
The attending or operating physician on the inpatient claim is in a 
BPCI Model 2 PGP participating in CABG episodes only. The episode is 
initiated under the AMI model. A CABG episode under BPCI Model 2 would 
not be initiated unless a CABG was performed on the beneficiary while 
hospitalized.
    We established the proposal for BPCI PGP episode initiators in 
hospitals participating in EPMs at Sec.  512.230(g). We sought comment 
on this proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported our proposal to give precedence 
to situations where there was overlap between an episode attributed to 
a PGP voluntarily participating in BPCI and one that could otherwise 
have been attributed to an EPM participating hospital. However, we 
received several comments that expressed disagreement with this policy. 
These commenters believed that the hospital participant should have 
priority for having responsibility and financial accountability for the 
episode. A commenter expressed the specific concern that PGPs 
participating in BPCI could potentially select lower intensity cases 
and steer higher intensity and potentially more costly cases to non-
BPCI, EPM participant hospitals. Concern was also expressed by some 
commenters that attributing episodes to BPCI in these situations would 
lower the volume of episodes available to the hospital and potentially 
make it less cost effective for the hospital to implement operational 
changes necessary to better manage episodes.
    Response: We acknowledge the potential for overlap between PGP 
initiated BPCI episodes and hospital attributed EPM episodes in those 
MSAs selected for EPM participation where there are also PGP BPCI 
initiators. CMS will monitor admission and transfer patterns and trends 
to identify any inappropriate patient steerage that may be occurring. 
On balance, however, we believe it is important to maintain CMS' 
commitment to existing models for which participants have volunteered 
and in which they are already actively involved. As these models end 
and CMS has the opportunity to evaluate their performance, including 
the impact of overlaps, we will incorporate the findings in the design 
of future models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for 
handling overlaps between BPCI PGP episodes and episodes initiated in 
hospitals participating in EPMs.
(c) Beneficiary Overlap
(1) Beneficiary Overlap With BPCI
    As we stated in the proposed rule, we also need to account for 
instances where a different model's episode could initiate during an 
ongoing EPM episode. We proposed that any BPCI Model 2, 3 or 4 episode, 
regardless of its anchor DRG exclusion status from an EPM episode 
definition, takes precedence over an AMI, CABG or SHFFT episode such 
that it would cancel or prevent the initiation of an AMI, CABG or SHFFT 
episode. For example--
     If a beneficiary is in an ongoing AMI model episode and is 
treated for SHFFT by a hospital, PGP physician, or post-acute care 
provider participating in a BPCI SHFFT episode, the initial AMI model 
episode will be canceled. The second entity will initiate a new episode 
under BPCI subject to the payment rules under that model, and
     If a beneficiary is in an ongoing BPCI AMI episode and is 
readmitted for SHFFT to an EPM participant in the SHFFT model, the BPCI 
episode would continue and the SHFFT model episode would not initiate.
    Participants in BPCI have an expectation that eligible episodes 
will be part of the BPCI model test, whereas, based on our proposal, 
EPM participants would be aware that episodes may be canceled when 
there is overlap with BPCI episodes. As stated in the proposed rule, we 
aim to preserve the integrity of ongoing model tests without 
introducing major modifications that could make evaluation of existing 
models more challenging. Given the current scheduled end date for BPCI, 
we proposed to give precedence to episodes covered under BPCI Models 2, 
3 and 4 initiated on or before September 30, 2018.
    In the proposed rule, we acknowledged that this proposed BPCI-EPM 
overlap policy differs from the CJR beneficiary overlap policy, where a 
beneficiary may be in a CJR LEJR episode and a non-LEJR BPCI episode 
concurrently. However, in CJR this overlap is rare. Within the 90-day 
post-hospital discharge period, included readmissions occur for less 
than 1 percent of LEJR beneficiaries. In contrast, included 
readmissions occur for approximately 25 percent of AMI and CABG 
beneficiaries. The high incidence of included readmissions for AMI, 
CABG, and SHFFT episodes necessitates a different policy to avoid 
double-paying savings and double-counting losses, as well as not 
initiating new episodes when the readmission is a complication of care 
during the first episode that could have been managed.
    As we stated in the proposed rule, we considered alternative 
options for dealing with situations in which a beneficiary in an EPM 
episode could also be in a BPCI episode, including allowing the first 
episode initiated to take precedence regardless of the model under 
which it occurred. This would encourage more accountable care, 
particularly with AMI, CABG, and SHFFT episodes that are more likely to 
involve readmissions for complications than generally occur with LEJR. 
However, preventing BPCI episodes from being initiated, particularly 
those initiated by post-acute care providers which, by definition, 
occur after an anchor hospitalization, could substantially reduce the 
number of such episodes and our ability to fully test BPCI. Moreover, 
operational challenges due to different timelines for payment 
reconciliation are of concern.
    We established the proposal for beneficiary overlap with BPCI at 
Sec.  512.230(h). We sought comment on this proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: As with the previously described overlap situations, we 
received numerous comments in support of giving precedence to the BPCI 
initiated episode. However, many commenters did express concern over 
how EPM participant hospitals would be able to know whether a 
presenting patient is already covered by a BPCI episode or if an EPM 
episode is subsequently cancelled. Several commenters stated that it 
was unrealistic to expect hospitals or other providers to identify such 
patients in ``real-time'' and requested CMS clarify its administrative 
policies for identifying and informing EPM participants about 
beneficiaries whose episodes are initiated and then cancelled for any 
reason. A commenter requested at least quarterly notification. The 
commenters pointed out that EPM participant awareness of episode 
cancellation is important for several

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reasons, including EPM participant calculation and monitoring of 
episode spending; beneficiary notification; provision of beneficiary 
engagement incentives; and determination of beneficiary eligibility for 
certain rule waivers. In addition, these commenters expressed concern 
about the potential for beneficiary confusion and dissatisfaction with 
multiple coordinators of care, as well as costly duplication of 
services when multiple entities believe they are accountable for the 
episode.
    Response: We acknowledge the potential for confusion for providers 
participating in markets where there are BPCI participants or in 
situations where patients may travel out of area to receive services 
that result in cancelling EPM episodes. We also appreciate the interest 
of the commenters in conducting timely analyses of EPM episode 
spending, as well as ensuring that the requirements of the EPM are met 
in their treatment of Medicare beneficiaries. The potential for this to 
occur makes it important for EPM participants to become familiar with 
the range of models operating in their market and to maintain ongoing 
relationships with their patients after discharge, as well as to 
develop collaboration arrangements with physicians. Even with this, we 
acknowledge that EPM participants and their staff may not know when all 
overlaps occur. Given our plans for providing and updating episode 
claims data to EPM participants upon request as frequently as quarterly 
as discussed in section III.K.5. of this final rule, we will explore 
adding additional data elements to the beneficiary-identifiable claims 
data provided to EPM participants that would indicate potential for 
episode cancellation such as admission of a beneficiary to a hospital 
or post-acute care facility that initiates episodes under BPCI or 
receipt of inpatient services by a physician in a BPCI PGP. To the 
extent adding such indicators to the claims data is feasible, providing 
this information through the claims data shared with EPM participants 
would ensure that EPM participants are informed as frequently as 
quarterly about beneficiary circumstances that could result in EPM 
episode cancellation. This information would not be real-time, however, 
and while based on the best available information at the time, it would 
be subject to change due to the lag-time for the relevant claim to be 
submitted and processed and then reported back to the EPM participant. 
We note that at reconciliation, complete information would be provided 
to EPM participants about those episodes that were ultimately included 
in the participant's reconciliation report as discussed in section 
III.D.5. of this final rule.
    We note that we expect EPM participants to be actively managing all 
of their beneficiaries with conditions characterized by AMI, CABG, or 
SHFFT based on their care pathways, regardless of the model of program 
that may ultimately apply to the beneficiary under the uncommon 
circumstances of EPM episode cancellation. We also want to emphasize 
the importance of strong, ongoing communication among providers in a 
given geographic area caring for beneficiaries in similar models or 
programs where provider interests in delivering high quality, efficient 
health care should align.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for 
handling situations in which a beneficiary eligible for coverage under 
an EPM is already covered by a BPCI episode or subsequently becomes 
eligible for coverage under a BPCI episode during the EPM episode 
period. Recognizing the limitation on available data, CMS will work to 
provide better, more timely informational resources to participants, 
where feasible, to assist them in identifying episodes that may be 
ineligible or cancelled due to overlaps.
(2) Beneficiary Overlap With the CJR Model and Other EPMs
    As discussed in section III.C.4. of the proposed rule, if a 
beneficiary is in a SHFFT, AMI or CABG model or CJR episode and has a 
hospital readmission that is not excluded from the ongoing episode 
definition and would otherwise initiate an episode in a different EPM 
or the CJR model, that hospital readmission will not initiate another 
episode or cancel the ongoing episode. If a beneficiary is in a SHFFT, 
AMI or CABG model episode or CJR episode and has a hospital readmission 
that is excluded from the ongoing episode definition and could initiate 
an episode in a different EPM or the CJR model, the subsequent EPM or 
CJR episode will initiate, the ongoing episode would continue, and both 
episodes will occur concurrently. For example--
     The CJR model episode definition does not exclude the MS-
DRGs that would initiate a SHFFT model episode. If a beneficiary is in 
the CJR model and receives SHFFT at an EPM participant in the SHFFT 
model during the ongoing CJR episode, the CJR episode will continue and 
the SHFFT model episode will not initiate;
     The SHFFT model episode definition does not exclude the 
MS-DRGs that would initiate a CJR LEJR episode. If a beneficiary is in 
the SHFFT model and receives an LEJR at a CJR hospital during the 
ongoing SHFFT episode, the SHFFT episode will continue and the CJR 
episode will not initiate;
     The SHFFT model episode definition does not exclude the 
MS-DRGs that would initiate an AMI model episode. If a beneficiary is 
in the SHFFT model and is readmitted for an AMI to an EPM participant 
in the AMI model during the ongoing SHFFT model episode, the SHFFT 
model episode will continue and the AMI model episode will not 
initiate;
     The AMI model episode definition does not exclude the MS-
DRGs that would initiate a CABG model episode. If a beneficiary is in 
the AMI model and is readmitted for a CABG to the same or another EPM 
participant in the CABG model during the ongoing AMI model episode, the 
AMI model episode will continue and the CABG model episode will not 
initiate.
    As stated in the proposed rule, we believe that an overlap policy 
that gives precedence to the ongoing episode over subsequent episodes 
initiated during the post-hospital discharge period, except where the 
second admission is explicitly excluded, aligns with our stated goal of 
encouraging more accountable care. Moreover, this policy would 
establish an operationally straightforward policy for future EPMs.
    We established the proposal for beneficiary overlap with the CJR 
model and other EPMs at Sec.  512.230(i). We sought comment on this 
proposal.
    We received no comments related to our proposed overlap policy that 
gave precedence to the ongoing episode when there was the potential for 
overlap between CJR and EPM episodes that were not otherwise excluded 
from the first episode's definition.
    Final Decision: Given that we received no public comments on the 
proposed policy for beneficiary overlap with the CJR model and the 
EPMs, we are finalizing the proposal, without modification, to give 
precedence to an ongoing EPM episode over subsequent episodes initiated 
during the post-hospital discharge period, except where the second 
admission is explicitly excluded from the initial episode.
(3) Beneficiary Overlap With Shared Savings Models and Programs
    We explained in the proposed rule our expectation that many 
beneficiaries in an AMI, CABG or SHFFT model episode will also be 
assigned to a

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Shared Savings Program ACO or a participant in an ACO model initiated 
by the CMS Innovation Center. For the purposes of this discussion, the 
term ACO will be used generically to refer to either Shared Savings 
Program or Innovation Center ACO models. Shared savings payments to 
ACOs and shared savings losses repaid by ACOs to CMS have the potential 
to overlap with EPM reconciliation payments. As with CJR, we proposed 
to attribute savings achieved during an EPM episode to the EPM 
participant, and to include EPM reconciliation payments for ACO-aligned 
beneficiaries as ACO expenditures. In order to address comments 
received during rulemaking for CJR, we proposed to test an alternative 
strategy to address ACO overlap. Specifically, we proposed to exclude 
beneficiaries from EPMs who are aligned to ACOs in the Next Generation 
ACO model and End Stage Renal Disease (ESRD) Seamless Care 
Organizations (ESCOs) in the Comprehensive ESRD Care model in tracks 
with downside risk for financial losses. We did not propose to exclude 
beneficiaries assigned to Shared Savings Program ACOs in Tracks 1, 2, 
or 3. However, we sought comment on excluding beneficiaries from EPMs 
that are prospectively assigned to Shared Savings Program Track 3 ACOs 
as well as to other financial risk tracks. The Shared Savings Program 
is a national program. We do not believe that testing a new approach to 
addressing overlap, which could potentially disrupt ACO investments, 
operations, and care redesign activities, would be appropriate for all 
Shared Savings Program ACOs at this time prior to a test with a smaller 
population. As we stated in the proposed rule, we plan to monitor and 
learn from the test of excluding beneficiaries prospectively assigned 
to an ACO from risk tracks and to consider these results and comments 
in future rule-making.
    Several strong considerations drive us to otherwise follow CJR 
precedent for addressing ACO overlap. As we stated in the proposed 
rule, CMS continues to avoid double payment of savings and double 
recoupment of losses, which is an important principle of successful 
payment reform. Further, in implementing the EPMs, there would be no 
additional operational effort due to consistency in ACO overlap 
policies across models. In this respect, we anticipate little to no 
difficulty in replicating prior policy as new episode payment models 
are introduced. Third, this would have no negative financial impact on 
EPM participants, an important consideration for future EPMs. The 
payment reconciliation for EPM participants is described in section 
III.D.5. of the proposed rule.
    Therefore, we proposed to follow the policy set forth in the CJR 
Final Rule for accounting for overlap between EPMs and the Shared 
Savings Program and ACO models other than the Next Generation ACO and 
CEC models listed previously.
    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 the Shared Savings 
Program, we believe that the ACO model overlap adjustment policy should 
be aligned with the Shared Savings Program policy. Thus, we proposed 
that under EPMs, we would make an adjustment to the reconciliation 
amount to account for any of the applicable discount for an episode 
resulting in Medicare savings that is paid back through shared savings 
under the Shared Savings Program or any other ACO model, but only when 
an EPM hospital also participates in the ACO and the beneficiary in the 
EPM episode is also assigned to that ACO. This adjustment would be 
necessary to ensure that the applicable discount under the EPM 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 proposed not to make an adjustment under EPMs when a 
beneficiary receives an AMI, SHFFT, or CABG at a hospital participating 
in the corresponding EPM and is assigned 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 an EPM adjustment, given 
that the participant may have engaged in care redesign and reduced 
spending during the EPM episode. The participant may be unaware that 
the beneficiary is also assigned 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 
each of the EPMs, as discussed in section IV of the proposed rule, 
would examine overlap in such situations and the potential effect on 
Medicare savings.
    We note that our proposed policy as outlined in the proposed rule 
would entail CMS reclaiming from the EPM participant any discount 
percentage paid out as shared savings for the Shared Savings Program or 
ACO models only when the hospital is an ACO participant and the 
beneficiary is assigned to that ACO, while other total cost of care 
models such as the Comprehensive Primary Care Plus initiative (CPC+) 
would adjust for the discount percentage in their calculations. We 
believe that other ACO models in testing that share operating 
principles with the Shared Savings Program should follow the same 
policies as the EPM Shared Savings Program adjustment for certain 
overlapping ACO beneficiaries. As the landscape of CMS models and 
programs changes, we may revisit this policy through future rulemaking.
    However, there are circumstances when an alternative option may be 
appropriate to consider. Therefore, we are also considering an EPM-ACO 
overlap policy that would exclude from EPMs beneficiaries who are 
assigned to ACOs in the Next Generation ACO model and ESCOs in the 
Comprehensive ESRD Care model in tracks with downside risk for 
financial losses. Some ACOs have successfully managed acute care and 
post-acute care expenditures below regional or national mean costs, and 
expressed that the current CJR and BPCI ACO overlap policies deprives 
them of a key source of savings. We are aware of situations in certain 
markets that seem to reduce opportunities for ACOs to achieve savings 
given historic experience that indicates these particular ACOs are able 
to manage the care within episodes as successfully as EPM participants. 
Attributing savings to participants in episode payment models, such as 
CJR participants and EPM participants under the proposed rule, creates 
a problem where the ACO is accountable for coordinating a beneficiary's 
care over a performance year but is not able to benefit from savings 
achieved from episodes completed during the performance year. Data 
shows that post-acute care spending is among the most significant 
sources of savings for ACOs currently, and where they focus significant 
investments.86 87 As we discussed in the proposed rule 
certain considerations

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weigh against exclusion of all ACO-assigned beneficiaries from 
participation in EPM episodes. Such a blanket exclusion would remove a 
large proportion of Medicare FFS beneficiaries from the EPMs, many of 
whom would inevitably receive care at EPM participants. This would 
dilute the power of the EPM test and generalizability of EPM findings. 
Additionally, differences between ACO beneficiary assignment algorithms 
do not support a blanket exclusion. It is more operationally feasible 
to identify and exclude beneficiaries who are prospectively assigned to 
ACOs. In retrospective assignment models, beneficiaries may be assigned 
to an ACO at the end of the performance year, before the performance 
year, or preliminarily assigned to one ACO before the performance year 
and subsequently assigned to a different ACO after all qualifying 
services are considered. In retrospective assignment, there will be 
significant numbers of beneficiaries assigned at final reconciliation 
to a given ACO who were not identified as preliminarily assigned to 
that ACO prior to the performance year. That is, they were identified 
either as unassigned to any ACO or assigned to a different ACO. In 
prospective assignment models and tracks, the list of assigned 
beneficiaries is available prior to the start of the performance year 
and a beneficiary's assignment does not change on the basis of his or 
her utilization in the performance year (subject to various exclusions 
made on a quarterly basis, such as a beneficiary's election into a 
Medicare Advantage plan).
---------------------------------------------------------------------------

    \86\ McWilliams, J. Michael, Laura A. Hatfield, Michael E. 
Chernew, Bruce E. Landon, and Aaron L. Schwartz. ``Early Performance 
of Accountable Care Organizations in Medicare--NEJM.'' N Engl J Med. 
Massachusetts Medical Society, 13 Apr. 2016. Web. 02 May 2016. 
http://www.ncbi.nlm.nih.gov/pubmed/27075832.
    \87\ McWilliams, J. Michael, Michael E. Chernew, Bruce E. 
Landon, and Aaron L. Schwartz. ``Performance Differences in Year 1 
of Pioneer Accountable Care Organizations.'' N Engl J Med. (2015); 
372(20): 1927-936. Massachusetts Medical Society, 15 Apr. 2015. Web. 
02 May 2016. http://www.ncbi.nlm.nih.gov/pubmed/25875195.
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    Because ACOs in two-sided risk arrangements share in both savings 
and losses, they have stronger incentives than those in one-sided risk 
arrangements that share only in savings to reduce total cost of care. 
Given the possibility of paying CMS shared losses, we believe that ACOs 
in two-sided risk arrangements may be best positioned to assume the 
risk associated with EPM episodes, while ACOs in one-sided risk 
arrangements may be less well-positioned to do so. ACOs in one-sided 
risk arrangements, such as those in the Shared Savings Program Track 1, 
do not bear the risk of owing losses to CMS. In contrast, ACOs in two-
sided risk arrangements, such as the Next Generation ACO model, are 
held to as much as 80 percent to 100 percent of first dollar losses. 
Thus, we explained our belief that pursuing a blanket exclusion from 
EPMs of assigned beneficiaries from all ACOs would inappropriately 
disadvantage EPM participants that carry significant financial risk 
under EPMs.
    This proposed ACO overlap policy would grant ACOs in models and 
tracks with the highest levels of downside risk for financial losses--
the Next Generation ACO model and tracks of the Comprehensive ESRD Care 
model with downside risk for financial losses--paramount financial 
opportunity in exchange for accepting total cost of care responsibility 
for their beneficiaries. EPM participants may still realize 
opportunities to save by partnering with ACOs, but outside of the EPM 
arrangement. Specifically, we refer to section III.I. of the proposed 
rule which describes opportunities for gainsharing allowed under these 
models.
    As we stated in the proposed rule, this policy tests the effects of 
such an ACO-assigned beneficiary exclusion policy within a broader test 
of the effectiveness of EPMs. We can learn its impact on EPM 
participants and ACOs that have beneficiaries excluded from EPMs, as 
well as ACOs that do not have beneficiaries excluded from EPMs. This 
will improve our understanding about the appropriate entity to hold 
accountable for the costs within the episode. For this reason we 
recommended this test be limited to the AMI, CABG, and SHFFT, and CJR 
models, and ACO models being conducted under CMS' Innovation Center, 
and did not propose to implement the policy more broadly to other ACOs, 
such as those in the Shared Savings Program. In proposing the exclusion 
of beneficiaries in only a limited number of ACO initiatives we 
attempted to balance the desire to build a new payment reform 
initiative while mitigating the potential challenges to existing shared 
savings models and programs. We sought comment on this proposal as well 
as input on extending the proposal to CJR and other ACOs accepting two-
sided risk, such as those ACOs in the Shared Savings Program Track 3.
    We have investigated CMS data related to the services under 
consideration in the AMI, CABG and SHFFT models. A small fraction of 
total beneficiaries assigned to ACOs qualifying for this exclusion in 
fact have relevant anchor hospitalizations that would initiate an EPM 
in a given calendar year. For instance, from 2013 through 2015, about 
2.4 percent of beneficiaries aligned to Pioneer ACO model participants 
had an anchor hospitalization that would have initiated an AMI, CABG or 
SHFFT model.
    We considered several additional options to account for EPM-ACO 
beneficiary overlap prior to proposing the strategy outlined 
previously. We considered whether to split the risk, including at an 
equal sharing rate, at the time of financial reconciliation between EPM 
participants and ACOs when episodes included overlapping beneficiaries. 
This has the advantage of mitigating the supposed ``carve out'' of ACO 
expenditures, but requires CMS to arbitrarily declare a level of risk 
sharing. We are also concerned about the operational feasibility of 
such calculations, given that reconciliation would have to occur in 
tandem, resulting in long delays in payments or recoupments for both 
EPM participants and ACOs. We also considered whether to attribute to 
ACOs the more favorable of either the episode-specific target price or 
the actual expenditures incurred by the beneficiary during the episode 
time period. However, this policy would result in significant losses to 
the Medicare Trust Fund, as the double payment of savings/losses would 
be a certainty.
    We established the proposal to exclude from the EPMs beneficiaries 
who are assigned to an ACO in the Next Generation ACO Model or 
Comprehensive ESRD Care Initiative at Sec.  512.230(f). We established 
the proposal to attribute savings achieved during an EPM episode to the 
EPM participant, and include EPM reconciliation payments for other ACO-
assigned beneficiaries as ACO expenditures at Sec.  512.305 and Sec.  
512.307. We sought comment on our proposals to account for beneficiary 
overlap with shared savings models and programs.
    The following is a summary of the comments received and our 
responses.
    Comment: We received numerous comments in response to our proposed 
policies for handling overlap between ACOs and EPMs.
    A number of commenters expressed concern that ACOs should not be 
competing with bundled payment models and that CMS needs a sustainable 
overlap policy that would allow both models to thrive. Related to this, 
many commenters expressed concern over the difficulty of understanding 
the different model policies, and the need for a rigorous analysis of 
how different programs interact and impact participating providers as 
well as patients. A few commenters believed more information on the 
effect of overlapping value based models was necessary before moving 
forward with additional models.
    A commenter wrote to support the current overlap policy and 
recommended that EPM participants be allowed to execute arrangements to

[[Page 336]]

share or shift risk to an ACO but recommended against automatically 
excluding certain categories of beneficiaries assigned to ACOs. Only if 
the ACO and EPM fail to come to agreement on a distribution arrangement 
should the proposed rule be implemented. Another commenter wrote that 
giving priority to ACOs over EPMs could subordinate ``provider led'' 
models and sought further clarification on how this policy might 
function with future physician led EPMs. A commenter suggested that in 
the absence of an agreement, ACOs should be allowed to accept EPM 
assignment for ACO beneficiaries where an ACO participant served as the 
``attending physician'' during the anchor stay. Under this policy a 
beneficiary would only be excluded from an EPM if they are actively 
being managed by an attending physician associated with the ACO and the 
provider managed episode would take precedence over the EPM participant 
which was an institutional provider.
    On the other hand, a significant number of commenters wrote to 
support the proposed exclusion of beneficiaries assigned to ACOs in 
either the Next Generation ACO or Comprehensive ESRD Care models. A 
substantial number of these commenters supported extending the 
exclusion to beneficiaries assigned to Shared Savings Program Track 3 
ACOs. A number of these commenters recommended extending the exclusion 
even further to include more ACO related exclusions from EPMs and 
expressed concern that the current approach undermines ACOs. These 
commenters believed it was important to give preference to population 
based models versus those focused on more limited episodes. While 
bundling may give short term savings, it was noted, they do not focus 
on the total cost of care and have the potential to increase total 
utilization. In support of this perspective, several commenters 
recommended the exclusion be extended to include beneficiaries assigned 
to any ACO unless a collaboration agreement is in place. If there is no 
collaborative agreement in place between an EPM participant hospital 
and an ACO that it is not part of, then beneficiaries assigned to that 
ACO should be excluded from the EPM episodes. A commenter suggested 
that CMS should allow for ``more flexible, market-based options where 
parties can mutually agree'' to share the risk of an episode rather 
than the proposed exclusion. A commenter recommended that CMS allow for 
prospective alignment for all types of ACOs regardless of the risk 
sharing arrangement with CMS. The commenter disagreed with our 
statement that ACOs that didn't share downside risk might be less able 
to manage risk and expressed the view that EPMs had an even lower risk 
threshold. Extending the option for prospective alignment to all ACOs 
with downside risk, they noted, could incentivize ACOs to assume more 
financial risk. Another suggested excluding beneficiaries based on 
preliminary prospective assignment with retrospective reconciliation if 
the EPM participant is not a member of the ACO or does not have a 
collaboration agreement with the ACO. Other commenters suggested that 
ACO participant hospitals be totally excluded from EPMs.
    Response: We acknowledge the range of perspectives expressed by 
commenters and appreciate the many specific suggestions for handling 
these overlaps. We also acknowledge the operational challenge both ACOs 
and EPMs face and the financial impacts on both when there are 
overlaps. We believe the level and range of responses reflect the 
challenge in balancing multiple perspectives as was reflected in the 
discussion in the proposed rule. The predominance of commenters 
supported our proposal to exclude from EPMs those beneficiaries 
assigned to Next Generation ACOs and the downside risk track of 
Comprehensive ESRD Care models, and a significant number of commenters 
also supported extending this exclusion to Shared Savings Program Track 
3 ACOs which also have beneficiaries prospectively assigned and share 
downside risk. We believe it is appropriate to test the impact of 
granting full-risk ACO models the opportunity to ``hold the risk'' 
associated with the care throughout the performance year, rather than 
defaulting to the EPM participant; ACOs have stated that they are the 
appropriate accountable entity for beneficiaries for whom they remain 
financially responsible, even in the event an assigned beneficiary 
experiences an episode at an EPM hospital. CMS believes there is 
significant value in testing an alternative approach which would also 
not significantly deplete the total number of EPMS. We are less 
convinced that all beneficiaries assigned to ACOs, regardless of model 
or track, should be excluded from EPMs and, among other issues, believe 
that would significantly deplete the volume of EPM episodes. We also 
remain concerned that excluding all ACO beneficiaries could ultimately 
exclude patients from EPMs that end up not being assigned to any model. 
We recognize the broader, more comprehensive perspective of ACOs and 
encourage the development of collaborative partnership agreements with 
EPMs. We do not, however, believe it is appropriate for CMS to mandate 
such agreements or the detailed terms of such agreements, or believe it 
is practical to tie exclusions to the presence of hospital and ACO 
specific agreements that may be in place for specific episodes.
    In sum, we are convinced that there is merit in extending our 
proposed beneficiary exclusion from EPMs to include those beneficiaries 
assigned to Shared Savings Program Track 3 ACOs. We also note that CMS 
has recently announced that it will re-open applications for new 
participants in the Next Generation Accountable Care Organization (ACO) 
model for the 2018 performance year. Therefore we are finalizing our 
proposal with one modification: The exclusion of ACO beneficiaries 
assigned to Shared Savings Program Track 3 ACOs from the EPMs.
    Comment: A few commenters stated that, while bundled payments may 
provide savings to Medicare in the short term, the EPMs do not 
sufficiently address volume or total cost of care. Commenters suggested 
that because ACOs focus on total cost of care and population health, 
while episode and bundled payments focus on specific disease states, 
issues such as the utilization or volume of services and selection or 
type of services such as preventative services could be better managed 
by ACOs. These commenters believed that the EPMs actually threaten the 
long term success of ACOs and that further, the EPMs could potentially 
increase overall Medicare costs.
    Response: We appreciate these commenters' concerns. The goals of 
the EPMs are to test methods to improve the quality of care furnished 
to beneficiaries and reduce spending during episodes in specific 
geographic areas. While we understand that overlaps between ACOs and 
EPMs exist, we believe the policies for handling overlap, which we are 
finalizing with slight modification in this final rule (that is Shared 
Savings Program Track 3 ACOs will be excluded from the EPMs), 
adequately and appropriately address and account for overlap with other 
Innovation Center Models.
    With respect to commenters' assertions that ACOs can better manage 
patient care and/or lower costs of health care, we believe we must also 
continue to assess the extent to which ACOs contribute to lowering 
costs and improving care, as research around this

[[Page 337]]

issue continues to evolve.88 89 We will continue rigorous, 
independent evaluations that examine each particular payment model and 
how overlapping models affect Medicare beneficiaries so as to determine 
the need to require participation in these episode models to enhance 
learning around the best approaches to improving quality while 
containing costs. We will also continue to monitor the impact of 
testing alternative payment approaches and consider volume effects as 
part of that process.
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    \88\ Song Z., Fisher E.S. The ACO experiment in infancy--looking 
back and looking forward. JAMA. 2016;316(7):705-706.
    \89\ Schulman K.A., Richman B.D. Reassessing ACOs and health 
care reform. JAMA. 2016;316(7):707-708.
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    We refer readers to section III.G. of this final rule for 
discussion of monitoring and beneficiary protections under this model 
which we believe will address the commenters' concerns about potential 
increases to overall Medicare spending. We also refer readers to 
section IV of this final rule where we discuss the evaluation of the 
EPMs, including consideration of the impact of the EPMs on the total 
number of episodes, total cost of care and potential beneficiary risk 
selection.
    Comment: Many commenters expressed concern about the challenge of 
having accurate and timely information on patient attribution with 
multiple models. They believed it was unrealistic to expect hospital 
staff and others to be able to accurately identify patients in excluded 
ACO models and questioned how EPM participants and their partners would 
be able verify a patient's status. This was a particular concern with 
patients who may travel out of their home area to receive care, either 
to referral centers or due to living out of the area for part of the 
year.
    Response: We appreciate the operational challenges that EPM 
participants and their collaborating partners face in an environment 
where there are many, potentially overlapping, models in place. CMS is 
doing what we can to reduce operational barriers where we can 
practically and effectively do so. To this end we are in the process of 
developing a web portal where EPM participants can, at the point of 
care, look up and identify beneficiaries prospectively assigned to ACOs 
who will be excluded from EPMs. This system is currently in testing, 
and is expected to be operational when EPMs are implemented in July 
2017. CMS will provide more specific information as it is rolled out.
    Comment: A commenter stated that they are concerned with our 
inability to fully model the estimated impact of the EPMs on 
beneficiaries who are also aligned or attributed to a Medicare Shared 
Savings Program participant or an ACO model initiated by the CMS 
Innovation Center. The commenter stated that CMS should delay 
implementation of EPMs until this issue can be evaluated. Further, they 
believe CMS should release the data necessary to study this issue.
    Response: We understand the commenter's desire to understand the 
full effect of EPMs in relation to other CMS initiatives. As discussed 
in the proposed rule (81 FR 50989 through 51002), the high uncertainty 
associated with concurrent EPM and ACO and/or Shared Savings Program 
attribution is a limitation in our modeling of the impacts of the 
interaction between these models and programs. We do not believe that 
delaying EPMs would enable prospective modeling of the potential 
interaction. We refer readers to section III.D.6.c. of this final rule 
for a discussion of our approach to accounting for beneficiaries who 
are simultaneously receiving care under the EPMs and other alternative 
payment models such as BPCI or CJR. We refer readers to section III.G. 
for a discussion of the Monitoring and Beneficiary Protections which 
will be implemented in the EPMs. We will monitor the impact of the EPMs 
on other CMS initiatives such as ACOs to ensure quality of care in 
these programs is not being adversely impacted by the EPMs. As 
discussed in section III.G. of this final rule, we plan to publish data 
as part of the EPM evaluations to promote transparency and an 
understanding of the EPM effects, including impacts on other models and 
programs such as ACOs.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to exclude 
from eligibility for EPMs not only beneficiaries assigned to Next 
Generation ACOs and Comprehensive ESRD Care Initiative models but also 
beneficiaries prospectively assigned to Shared Savings Program Track 3 
ACOs. However, for the reasons previously specified in this section, we 
do not believe it is appropriate to change the proposed policy, as 
implemented in the CJR model, for handling overlaps between EPMs and 
other ACOs (ACOs whose beneficiaries are not excluded from the EPMs) to 
attribute savings achieved during an EPM episode to the EPM 
participant, and to include EPM reconciliation payments for ACO-
assigned beneficiaries as ACO expenditures. We also note that we will 
implement an on-line system for verification of attribution to support 
EPM participants in their ability to identify such exclusions.
d. Payment Reconciliation of Overlap With Non-ACO CMS Models and 
Programs
    In general, Per-Beneficiary Per-Month (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 these PBPM payments may be made for services furnished to a 
beneficiary that is in another Innovation Center model at the same time 
that the beneficiary is in an EPM, but the clinical relationship 
between the services paid for by the PBPM payments and the EPM will 
vary. For purposes of the proposed rule, we considered clinically 
related services paid for by PBPM payments that are for the purpose of 
care coordination and care management of any beneficiary diagnosis or 
hospital admission not excluded from an EPM's episode definition, as 
discussed in section III.C. of the proposed rule. As with CJR, we 
proposed to include PBPM payments for new and enhanced services in EPM 
reconciliation calculations if we determine, on a model by model basis, 
that the services paid for by the PBPM payments are (1) not excluded 
from an EPM model's episode definition; (2) rendered during the 
episode; and (3) paid for from the Medicare Part A or Part B Trust 
Funds. That is, we would include the clinically related services paid 
for 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.C. of the proposed rule. The PBPM payments for clinically 
related services would not be excluded from the EPMs' historical 
episodes used to calculate target prices when the PBPM payments are 
made from the Part A or Part B Trust Fund, and they would not be 
excluded from calculation of actual episode expenditures during an 
EPM's 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 EPMs, as discussed 
in section III.C. of the proposed rule) would not be the only mechanism 
for exclusion of a

[[Page 338]]

service from an EPM. All such PBPM model payments that we determine are 
clinically unrelated would be excluded as discussed in the proposed 
rule. Finally, all services paid for by PBPM payments funded through 
the Innovation Center's appropriation under section 1115A of the Act 
would be excluded from the EPMs, without a specific determination of 
their clinical relationship to an EPM. 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 
EPMs. In addition, because these services are not paid for from the 
Medicare Parts A or B Trust Funds, we are not confident that they would 
be covered by Medicare under existing law. Therefore, we believe the 
services paid for by these PBPM payments are most appropriately 
excluded from the EPMs. Our proposal for the treatment of services paid 
for by PBPM payments in the EPMs would pertain to all existing models 
with PBPM payments, as well as future models and programs that 
incorporate PBPM payments. As we stated in the proposed rule, we 
believe that this is fully consistent with our goal of including all 
related Part A and Part B services in the EPMs, as discussed in section 
III.C. of the proposed rule.
    As with CJR, we propose to exclude the PBPM payments for the OCM 
and Medicare Care Choices Model (MCCM) from the AMI, CABG, and SHFFT 
episode definitions. These PBPM payments (listed on the CMS Web page at 
https://innovation.cms.gov/Files/x/cjr-pbpmexclusions.xlsx) would be 
excluded from EPM reconciliation calculations. While the OCM 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 the EPMs. The OCM incorporates episode-based 
payment initiated by chemotherapy treatment, a service generally 
reported with ICD-9-CM and ICD-10-CM codes that will be excluded from 
the AMI, CABG, and SHFFT episode definition in section III.C. of the 
proposed rule. We believe the care coordination and management services 
paid for by OCM PBPM payments would be focused on chemotherapy services 
and their complications, so the services would be clinically unrelated 
to AMI, CABG and SHFFT model episodes. Therefore, we proposed that 
services paid for by PBPM payments under the OCM be excluded from the 
AMI, CABG, and SHFFT models. Similarly, we proposed to exclude services 
paid for by PBPM payments under the MCCM. The MCCM focuses on providing 
care coordination and palliative care services for beneficiaries with 
certain conditions certified as terminally ill with a life expectancy 
of 6 months or less that have not elected the Medicare hospice benefit. 
The MCCM seeks to test whether providing palliative care services, 
without beneficiaries having to forgo curative care, incentivizes 
beneficiaries to elect hospice sooner. This is aimed at addressing the 
large percentage of hospice beneficiaries who elect the hospice benefit 
too late to fully benefit from the range of services that hospice has 
to offer at end of life. Since the purpose of the MCCM is to test 
whether providing palliative care services to beneficiaries who are 
otherwise eligible to elect the Medicare hospice benefit without 
requiring the beneficiary to forgo curative care results in 
beneficiaries electing the hospice benefit sooner, we will not include 
such payments in the AMI, CABG and SHFFT models' episode spending 
calculations. In addition, unlike the regular hospice benefits, which 
are furnished to beneficiaries in lieu of curative care and which 
therefore can be coordinated during an AMI, CABG or SHFFT model 
episode, the services furnished under the MCCM will be in addition to 
curative services. We note that we are including such curative services 
in the EPM episode, as they are consistent with our episode definition 
described in III.C. of the proposed rule, but not the services 
represented by the PBPM payment, which are provided in addition to 
curative services. Beneficiaries electing the hospice benefit could 
have lower episode spending because they have forgone curative care. 
However beneficiaries included in the MCCM may have higher episode 
spending because they are receiving both curative care and the services 
represented by the PBPM. We do not want to create incentives that deter 
providers from enrolling beneficiaries in the MCCM.
    We acknowledge there may be new models that could incorporate a 
PBPM payment for new or enhanced services. We 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 
EPM episodes through the same sub regulatory approach that we have 
proposed to use to update the episode definitions (excluded MS-DRGs and 
ICD-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 in the EPMs based 
on the standards we proposed to use to update EPM episode definitions 
that are discussed in section III.C. of the proposed rule.
    If we determine that a PBPM payment would primarily be used to pay 
for services to manage an excluded clinical condition, we would exclude 
the PBPM payment from the EPM 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 EPM 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 EPM episode definitions discussed in section III.C. 
of the proposed rule. To allow for public input on our planned 
application of these standards, we will post our proposed determination 
about whether the PBPM payment will be included in the episode on the 
CMS Web site. After our consideration of any public input received, we 
will make a final determination on the inclusion of the PBPM payment 
and will then post the final updated overlap list, reflecting any 
changes made to PBPM payment inclusions, to the CMS Web site.
    With the publication of this final rule, we are initiating the sub-
regulatory update process described in the preceding paragraphs to 
review potential additions to the PBPM exclusion lists for the EPMs. We 
did not consider the 2017 PBPM changes in the EPM proposed rule, 
because we limited our PBPM proposals to those models that were active 
when the proposed rule was published in the Federal Register on August 
2, 2016. Since the proposed rule was published, other PBPM models have 
become active, such as the Million Hearts[supreg] Cardiovascular 
Disease (CVD) Risk Reduction Model and the Comprehensive Primary Care 
Plus (CPC+) model. These would be examples of PBPMs we will review for 
calendar year 2017 under the sub-regulatory update process we are 
establishing in this final rule. The potential modifications to the 
PBPM exclusion list for each EPM are posted on the CMS Web site at 
https://innovation.cms.gov/initiatives/epm. We request that public 
input on the potential modifications be sent to [email protected] through 
11:59 p.m. Eastern Standard Time on January 27, 2017.

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After receiving and reviewing public input on potential revised 
exclusions, we will post the final revised PBPM exclusion lists by 
February 24, 2017, and will also specify via web post when the 
revisions will take effect and to which episodes they will apply.
    The payment reconciliation process is described in section III.D.5. 
of the proposed rule. As with CJR, 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 EPM-
related reconciliation payments and repayments as described in section 
III.D.5. of the proposed rule, for beneficiaries who are also in EPM 
episodes.
    We established the proposal for accounting for non-ACO services and 
payments in the EPM reconciliation process at Sec.  512.210. We sought 
comment on this proposal.
    The following is a summary of the comments received and our 
responses.
    We did not receive any specific comments relating to how we have 
proposed to handle PBPM payments from non-ACO models in the EPM 
reconciliation process
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include PBPM payments for new and enhanced services in EPM 
reconciliation calculations if we determine, on a model by model basis, 
that the services paid for by the PBPM payments are (1) not excluded 
from an EPM model's episode definition; (2) rendered during the 
episode; and (3) paid for from the Medicare Part A or Part B Trust 
Funds. We will post our list of PBPM payments which we propose to 
exclude from EPM episode spending calculations on the CMS Web site at 
https://innovation.cms.gov/initiatives/epm model exclusion and request 
that public input on the potential PBPM exclusions be sent to 
[email protected] through 11:59 p.m. Eastern Standard Time on January 
27th, 2017. After receiving and reviewing public input on potential 
PBPM exclusions, we will post the final PBPM exclusions by February 
24th, 2017 including providing information about when the PBPM 
exclusions will take effect.
7. Limits or Adjustments to EPM Participants' Financial Responsibility
a. Overview
    We recognized that hospitals that would be designated for 
participation in the proposed EPMs currently vary with respect to their 
readiness to function under an EPM with regard to their organizational 
and systems capacity and structure, as well as their beneficiary 
population served. That is, some EPM participants may be more quickly 
able to demonstrate high quality performance and savings than others, 
even though we proposed that the EPM-episode benchmark prices be based 
predominantly on the participant's own historical EPM-episode 
utilization in the early years of the EPMs. We also noted that 
providers may be incentivized to excessively reduce or shift 
utilization outside of an EPM's episode by the proposed payment 
policies of the EPMs. In order to mitigate any excessive repayment 
responsibility for EPM participants or reduction or shifting of care 
outside an EPM episode, especially beginning in performance year 2 of 
the EPMs when we proposed to begin to phase in responsibility for 
repaying Medicare for excess EPM-episode payments, we proposed several 
specific policies as follows (81 FR 50872).
b. Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts and Reconciliation Payments
(1) Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts
    As discussed in section III.D.3.d. of the proposed rule regarding 
our proposed pricing adjustment for high payment EPM episodes (81 FR 
50846), EPM participants would not bear financial responsibility for 
actual EPM-episode payments greater than a ceiling set at 2 standard 
deviations above the mean regional EPM-episode payment. Nevertheless, 
EPM participants would begin to bear repayment responsibility beginning 
performance year 2 (DR) for those EPM episodes where actual EPM-episode 
payments are greater than the EPM quality-adjusted target prices up to 
the level of the regional EPM-episode ceiling. When aggregated across 
all EPM episodes in a model, the total money owed to Medicare by an EPM 
participant for actual EPM-episode payments above the applicable EPM 
quality-adjusted target price could be substantial if a participant's 
EPM episodes generally had high payments. As an extreme example, if a 
participants had all of its EPM episodes paid at 2 standard deviations 
above the mean regional EPM-episode payment, the EPM participant would 
need to repay Medicare a large amount of money, especially if the 
number of EPM episodes was large.
    To limit a participant's overall repayment responsibility for 
actual EPM-episode payments under the EPMs, (hereafter called a ``stop-
loss limit''), we proposed to establish the same stop-loss limits that 
were adopted for the CJR model (80 FR 73401); except, that they would 
apply beginning in the second rather than first quarter of performance 
year 2 (81 FR 50872 through 50873). Specifically, we proposed a 5 
percent stop-loss limit in performance year 2 (DR), a 10 percent stop-
loss limit in performance year 3, and a 20 percent stop-loss limit for 
performance years 4 and 5 for each EPM. That is, beginning in the 
second quarter of performance year 2, the EPM participant would owe 
Medicare under each proposed EPM no more than 5 percent of the sum of 
the EPM quality-adjusted target prices for all of the EPM participant's 
EPM episodes during performance year 2 (DR). This responsibility would 
gradually phase up to 20 percent by performance year 4.
    For performance year 2, the comparison against the stop loss limit 
would only apply for NPRA attributable to episodes ending in 
performance year 2 (DR). As described in section III.D.5. of the 
proposed rule, when calculating the NPRA for performance year 2, we 
would ensure the NPRA attributable to episodes ending during 
performance year 2 (NDR) was not less than zero and that NPRA 
attributable to episodes ending during performance year 2 (DR) did not 
exceed the stop-loss limit of 5 percent of the sum of quality-adjusted 
target prices for episodes that ended during performance year 2 (DR).
    Similarly, when conducting the subsequent reconciliation 
calculation to reassess actual EPM-episode payments for performance 
year 2 (which would occur concurrently with the reconciliation for 
performance year 3), we would combine the performance year 2 (NDR) NPRA 
and the result of the subsequent reconciliation calculation for 
performance year 2 (NDR) to ensure the result was not less than zero. 
Also, we would combine the performance year 2 (DR) NPRA and the result 
of the subsequent reconciliation calculation for performance year 2 
(DR) to ensure the stop-loss limit was not exceeded.
    For performance years 3 through 5, it would not be necessary to 
split the performance years to ensure that the stop-loss limit was not 
exceeded as a single stop-loss limit would apply in each year. For 
example, as described in section III.D.5. of the proposed rule, when 
calculating the NPRA for performance year 3,, we would ensure the NPRA 
did not exceed the stop-loss limit of 10 percent of the sum of quality-
adjusted target prices. Similarly when conducting the subsequent

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reconciliation calculation to reassess actual EPM-episode payments for 
performance year 3 (which would occur concurrently with the 
reconciliation for performance year 4), we would combine the 
performance year 3 NPRA and the result of the subsequent reconciliation 
calculation for performance year 3 to ensure the stop-loss limit was 
not exceeded.
    Note that, as described in sections III.D.5.b. and III.D.6.b.(2) of 
the proposed rule (81 FR 50865 through 50867 and 50869 through 50871), 
the result of the post-episode spending calculation and ACO overlap 
calculation that would occur concurrently with the subsequent 
reconciliation calculation for a given performance year would not be 
subject to the stop-loss limit. The result of these calculations would 
be added to the NPRA and subsequent reconciliation calculation to 
create the repayment amount or reconciliation payment. We believed that 
these limits would both offer EPM participants reasonable protections 
while maintaining incentives to improve care quality and efficiency. We 
noted that in addition to the CJR model, we apply a similar ultimate 20 
percent stop-loss limit to payments under the BPCI initiative.
    The proposal to limit participants' overall payment responsibility 
under the models was included in Sec.  512.305(c)(2)(iii)(A). We sought 
comment on our proposal to limit hospitals' overall payment 
responsibility.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters offered a variety of perspectives on the 
proposal to limit hospitals' payment responsibility under the models. A 
number of commenters requested that CMS include additional protection 
to participants by delaying the phase-in period under which the limits 
would increase, or reducing the limits across-the-board or for certain 
hospital types, for example, participants treating a large percentage 
of complex cases or vulnerable populations. One commenter recommended 
that the limits remain at a statistically equivalent level of case 
complexity provided that the participants are improving with respect to 
their performance measures.
    Another commenter recommended that in lieu of a blanket stop loss 
protection, CMS should instead make outlier payments for high-cost 
cases as they believed it would provide a better safety net to the 
small percentage of extremely high-cost episodes. One commenter 
recommended that hospitals with fewer than 20 episodes not be required 
to participate and if they did, their stop-loss threshold should be 
increased. Another commenter suggested that CMS include additional 
stop-loss protections for participants that provide services to complex 
patients and patients with co-morbidities. The commenter also seemed to 
suggest that the additional stop-loss protections be offered where 
beneficiaries receive hospice services during an episode.
    Response: We appreciate the comments we received either in support 
of our proposal or to modify the proposal. While we are not persuaded 
by comments to reduce the stop-loss limits or modify our proposed 
mechanism for offering participant hospitals protections against 
significant financial loss, we are delaying the phase-in period under 
which the stop-loss limits would increase to conform with our policy to 
delay when EPM participants would be required to accept downside risk 
under the EPMs as described in section III.D.2.c. of this final. Thus, 
under our final policy, except for those EPM participants with 
additional stop-loss protections as discussed in section III.D.7.c.(1) 
of this final rule, the limits on a EPM participant's repayment 
responsibility as displayed in Table 19 are--
     For performance year 2, 5 percent for EPM participants 
that voluntarily elect downside risk for that year; and
     For performance years 3, 4 and 5, 5 percent, 10 percent, 
and 20 percent respectively.

                               Table 19--Proposed and Final Stop-Loss Limits by PY
----------------------------------------------------------------------------------------------------------------
                PY1                              PY2              PY3  (percent)  PY4  (percent)  PY5  (percent)
----------------------------------------------------------------------------------------------------------------
                                            Proposed Stop-Loss Limits
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1.....  n/a during non-downside                  10              20              20
                                      risk period and 5% during
                                      downside risk period.
----------------------------------------------------------------------------------------------------------------
                                             Final Stop-Loss Limits
----------------------------------------------------------------------------------------------------------------
  Downside Risk for All Participants- DR effective for episodes ending on or after 1/1/2019 (anchor discharges
                                        occurring on or after 10/4/2018)
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1 and PY2 without election of                     5              10              20
 voluntary downside risk for PY2.
----------------------------------------------------------------------------------------------------------------
 Voluntary Downside Risk--DR effective for episodes ending on or after 1/1/2018 (anchor discharges occurring on
                                               or after 10/4/2017)
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1.....  5%.........................               5              10              20
----------------------------------------------------------------------------------------------------------------

    We believe that this policy in conjunction with our policies to 
delay when hospitals must assume downside risk and cap high cost 
payments as well as our plans to implement further risk adjustment 
measures offer sufficient protections to hospitals participating in the 
model while maintaining incentives that will encourage improvements in 
care quality and efficiency.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
establish limits on participants' overall payment responsibility. Our 
final policy on participants' overall payment responsibility is 
included in Sec.  512.305(c)(2)(iii)(A).
(2) Limitation on Reconciliation Payments
    We believe limits on reconciliation payments made under the 
proposed EPMs would also be appropriate for several reasons. Under our 
proposal, in performance year 1, EPM participants would have no 
repayment responsibility for excess EPM episode spending above the EPM 
quality-adjusted target price,

[[Page 341]]

and CMS would bear full financial responsibility for Medicare actual 
EPM-episode payments for an EPM episode that exceeds the EPM quality-
adjusted target price; however, we believe our responsibility should 
have judicious limits. In addition, our proposed rule noted that 
beginning in performance year 1, EPM participants would be eligible for 
reconciliation payments due to the NPRA if actual EPM-episode payments 
are less than the quality-adjusted target prices. This proposal for 
reconciliation payments due to the NPRA was intended to provide a 
financial incentive to EPM participants from the beginning of the model 
to manage and coordinate care throughout the EPM episode with a focus 
on ensuring that EPM beneficiaries receive the lowest intensity, 
medically appropriate care throughout the EPM episode that results in 
high quality outcomes. However, for purposes of responsible stewardship 
of CMS resources and concerns about potentially excessive reductions in 
utilization under the proposed EPMs that could lead to beneficiary 
harm, we also believed it would be reasonable and hence proposed to cap 
an EPM participant's reconciliation payments resulting from actual EPM-
episode payments for a given performance year as a percentage of EPM-
episode payments.
    In determining what would constitute an appropriate reconciliation 
payment limit due to actual episode spending (hereafter called a 
``stop-gain limit''), we believe it should provide significant 
opportunity for EPM participants to receive reconciliation payments for 
greater episode efficiency that includes achievement of quality care 
and actual EPM-episode payment reductions below the quality-adjusted 
target price, while avoiding the creation of significant incentives to 
sharply reduce utilization that could be harmful to EPM beneficiaries. 
We also believe that establishing parallel stop-gain and stop-loss 
limits is important to provide proportionately similar protections to 
CMS and EPM participants for their financial responsibilities under the 
EPMs as well as to protect the health of beneficiaries.
    Accordingly, we proposed to establish symmetrical stop-gain limits 
(81 FR 50873). Specifically, we proposed a 5 percent stop-gain limit in 
performance years 1 and 2, a 10 percent stop-gain limit in performance 
year 3, and a 20 percent stop-gain limit for performance years 4 and 5 
for each EPM. That is, in performance year 1 as we phased-in the stop-
gain limits, the reconciliation payment that the EPM participant would 
be eligible to receive under each proposed EPM would be no more than 5 
percent of the sum of the EPM quality-adjusted target prices for all of 
the EPM participant's EPM episodes during the performance year. This 
limit would gradually phase up to 20 percent by performance year 4. As 
was also indicated in the CJR Final Rule, we wanted to ensure that any 
savings achieved by EPM participants in the early years of the EPM were 
not due to random variation, and that changes undertaken to improve 
efficiency included achievement in care quality and not sharp decreases 
in utilization that could be harmful to beneficiaries (80 FR 73402).
    We clarified in our proposed rule that, as with the stop-loss 
limits, we proposed to determine whether an EPM participant had met the 
stop-gain limit by assessing the NPRA and subsequent reconciliation for 
a given performance year, if any. We noted that this approach aligned 
with our goal to place limits on the amount a participant may earn as a 
reconciliation payment due to reduced actual EPM-episode payments.
    We also noted that we planned to monitor beneficiary access and 
utilization of services and the potential contribution of the stop-gain 
limit to any inappropriate reduction in EPM- episode services. We refer 
to section III.G. of the proposed rule for our discussion on monitoring 
and addressing participants' performance under the proposed EPMs.
    The proposal to establish a cap on an EPM participant's 
reconciliation payment due to actual EPM-episode payments for a given 
performance year as a percentage of EPM-episode payment was included in 
Sec.  512.305(c)(2)(iii)(B). We sought comment on this proposed cap.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters addressing how reconciliation payments would be 
capped either opposed the caps or recommended that CMS raise the dollar 
amount at which payments would be capped. These commenters stated that 
doing so would make additional resources needed for infrastructure 
development available or allow greater rewards for savings achieved.
    Response: We appreciate the comments we received on our proposal, 
but disagree with recommendations to eliminate or raise the dollar 
amount at which payments would be capped. While the proposed models 
intend to establish financial incentives to better manage and 
coordinate care throughout the EPM episode in a way that improves both 
health care quality and efficiency, we believe it is also necessary to 
establish limits to discourage the chances for excessive reductions in 
utilization under the proposed EPMs that could lead to beneficiary 
harm. We believe our proposed cap on reconciliation payments achieves 
an appropriate balance that both provides incentives for participants 
to improve care quality and efficiency without also encouraging 
excessive and inappropriate reductions in utilization.
    Also, as previously stated, we believe it is important that stop-
gain and stop-loss limits under the models be established in a way that 
provides proportionately similar protections to CMS and EPM 
participants for their financial responsibilities under the EPMs as 
well as to protect the health of beneficiaries. As such, we proposed to 
establish stop-gain limits under the models that were symmetrical with 
our stop-loss limits.
    As we previously noted in section III.D.7.b.(1), in delaying when 
EPM participants would be required to accept downside risk under the 
EPMs as described in section III.D.2.c. of this final rule, our final 
policy includes conforming adjustments to the limits on EPM 
participants' overall payment responsibility. These conforming 
adjustments also necessitate adjustments to the stop-gains limits under 
the model for consistency with our policy for symmetrical stop-loss and 
stop-gain limits. Accordingly, the final stop-gain limits are 5 percent 
in performance years 1, 2, and 3; 10 percent in performance year 4; and 
20 percent in performance year 5 for each EPM (see Table 20).

[[Page 342]]



                 Table 20--Proposced and Final Stop-Gain Limits and Final Stop-Loss Limits by PY
----------------------------------------------------------------------------------------------------------------
                PY1                              PY2              PY3  (percent)  PY4  (percent)  PY5  (percent)
----------------------------------------------------------------------------------------------------------------
                                            Proposed Stop-Gain Limits
----------------------------------------------------------------------------------------------------------------
5%.................................  5%.........................              10              20              20
----------------------------------------------------------------------------------------------------------------
                                             Final Stop-Gain Limits
----------------------------------------------------------------------------------------------------------------
5%.................................  5%.........................               5              10              20
----------------------------------------------------------------------------------------------------------------
                          Final Stop-Loss Limits: Downside Risk for All Participants *
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk............  n/a as no downside risk....               5              10              20
----------------------------------------------------------------------------------------------------------------
                            Final Stop-Loss Limits: Voluntary Downside Risk in PY2 *
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk............  5%.........................               5              10              20
----------------------------------------------------------------------------------------------------------------
* Limits apply to hospitals other than those eligible for the separate stop-loss limits discussed in section
  III.D.7.c.(1) of this final rule.

    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
establish a cap on an EPM participant's reconciliation payment due to 
actual EPM-episode payments for a given performance year as a 
percentage of EPM-episode payment. Our final policy on the proposed 
cap, which includes conforming adjustments so that the stop-loss and 
stop-gain limits are symmetrical, is included in Sec.  
512.305(c)(2)(iii)(B).
c. Additional Protections for Certain EPM Participants
(1) Policies for Certain EPM Participants to Further Limit Repayment 
Responsibility
    While the aforementioned proposals generally provide additional 
safeguards to ensure that EPM participants would have limited repayment 
responsibility, we proposed additional protections for certain groups 
of EPM participants that may have a lower risk tolerance and less 
infrastructure and support to achieve efficiencies for high-payment EPM 
episodes (81 FR 50873 through 50874). Specifically, we proposed 
additional protections for rural hospitals, SCHs, Medicare Dependent 
Hospitals, and Rural Referral Centers (RRCs). 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.
    For the purpose of these models, we proposed 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.
    We proposed to define a Sole Community Hospital as it is defined in 
Sec.  412.92. That is, 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.
    We proposed to define a Medicare Dependent Hospital (MDH) as it is 
defined in Sec.  412.108. That is, an MDH is 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.
    We proposed to define a Rural Referral Center as it is defined in 
Sec.  412.96. Specifically, 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 these criteria, 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 at least 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.

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    ++ At least 40 percent of all inpatients treated are referred from 
other hospitals or from physicians who are not on the hospital's staff.
    Additional information on these hospitals can be found in the CJR 
Final Rule at 80 FR 73403 through 73405.
    In the CJR Final Rule, we established the same stop-gain limits for 
these hospitals as for hospitals in general (that is, 5 percent in 
performance years 1 and 2, 10 percent in performance year 3, and 20 
percent in performance years 4 and 5); however, we limited losses for 
rural hospitals, SCHs, Medicare Dependent Hospitals and RRCs to 3 
percent in performance year 2, and 5 percent in performance years 3 
through 5 (80 FR 73406). In that Final Rule, we noted that these 
hospitals can face unique challenges that do not exist for most other 
hospitals. For example, these hospitals may be the only source of 
health care services for beneficiaries or certain beneficiaries living 
in rural areas, and may be in areas with fewer providers including 
fewer physicians and post-acute care facilities. Further, these 
hospitals may have more limited options in coordinating care and 
reducing spending while maintaining quality of care. We continue to 
believe that urban hospitals may not have similar concerns as they are 
often in areas with many other providers and have a greater opportunity 
to develop efficiencies under the EPMs. Given these circumstances, for 
the CJR model we determined that we should have a more protective stop-
loss limit policy for these hospitals. Given the similarity between the 
CJR model and the proposed EPMs, we had similar concerns, which we 
believed should be addressed by establishing greater protections for 
these hospitals when they are EPM participants. Accordingly, we 
proposed the same stop-loss thresholds for these hospitals 
participating in the proposed EPMs as were adopted for the CJR model 
except that the thresholds would begin in performance year 2 (DR)--
specifically, 3 percent in performance year 2 (DR), and 5 percent for 
performance years 3 through 5 for each EPM.
    The proposal to establish separate financial loss limits for 
certain hospitals that could be less able to tolerate risk was included 
in Sec.  512.305(c)(2)(iii)(C). We sought comment on our proposed limit 
on financial loss for these hospitals.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported the proposal to establish 
separate financial loss limits for certain hospitals. One commenter 
recommended that CMS provide additional protection to these providers 
by waiving downside risk for them for the entire duration of the models 
as well as to retaining the proposed protections to MDHs in the event 
the MDH status expires during the period of the models. Some commenters 
requested that CMS extend to participants with a low volume of episodes 
or to hospitals that serve a large portion of vulnerable populations 
these same financial loss limits because they likely lacked the 
infrastructure and support to achieve greater efficiencies or served 
beneficiaries with more complex and diverse treatment needs. Some 
commenters provided data in support of their request suggesting that 
hospitals with fewer episodes had the widest range in gains and losses 
largest year-to-year variation in episode spending relative to target 
prices. One commenter suggested that CMS determine eligibility for 
these separate financial loss limits based on the same thresholds that 
would be applied for determining whether a participant's EPM-episode 
benchmark prices would be based only on regional historical EPM-episode 
payments.
    Response: We appreciate and agree with the comments supporting our 
proposal to establish separate financial loss limits for certain 
hospitals. We do not agree with the suggestion that we instead waive 
downside risk entirely for these hospitals. Given their lower tolerance 
of risk, more limited infrastructure and support to achieve 
efficiencies, and special status under Medicare to preserve Medicare 
beneficiaries' access to care from these hospitals, we recognize that 
certain adjustments to the model are warranted for these hospitals. 
However, we believe our proposed financial loss limits offer sufficient 
protection to these hospitals while allowing us to maintain an 
appropriate balance of incentives to encourage care quality and 
efficiency improvements as would exist for the other hospitals that 
would be participating under the models.
    Under current law, the MDH program will continue through September 
30, 2017, but will expire absent additional legislative authority. As 
we stated in the CJR Final Rule (80 FR 73406), we understand the 
concern that with the expiration of MDH status, hospitals will lose 
their MDH designation and additional Medicare FFS payments provided 
under the MDH designation. Additionally, under the expiration of MDH 
status, hospitals would no longer qualify for the protective stop-loss 
limit tied to that status under the EPM models. We believe it would be 
inconsistent to apply the additional benefit of protective stop-loss 
limits to former MDHs when by law, those hospitals are not permitted to 
retain the other Medicare payment benefits provided to MDHs. We would 
note, however, that should a participant's MDH payment status expire, 
some MDHs may apply with their MACs to determine if they qualify as an 
RRC or SCH and would be able to maintain the protective stop-loss 
limits.
    The requests commenters made to extend separate financial loss 
limits to hospitals with a low volume of episodes have persuaded us to 
extend these separate limits under the EPMs under certain specific 
circumstances. We conducted an analysis of cost variation for episodes 
under the EPMs and found greater variation in episode-level spending 
for episodes occurring among low-volume than high-volume hospitals. 
Under a range of low-volume thresholds, this analysis showed the 
standard deviation of historical AMI episode spending at low-volume 
hospitals in selected MSAs was 10 to 32 percent higher than high-volume 
hospitals in selected AMI model MSAs. Likewise, the standard deviation 
of historical SHFFT episode spending at low-volume hospitals was 14 to 
18 percent above high-volume hospitals in selected AMI model MSAs, and 
the standard deviation of historical CABG episode spending was 6 to 19 
percent higher above high volume hospitals in selected CABG model 
MSAs.\90\ Based on the results of our analysis, we share commenters' 
concerns that when there is a low volume of episodes under a model, an 
EPM participant could potentially be held responsible for random 
variation in spending that occurs under that model. Thus, we have been 
persuaded to extend the separate financial loss limits that apply to 
rural hospitals, SCHs, MDHs, and RRCs to EPM participants determined to 
have a low volume of episodes under an EPM, which we will refer to as 
``EPM volume protection hospitals.''
---------------------------------------------------------------------------

    \90\ Episodes for AMI, SHFFT, and CABG beneficiaries initiated 
by all U.S. IPPS hospitals in MSAs selected for EPMs and constructed 
using standardized Medicare FFS Parts A and B claims, as proposed in 
this rule that began in CYs 2012-2014.
---------------------------------------------------------------------------

    In contrast to rural hospitals, SCHs, MDHs, and RRCs, however, we 
will apply the separate loss limits to EPM volume protection hospitals 
at the model level as we will apply loss limits to most other hospitals 
under the EPMs rather than at the hospital level as is the case for 
these specific types of hospitals eligible for separate loss limits. 
Accordingly, this means we could

[[Page 344]]

extend the separate loss limits to an EPM volume protection hospital 
for one or more EPMs but not necessarily all of the EPMs, depending on 
whether their historical EPM episode volume exceeded the threshold 
number for the specific model.
    An EPM participant will qualify as an EPM volume protection 
hospital if their volume of historical EPM episodes that started in 
calendar years 2013 through 2015 is at or below the 10th percentile of 
the number of hospital-specific historical EPM episodes for hospitals 
located in the MSAs eligible for selection into that specific EPM. For 
purposes of determining the 10th percentile threshold, we will use 
historical episodes for the same historical periods used to determine 
an EPM participant's benchmark and quality-adjusted target prices for 
performance year 1 based on hospitals with one or more historical 
episodes under that model in the applicable MSAs. This would include 
hospitals such as rural hospitals, MDHs, SCHs, and RRCs. While we 
considered both higher and lower thresholds, we believe the 10th 
percentile achieves the most appropriate balance with respect to 
focusing our policy on those hospitals that would uniquely have a low 
volume of episodes under an EPM. Though our analysis of episode volume 
from 2012-2014, suggests that around 10 percent of hospitals with any 
episodes would be subject to these additional protections, we expect 
that only around 1 percent or less of episode volume would be subject 
to the additional protections.
    We also note that a participant could potentially be eligible for 
the separate loss limits based on their being either an EPM volume 
protection hospital or meeting the criteria for being one of the other 
eligible hospital types such as a rural hospital, MDH, SCH, or RRCs. We 
wish to clarify that in these cases we would extend the separate loss 
limits based on the criteria for the latter hospitals as their separate 
loss limits would apply at the hospital rather than the model level. 
Also, we would note that the stop-loss protections would not be 
additive whereby a participant benefitted from the stop-loss 
protections under both eligibility criteria.
    For each EPM, we will post the applicable historical EPM episode 
number threshold used to determine whether EPM participants are EPM 
volume protection hospitals and a list of the CCNs of EPM participants 
that are classified as EPM volume protection hospitals to the CMS Web 
site before the beginning of performance year 1. We will also indicate 
to each EPM participant whether it is classified as an EPM volume 
protection hospital at the same time that we prospectively communicate 
quality-adjusted target prices to EPM participants, as described in 
section III.D.4.a. of this final rule.
    While the threshold for each EPM will be set for all five 
performance years so that EPM participants can know before the 
beginning of the first EPM performance year their hospital status for 
the five years of the EPM, we make technical revisions to the list of 
EPM volume protection hospitals to account for changes in business 
practices, like mergers, acquisitions, or the opening of new hospitals. 
For example if an EPM participant that was an EPM volume protection 
hospital merged with another EPM participant and the merged entity 
continued to use the CCN of the EPM volume protection hospital, we 
would consider the historical episode volume at both EPM participants 
to determine whether the merged entity would continue to be an EPM 
volume protection hospital.
    We are not adopting the suggestion to determine an EPM 
participant's eligibility for the separate protections using the same 
thresholds that are applied for determining whether their EPM-episode 
benchmark prices would be based only on regional historical EPM-episode 
payments. While these thresholds are appropriate for purposes of 
ensuring reliable estimates when establishing prices under the models, 
the measure would not be an effective metric for distinguishing 
hospitals with a low volume of episodes from other hospitals. Rather, 
it would result in too high a share of hospitals qualifying for the 
separate protections and thus would be too crude a metric for 
distinguishing hospitals with a low volume of episodes.
    While we appreciate the comment suggesting that we extend the 
separate stop-loss limits to hospitals treating a large portion of 
vulnerable patients, we are not adopting this suggestion at this time. 
As discussed in the following section of this final rule, however, we 
requested comments on issues specific to hospitals serving a high 
percentage of potentially vulnerable populations and their 
opportunities to advance the goals of the EPMs. As we discuss in that 
section, while we will not be incorporating the suggestions we received 
in this rule, we will share the comments and suggestions we received 
with the Assistant Secretary for Planning and Evaluation for their 
consideration as well as consider their potential applicability, where 
appropriate, in future rulemaking.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
establish separate financial loss protections for certain hospitals. 
Once again, we would note that in delaying when EPM participants would 
be required to accept downside risk under the EPMs as is described in 
section III.D.2.c. of this final rule, our final policy includes 
conforming adjustments to the separate financial loss limits on 
participants' overall payment responsibility. We will extend the 
separate financial loss protections to EPM participants determined to 
have a low volume of episodes within a model. Thus, under our final 
policy, the separate financial loss limits for rural hospitals, SCHs, 
MDHs, RRCs, and EPM volume protection hospitals as displayed in Table 
21 are--
     For performance year 2, 3 percent for EPM participants 
that voluntarily elect downside risk for that year; and
     For performance years 3, 4 and 5, 3 percent, 5 percent, 
and 5 percent respectively.

                          Table 21--Proposed and Final Separate Stop-Loss Limits by PY
----------------------------------------------------------------------------------------------------------------
                PY1                              PY2              PY3  (percent)   PY4 (percent)   PY5 (percent)
----------------------------------------------------------------------------------------------------------------
                    Proposed Separate Stop-Loss Limits Rural Hospitals, SCHs, MDHs, and RRCs
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1.....  n/a during non-downside                   5               5               5
                                      risk period and 3% during
                                      downside risk period.
----------------------------------------------------------------------------------------------------------------

[[Page 345]]

 
     Final Separate Stop-Loss Limits Rural Hospitals, SCHs, MDHs, RRCs, and EPM Volume Protection Hospitals
----------------------------------------------------------------------------------------------------------------
  Downside Risk for All Participants--DR effective for episodes ending on or after 1/1/2019 (anchor discharges
                                        occurring on or after 10/4/2018)
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1 and PY2 without election of                     3               5               5
 voluntary downside risk for PY2.
----------------------------------------------------------------------------------------------------------------
 Voluntary Downside Risk--DR effective for episodes ending on or after 1/1/2018 (anchor discharges occurring on
                                               or after 10/4/2017)
----------------------------------------------------------------------------------------------------------------
n/a as no downside risk in PY1.....  3%.........................               3               5               5
----------------------------------------------------------------------------------------------------------------

    Our final policies for the separate financial loss protections in 
included in Sec.  512.305(c)(2)(iii)(C) and Sec.  
512.305(c)(2)(iii)(D).
(2) Considerations for Hospitals Serving a High Percentage of 
Potentially Vulnerable Populations
    In addition to the aforementioned hospitals, our proposed rule 
noted our recognition that other EPM participants, for which we did not 
propose additional protections, could also face factors affecting their 
ability to achieve savings under the proposed EPMs, and that these 
factors could be unrelated to their practice patterns but instead could 
reflect the EPM participants' responsibilities for a relatively high 
percentage of potentially vulnerable populations with higher than 
average historical spending and/or less opportunities for efficiencies. 
For example, this could include hospitals that serve a relatively high 
percentage of beneficiaries that are dually eligible for both Medicare 
and Medicaid or whose total Medicare payments include a relatively high 
proportion of disproportionate share hospital payments under 
1886(d)(5)(F) of the Act. Some of these hospitals are located in rural 
areas and would thus likely be classified as a type of hospital for 
which we proposed additional protections. However, most hospitals that 
serve a relatively high percentage of beneficiaries that are dually 
eligible for both Medicare and Medicaid or whose total Medicare 
payments include a relatively high proportion of disproportionate share 
hospital payments are located in urban areas, and very few are 
classified as a rural hospital, RRC, MDH, or SCH that would be subject 
to the additional protections we proposed. For the first 2 performance 
years of the EPMs, where quality-adjusted target prices are set 
predominantly based on EPM-participant hospital-specific data, factors 
affecting these hospitals may be of less concern than in the final 3 
performance years of the EPMs where pricing is either predominantly or 
totally based on regional data.
    Our proposed rule also noted that the potential challenges posed by 
these kinds of factors is highlighted in Section 2(d) of the Improving 
Medicare Post-Acute Care Transformation ``IMPACT'' Act of 2014 (Pub. L. 
113-183). Specifically, Section 2(d) requires the Secretary to conduct 
a study that examines the effect of individuals' socioeconomic status, 
including their Medicaid eligibility, on quality measures and resource 
use and other measures for individuals under the Medicare program, in 
recognition that less healthy individuals may require more intensive 
interventions. The Secretary is required to submit a report on the 
results of this study within 2 years of enactment of the IMPACT Act. 
The IMPACT Act also requires the Secretary to conduct a second study 
that examines the impact of various risk factors, as well as race, 
health literacy, limited English proficiency (LEP), and Medicare 
beneficiary activation, on quality measures and resource use and other 
measures under the Medicare program in order to recognize that less 
healthy individuals may require more intensive interventions. The 
Secretary must submit a report on the results of this study within 5 
years of enactment of the IMPACT Act.
    If these studies find a relationship between the factors examined 
in the studies and quality measures and resource use and other 
measures, then the Secretary shall provide recommendations for, among 
other things, how CMS should account for such factors in quality 
measures, resource use measures, and other measures under Medicare; and 
in determining payment adjustments based on such measures in other 
applicable provisions related to the program. Likewise, taking into 
account these studies and their recommendations as well as other 
relevant information, the Secretary is required to routinely, as 
determined appropriate and based on an individual's health status and 
other factors, assess appropriate adjustments to quality measures, 
resource use measures, and other measures under the Medicare program; 
and assess and implement appropriate adjustments to Medicare payments 
based on these measures. The Assistant Secretary for Planning and 
Evaluation is responsible for these studies and a report on the results 
of the first one is forthcoming. Our proposed rule noted that upon 
issuance of these studies' reports, we planned to consider their 
results as we implemented the proposed EPMs. We also planned to monitor 
the influence of beneficiary characteristics such as socioeconomic 
status on EPM participants' performance during our implementation and 
evaluation of the EPMs. Given that the performance of EPM participants 
would be compared largely against their own historical episode cost 
performance data for the first 2 years of the models, however, we did 
not anticipate that the aforementioned factors should materially affect 
participants' ability to achieve savings. However, as we increasingly 
began to rely more on regional cost performance data to determine 
episode benchmarks and quality-adjusted target prices in performance 
year 3, these factors could become more germane. Thus, in the event we 
identified the need for adjustments, we could consider proposing 
additional policies through subsequent rulemaking. Additionally, we 
planned to use information collected as part of our efforts to monitor 
beneficiary access to care and quality of care as discussed in sections 
III.G.4. and III.G.5. of the proposed rule (81 FR 50914 through 50915) 
to inform if potential adjustments would be needed in future years of 
the model.
    Protections for EPM participants were discussed in section 
III.D.7.b.(1) and III.D.7.c.(1) of the proposed rule (81 FR 50872 
through 50874). We sought comment about all issues specific to

[[Page 346]]

hospitals serving a high percentage of potentially vulnerable 
populations and their opportunities to advance the goals of the EPMs 
(81 FR 50875). In particular, we sought comment, including data 
analysis, about approaches to identifying these hospitals; their 
opportunities to achieve high quality episode performance; specific 
considerations about their opportunities to achieve efficient care for 
the clinical conditions included in the AMI, CABG, and SHFFT models; 
potential approaches to risk adjustment; potential approaches to 
additional protections that could be considered for the future modeled 
after our proposals in section III.D.7.b.(1) of this final rule for 
certain other EPM participants or other alternatives; and evaluation 
methodologies to ensure that we include appropriate comparison groups 
and monitor and evaluate the most relevant outcomes.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters urged CMS to provide greater financial 
protections for providers serving a high portion of vulnerable 
populations, and recommended that CMS apply lower caps on such 
providers' losses. While these commenters suggested that further study 
was needed, they recommended that, at a minimum, CMS should extend the 
5 percent cap to include all of performance year 3, and reduce the cap 
in PY4 and PY5 to 10 percent. These commenters also noted that CMS 
would establish a definition of vulnerable populations, which should 
account for Medicaid and uninsured populations, and should seek public 
comment on this definition. For example, one commenter suggested that 
CMS consider section 1900 of the Social Security Act to identify 
hospitals serving a high number of vulnerable patients. Another 
commenter expressed their appreciation for CMS' highlighting of this 
issue, recommended that adjustments for socio-demographic variables 
would be logical starting point, and providers that care for vulnerable 
patients and populations should be treated equally.
    Response: We appreciate the comments we received on these issues 
and agree that further study is needed. While we will not be 
incorporating suggestions we received in this rule, we will share the 
comments and suggestions we received with the Assistant Secretary for 
Planning and Evaluation for their consideration as well as consider 
their potential applicability, where appropriate, in future rulemaking.
d. Application of Stop-Gain and Stop-Loss Limits
    Because participants could be participating in the proposed AMI, 
CABG, and SHFFT models concurrently with the CJR model, our proposed 
rule noted that an additional consideration concerns the level at which 
the stop-loss and stop-gain thresholds would be applied, for example, 
at the participant's level, as is currently the case for the CJR model, 
or at some other level, for example, at the model level. We indicated 
that our intention was to establish appropriate incentives and 
protections for participants under the proposed EPMs and the CJR model 
without creating unnecessary administrative complexity. Further, this 
issue would become especially relevant to the proposed EPMs and CJR 
model given that the CJR model and proposed EPMs would be operating at 
different points within their performance periods. That is, episodes 
under the proposed EPMs would always lag 1 performance year behind 
those in the CJR model. Thus, SHFFT model participants that would begin 
the first SHFFT model performance year in 2017 would already be 
participating in their second performance year under the CJR model. 
Consequently, in this example, a stop-loss limit could apply to the 
performance year 2 episodes under the CJR model but not to the 
performance year 1 SHFFT model episodes under the SHFFT model as SHFFT 
model participants would not have repayment responsibility in SHFFT 
model performance year 1 under our proposal. In contrast, for this 
example, the stop-gain limits would be the same for both the SHFFT and 
CJR model since the limit for both performance year 1 and 2 would be 5 
percent.
    Continuing with this example for a later performance year 
(performance year 4 for the CJR model and performance year 3 for the 
SHFFT model), any stop-loss limits that applied would be different. 
That is, the stop-loss limits for the CJR model episodes in performance 
year 4 would be 20 percent in contrast to the 10 percent stop-loss 
limit that would apply to the SHFFT model episodes in performance year 
3. The proposed stop-gain limits would likewise diverge in this example 
as they are proposed to be symmetrical with the stop-loss limits.
    Given these differences, we considered two options for setting 
stop-gain and stop-loss limits for hospitals participating in more than 
one of the AMI, CABG, SHFFT, and CJR models (81 FR 50875 through 
50876). Under the first option, we would determine stop-loss and stop-
gain limits, in total, at the participant level based on weighted 
thresholds. Specifically, CMS would calculate a single weighted stop-
loss/gain threshold based on the total spending under each model. Thus, 
using the aforementioned example where CJR model episodes would be in 
performance year 4 of their model and SHFFT model episodes would be in 
performance year 3, assuming 50 percent of total spending under the CJR 
and SHFFT models is for CJR model episodes and the remaining 50 percent 
is for SHFFT model episodes, the weighted stop-loss limit for the two 
models at the participant level would be 15 percent: (0.50 x 0.20 for 
CJR model episodes) + (0.5 x 0.10 for SHFFT model episodes) = 0.15. 
Although this option would allow the application of a single stop-loss 
threshold to a participant's total repayment under the models, we are 
concerned that computing a single limit such as this could either 
dilute or magnify the intended protections of the stop-loss limit under 
each model. As such, a participant that would have been protected from 
repayment exceeding 10 percent of its SHFFT model quality-adjusted 
target prices multiplied by the number of SHFFT model episodes for 
performance year 3 would only be protected for costs above the higher 
15 percent level. Conversely, a participant that would have been 
protected only for repayment above 20 percent of its CJR model quality-
adjusted target prices multiple by the number of CJR model episodes for 
performance year 3 would be protected against repayment above the lower 
15 percent threshold.
    Alternatively, we considered establishing stop-loss and stop-gain 
thresholds at the model level; that is, separately for each of the AMI, 
CABG, and SHFFT models, in addition to the limits that already exist 
for the CJR model. Under this option, we would separately apply the 
CJR-applicable stop-loss and stop-gain limits to CJR model episodes, 
the AMI-applicable limits to AMI model episodes, and so forth. Thus, 
considering the aforementioned example, the stop-loss limit for CJR 
model episodes in performance year 4 would be 20 percent for the 
hospital's CJR model episodes, while the stop-loss limit for SHFFT 
model episodes for performance year 3 would be 10 percent. While we 
might choose to aggregate these amounts to conduct a single financial 
transaction with a hospital participating in more than one model, we 
believe this option that would apply stop-loss and stop-gain limits at 
the model level for

[[Page 347]]

hospitals participating in more than one model is superior to first 
option in that it better maintains appropriate incentives and 
protections under each of the models.
    The proposal to establish stop-gain and stop-loss limits at the 
model level was included in Sec.  512.305(c)(2)(iii)(D). We sought 
comment on our proposal to establish stop-gain and stop-loss limits at 
the model level.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters expressed concerns that a blanket stop-
loss policy could offer insufficient protection to participants with a 
low volume of cases. Thus, one commenter recommended that the stop-loss 
provision be calculated on an episode-specific basis for each provider 
as the degree of outcome variability will differ significantly based on 
the provider's volume and starting price position relative to the 
region. Another commenter recommended that CMS apply stop-loss limits 
at the episode level separately for low, medium, and high volume 
providers rather than at the model or program level so that the level 
of protection would vary by the number of episodes. In their view, this 
approach would offer hospitals, particularly those with lower volume, 
greater protection against exceptionally high costs.
    Response: We appreciate the comment generally supporting our 
proposal as well as the suggestions to modify our proposal. As 
discussed elsewhere in this rule, in addition to protections we had 
proposed with respect to capping high-cost cases with respect to our 
financial calculations (see section III.D.3.d.), we are finalizing 
policies that would offer to hospitals with a low volume of episodes 
under a model the same stop-loss protections that would apply to 
certain other hospitals (see section III.D.7.c.) as well as further 
adjustments for risk that we anticipate making effective beginning in 
PY3 (see section III.D.4.a.2). We believe these protections are 
sufficient and are thus not adopting the recommended modifications to 
the application of stop-loss protections.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
establish stop-gain and stop-loss limits at the model level. Our final 
policy for establishing these limits is included in Sec.  
512.305(c)(2)(iii)(E).
e. EPM Participant Responsibility for Increased Post-Episode Payments
    Our proposed rule noted that while episodes under the proposed EPMs 
would extend 90 days post-discharge from the anchor or chained anchor 
hospitalization, some EPM participants may have an incentive to 
withhold or delay medically-necessary care until after an EPM episode 
ends to reduce its actual EPM-episode payments. This inappropriate 
shifting could include both those services that are related to the 
episode (for which the hospital would bear financial responsibility as 
such services would be included in the actual EPM-episode payment 
calculation) and those that are unrelated (which would not be included 
in the actual EPM-episode payment calculation), because an EPM 
participant engaged in shifting of medically-necessary services outside 
the EPM episode for potential financial reward may be unlikely to 
clearly distinguish whether the services were related to the EPM 
episode or not in the hospital's decisions.
    We also stated our belief that this inappropriate shifting would 
not be typical, especially given the relatively long EPM episode 
duration. However, in order to identify and address inappropriate 
shifting of care, we proposed to calculate for each EPM performance 
year the total Medicare Parts A and B expenditures in the 30-day period 
following completion of each EPM episode for all services covered under 
Medicare Parts A and B, regardless of whether the services are included 
in the proposed EPM episode definition (sections III.C.3. and III.C.4 
of the proposed rule, (81 FR 50829 through 50843). This proposal is 
consistent with our processes for BPCI Model 2 and the CJR model (80 FR 
73407 through 73408).
    We proposed that the post-episode spending calculation for a 
performance year would occur at the same time we performed the 
subsequent reconciliation calculation for that same year (81 FR 50876 
through 50877). We believe this timeframe would allow sufficient time 
for claims run out in order to set a reliable regional threshold for 
determining the post-episode spending. For example, we would conduct 
reconciliation for performance year 1 in the spring of 2018. The post-
episode spending calculation for performance year 1 would occur during 
the next reconciliation process (spring 2019), when we conduct the 
subsequent reconciliation calculation for performance year 1 and 
account for overlap with other models and programs.
    Our proposed calculation would include prorated payments for 
services that extend beyond the EPM episode as discussed in section 
III.D.3.c. of the proposed rule (81 FR 50846). Specifically, we would 
identify whether the average 30-day post-episode spending for an EPM 
participant in any given EPM performance year is greater than 3 
standard deviations above the regional average 30-day post-episode 
spending, based on the 30-day post-episode spending for episodes 
attributed to all regional hospitals participating in the EPM in the 
same region as the EPM participant. We proposed that if the EPM 
participant's average post-episode spending exceeds this threshold, the 
EPM participant would repay Medicare for the amount that exceeds such 
threshold. We noted that, consistent with CJR, an EPM participant's 
responsibility for post-episode spending would not be subject to the 
stop-loss and stop-gain limits proposed in section III.D.7.b. and 
III.D.7.c.(1) of the proposed rule (81 FR 50872 through 50875). Also, 
although we believed that cases in which an EPM participant would be 
responsible for repayment of post-episode spending that exceeds the 
threshold would be rare, our intention was to identify and hold EPM 
participants responsible for situations in which those participants 
have significantly increased spending on services in the 30 days 
following the end of an EPM episode in order to inappropriately shift 
services out of EPM episodes. This policy is consistent with our 
proposal for the CJR model in section V.D.1. of the proposed rule (81 
FR 50951 through 50952).
    We also noted that based on our experience with BPCI, we have not 
found that this proposal, including our proposal to include all 
Medicare Parts A and B expenditures to measure 30-day post-episode 
spending, would inappropriately penalize EPM participants. To that end, 
however, we believed that our proposed threshold of 3 standard 
deviations above the regional average is a high threshold, and we only 
proposed that an EPM participant would repay Medicare for the amount 
that exceeds such threshold. We further noted that those EPM 
participants that are eligible for reconciliation payments in an EPM 
performance year and also have average 30-day post-episode spending 
that is higher than 3 standard deviations above the regional average 
30-day post-episode spending would have their reconciliation payments 
reduced by the amount by which spending exceeds 3 standard deviations.
    The proposals to determine if a participant's post-episode spending 
30 days after the end of an episode exceeds 3 standard deviations of 
average spending in their region for that period, and require those 
participants exceeding that threshold to repay Medicare for the

[[Page 348]]

amounts in excess of 3 standard deviations were included in Sec.  
512.307(c). We sought comment on our proposals to determine if a 
participant exceeds this threshold and to repay amounts in excess of 
the threshold.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter expressed support for the proposal as it 
could help identify participants that withhold or delay medically 
necessary care until after an episode ends in order to reduce their 
actual episode spending. This commenter further suggested that CMS also 
implement a financial penalty for participants that are found to 
inappropriately delay beneficiaries' care.
    Response: We appreciate the comments in support of our proposal. As 
noted in section III.F.2. of this final rule, we have finalized various 
compliance tools for the EPMs that complement existing laws and 
regulations prohibiting care stinting, provision of substandard care, 
or denial of medically necessary care. As discussed in section 
III.F.2., when an EPM participant or its related EPM collaborator, 
collaboration agent, or downstream collaboration agent engages in these 
noncompliant behaviors, CMS may take remedial action, including 
reducing or eliminating the EPM participant's reconciliation payment or 
reducing or eliminating the EPM participant's CR incentive payment 
amount. In addition, under circumstances where CMS has required a 
corrective action plan, the EPM participant owes a repayment amount to 
CMS, and the EPM participant fails to timely comply with the corrective 
action plan or is noncompliant with the EPM's requirements, CMS may add 
25 percent to a repayment amount on an EPM participant's reconciliation 
report. We believe these tools and structure for the financial penalty 
is consistent with the request of the commenter.
    Comment: Some commenters viewed the proposal as unnecessary in 
light of other enforcement mechanisms to address hospitals that are 
willfully committing potential fraud and abuse or that the proposal 
effectively extends the episode duration from 90 to 120 days. One 
commenter stated that for cases where 30-day post-episode spending 
exceeded a certain threshold, these expenditures were likely necessary 
for treatment of a patient's clinical needs rather than representing an 
intentional delay in providing care to Medicare beneficiaries to game 
the system for greater financial rewards.
    Response: We disagree with the view that our proposal is 
unnecessary in light of other enforcement actions. We believe that our 
proposal in conjunction with our policies related to monitoring and 
enforcement actions is an appropriate means to discourage the 
occurrence of instances where access to high quality care might be 
impeded, and believe this deterrence is preferable to having to take 
enforcement actions subsequent to such an instance. We also do not 
agree with the comment that we are effectively extending episodes or 
that expenditures beyond our thresholds would typically be necessary 
for the care of a beneficiary. We also note that in the event that CMS 
identifies excessive post-episode spending at an EPM participant 
greater than 3 standard deviations above the regional average 30-day 
post-episode spending, the EPM participant will only be required to pay 
back the amount by which post-episode spending for episodes attributed 
to the EPM participant exceeds 3 standard deviations above the regional 
average 30-day post-episode spending. We note that this does not hold 
the EPM participant responsible for all post-episode spending as would 
be the case with 120 day episodes. Moreover, we believe that this 
threshold is sufficiently high to account for all clinically necessary 
care that would occur in the 30 days following an episode. As we noted 
in the CJR Final Rule (80 FR 73407), we believe that monitoring for 30 
day post-episode spending is an appropriate tool to identify 
inappropriate shifts in car based on our experience with BPCI.
    Comment: Some commenters raised concerns that care or services that 
are excluded from or unrelated to an episode would be included in the 
calculation of post-episode spending and recommended that we exclude 
these services from post-episode payment calculations. One commenter 
requested that CMS identify care situations that are ``unrelated'' to 
the EPM episode diagnosis with regard to calculating post-episode 
spending costs.
    Response: As we stated in the CJR Final Rule (80 FR 73407), we 
disagree that we should exclude the same set of services that are 
excluded from the episode definition in the 30 day post-episode 
spending calculations because of concerns that the models could lead to 
shifting of both related and unrelated (those not included in the 
episode definition) services due to some providers encouraging delays 
of services for beneficiaries that are not immediately necessary, 
without discriminating between those services that are in and out of 
the episode definition. Additionally, our experience with BPCI that 
similarly includes all costs when monitoring for 30 day post-episode 
spending has helped to inform our policy for the CJR and the proposed 
EPMs. Based on our experience with BPCI, we have not found that by 
including all costs to measure 30 day post-episode spending, that we 
are inappropriately penalizing hospitals. While we understand 
commenters' concerns that hospitals could be held responsible for high 
cost conditions that are not included in the episode definition, our 
policy aims to strike a balance to hold participating hospitals 
accountable for inappropriate shifts or delays in care and to provide 
hospitals with safeguards on financial risk for 30-day post-episode 
spending. Thus, we have set a high threshold where only hospitals that 
have a 30-day post-episode spending average that is 3 standard 
deviations above the regional average would be subject to repay that 
difference to Medicare, and in the case where the hospital's average 
30-day post-episode spending exceeds regional average 30-day post-
episode spending, the participant would repay Medicare for the amount 
that exceeds such threshold.
    Comment: Some commenters opposed the proposal to exclude post-
episode spending from the stop-loss for the proposed EPM models in part 
because they viewed the provision overall as unnecessary and because of 
potential harm to those hospitals that might result.
    Response: We have established the stop-loss policy to account for 
clinical variation or other high expenditures that are not accounted 
for by the target price methodology, which is not directly comparable 
to excessive spending that occurs during the 30 days after an episode. 
We believe that the post-episode spending policy sets a sufficiently 
high threshold to identify situations with clear increases in post-
episode spending due to shifting of services to maximize financial gain 
under the EPMs, and thus that the stop-loss policy should not apply to 
any potential amount that an EPM participant owes CMS under the post-
episode spending policy.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
determine if a participant's post-episode spending 30 days after the 
end of an episode exceeds 3 standard deviations of average spending in 
their region for that period, and require those participants exceeding 
that threshold to repay Medicare for the amounts in excess of 3 
standard

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deviations. Our final policy for this is included at VII.
Collection of Information Requirements
8. Appeals Process
a. Overview
    Consistent with the BPCI initiative and CJR model, we proposed to 
institute appeals processes for the EPMs that would allow EPM 
participants to appeal matters related to payment, such as CR incentive 
payments, reconciliation amounts, repayment amounts, determinations 
associated with quality measures affecting payment (the use of quality 
measure results in determining the composite quality score, or the 
application of the composite quality score during reconciliation) as 
well as non-payment related issues, such as enforcement matters. These 
matters are discussed respectively throughout section III.D. and III.F. 
of this final rule.
    We sought comment on the proposal to institute appeals processes 
for the EPMs.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter requested clarification on how CMS will handle 
an EPM participant's appeal of a potential calculation error when the 
beneficiary has substance abuse and/or behavioral health claims which 
cannot be shared with the EPM participant. The commenter expressed 
concern regarding the balance between privacy restrictions around 
substance abuse and behavioral health claims and information that is 
provided to EPM participants in order to verify the calculations. The 
commenter stated that EPM participants will have to assume CMS has 
performed all calculations correctly, and as this is not a desirable 
situation, according to the commenter, the commenter recommended CMS 
exclude these claims from the episode calculation or provide the 
information to the EPM participants.
    Response: While we appreciate the commenters' position, we believe 
that the inclusion of these substance use disorder claims in the 
episode target and actual price calculations is necessary for 
accurately pricing the episodes.
    Our proposal to exclude this information from the claims shared 
with model participants is consistent with our usual treatment of these 
data with other similar CMS programs and models where providers must 
take on risk in managing the care of their beneficiaries, such as the 
Shared Savings Program, BPCI and the CJR model. We would note that, 
based on our experience to date, we are unaware of this policy being a 
significant impediment to the operations of these efforts. We do 
understand that by not receiving this data, EPM participants are unable 
to fully verify the accuracy of CMS' calculations. However, as these 
claims typically represent less than 0.1 percent of episode spending 
(based on an analysis of 2015/2016 claims data used in current BPCI 
episodes) we do not believe their exclusion from the data that we 
provide to participants will produce material differences in the 
replication of target/actual prices.
    Further, Section 1115A of the Act does not authorize the waiver of 
the requirements under 42 CFR part 2 which govern the release of 
substance use disorder claims. We note, though, that we may be able to 
share these claims with participants in the near future based on 
proposals outlined in the Confidentiality of Substance Use Disorder 
Patient Records proposed rule published to the Federal Register by 
SAMHSA on February 9, 2016 (81 FR 6987), which updates the 42 CFR part 
2 regulations (referred to hereafter as the Part 2 Rule).
    These regulations govern the confidentiality of substance use 
disorder records. Significant changes have occurred within the U.S. 
health care system that were not envisioned by the current regulations, 
including new models of integrated care that are built on a foundation 
of information sharing to support coordination of patient care, the 
development of an electronic infrastructure for managing and exchanging 
patient information, and a new focus on performance measurement within 
the health care system. In the proposed rule, SAMHSA states that it 
strives to facilitate information exchange within new health care 
models while addressing the legitimate privacy concerns of patients 
seeking treatment for a substance use disorder.
    In section 2.53 of the proposed rule, SAMHSA also proposes to 
permit the disclosure of Part 2 data necessary to a regulated ACO or 
similar CMS-regulated organization (including a CMS-regulated Qualified 
Entity (QE)) for a Medicare, Medicaid, Children's Health Insurance 
Program (CHIP), or related audit or evaluation, under certain 
conditions. As such, should this SAMHSA proposal become final, EPM 
participants would be considered CMS-regulated Qualified Entities and 
would be able to receive this data pursuant to this audit and 
evaluation exception.
    CMS will continue to consider the feasibility of making de-
identified aggregate substance use disorder data available in a way 
that is both meaningful to EPM participants and in compliance with the 
Part 2 Rule. This issue is discussed in further detail in the data 
sharing section.
    Comment: Commenters expressed concern regarding the data files and 
reconciliation reports received from the contractors administering our 
programs based on their experiences thus far with BPCI and CJR. 
Commenters stated the monthly data feeds from CMS regularly omit data 
elements that are used by the contractor to identify and reconcile 
episodes to target prices. Specifically, commenters stated that the 
master beneficiary files contained errors in the DOD and MSCD 1-12 
fields. These fields either contained inaccurate or missing 
information. Commenters stated without these data elements, it is 
impossible to replicate the reconciliation results calculated by CMS. 
Participants are left to assume the contractor's calculations are 
accurate. Commenters stated that the ability to replicate the 
reconciliation results helps maintain a transparent and open 
relationship among the EPM participants, CMS, and CMS' contractor. 
Commenters also recommended CMS provide a mechanism for EPM 
participants to challenge and correct payment results that are not 
accurate. Commenters request the ability to provide evidence 
contradicting errors. Commenters stated currently there is no process 
or data system in place for this function. Commenters stated that the 
lack of a feedback loop will be an increasingly critical barrier to 
participation as the current system has been known to make errors.
    Response: We thank commenters for their feedback. We understand 
commenters' concern regarding missing data elements but we note that 
some of these elements are deliberately excluded in compliance with the 
constraints of 42 CFR part 2 and we are currently unable to provide 
such data. However, the comment response discussed previously outlines 
the potential changes that may be forthcoming regarding the data 
sharing constraints in 42 CFR part 2. Regarding the master beneficiary 
files that contained errors in the DOD and MSCD 1-12 fields, CMS will 
work with their contractors to insure that the data provided is 
accurate. We appreciate the feedback regarding these operational 
concerns and we will work with the EPM payment contractor to establish 
a tracking and feedback process for participants to ask questions of 
CMS regarding payment calculations and potential incorrect amounts and 
be provided more detailed information regarding their reconciliation 
report and calculation error reports for the EPM models.

[[Page 350]]

    Comment: A commenter recommended that CMS change the time period to 
recoup monies owed to CMS from EPM participants from 30 days to 60 days 
from the issuance of the Reconciliation Report.
    Response: We thank the commenter for the comment. However, because 
the operational processes used in payment/recoupment actions are part 
of a standard system that operates across multiple models, including 
BPCI and CJR, as well as standard FFS operational timelines, we are 
unable to accommodate a system change and the recoupment time frame 
will be finalized at 30 days.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification.
b. Notice of Calculation Error (First Level Appeal)
    We proposed the following calculation error process for EPM 
participants to contest matters related to payment or reconciliation, 
of which the following is a non-exhaustive list: The calculation of the 
EPM participant's reconciliation amount or repayment amount as 
reflected in the reconciliation report; the calculation of the EPM 
participant's CR incentive payment as reflected in the CR incentive 
payment report; the calculation of NPRA; the use of quality measure 
results in determining the composite quality score, or the application 
of the composite quality score during reconciliation; and the 
successful reporting of the voluntary PRO THA/TKA data. EPM 
participants would review their reconciliation report and CR incentive 
payment 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 EPM participant provides such notice, the 
reconciliation report and CR incentive report would be deemed final 
within 45 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. We proposed that if an EPM participant does not submit 
timely notice of a calculation error, that is notice within 45 calendar 
days of the issuance of the reconciliation report and CR incentive 
payment report, the EPM participant would be precluded from later 
contesting any of the following matters contained in the reconciliation 
report or CR incentive payment report for that performance year; any 
matter involving the calculation of the EPM participant's 
reconciliation amount or repayment amount as reflected in the 
reconciliation report; any matter involving the calculation of the EPM 
participant's CR incentive payment as reflected in the CR incentive 
payment report; any matter involving the calculation of NPRA; the use 
of quality measure results in determining the composite quality score, 
or the application of the composite quality score during 
reconciliation; and the successful reporting of the voluntary PRO THA/
TKA data. Given that EPM participants bear the financial risk in the 
EPM model, we proposed that only EPM participants might use the dispute 
resolution process described in this section.
    In summary, we proposed the following requirements in Sec.  512.310 
(a) for notice of calculation error:
     Subject to the limitations on review in subpart D of this 
part, if an EPM participant wishes to dispute the calculation that 
involves a matter related to payment, a CR incentive payment, 
reconciliation amounts, repayment amounts, or determinations associated 
with quality measures affecting payment, the EPM participant is 
required to provide timely written notice of the calculation error, in 
a form and manner specified by CMS.
     Unless the EPM participant provides such notice, CMS deems 
final the reconciliation report and CR incentive payment report 45 
calendar days after the reconciliation report or CR incentive payment 
report is issued and proceeds with the payment or repayment processes 
as applicable.
     If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report or CR 
incentive payment report, CMS responds in writing within 30 calendar 
days to either confirm that there was an error in the calculation or 
verify that the calculation is correct, although CMS reserves the right 
to an extension upon written notice to the EPM participant.
     Only EPM participants may use the notice of calculation 
error process described in this part.
    We sought comment on the proposed notice of calculation error 
requirements.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters recommended development of a fair and 
transparent process for providers to appeal reconciliation report 
information. Commenters stated EPM participants must be given adequate 
notice that their reconciliation reports are available, and must be 
provided with sufficient time to review their data. Commenters stated 
that, in many cases, the reconciliation reports may need to be reviewed 
by multiple providers at multiple locations, including both EPM 
participants and post-acute care providers. Commenters recommended that 
in order for EPM participants to access, review, and contest data in 45 
days, they would be required to ignore the demands of patient care and 
competing priorities providers face on a daily basis. Commenters 
recommended extending the appeals process to no less than 90 days. A 
commenter suggested the appeal process be extended to 90 days for at 
least the first 2 performance years. Another commenter recommend that 
the 45 days for hospitals to provide written notice of error should not 
begin until it is mutually agreed upon by the contractor and stated 
hospital that a complete report, which includes all data elements used 
by the contractor to identify and reconcile episodes to target prices, 
has been received.
    Commenters also disagreed that a reconciliation would be considered 
final if a notice is not provided in the time window. Commenters stated 
that they understood that there must be a timeframe to finalize these 
payments and that a disputed amount cannot be brought forth for an 
indefinite amount of time. However, commenters also stated that it is 
important for EPM participants to have an opportunity to submit a 
notice for substantial errors over a longer period of time. Commenters 
suggested that for submitted participant-caused errors that are greater 
than 20 percent of the payment amount, a 180-day window should be 
allowed. Due to the size of the potential error, commenters stated that 
EPM participants may require additional time to gather the necessary 
information and conduct the appropriate analysis to provide to CMS 
stating the rationale for their request. Commenters stated that many 
EPM participants will be new to the EPMs and this recommendation is an 
important safeguard for potential ``large ticket'' errors. Commenters 
concurred with CMS' proposal to provide a response within 30 days of 
receiving a request, including CMS reserving the right to an extension 
of that 30 days if CMS provides this notice to participants in writing.
    Response: We appreciate these comments and are sympathetic to the 
requests from commenters for more time to submit a notice of 
calculation error.

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However, we are also conscious of the need to distribute funds to 
providers with positive NPRAs in a timely fashion and the payment/
reconciliation disbursement/recoupment system is designed such that no 
funds can be released until notices of calculation errors are received 
by CMS. In balancing these needs, consistent with our rationale in the 
CJR model, we believe that 45 days is sufficient time for EPM 
participants to review reconciliation reports, and if they choose, to 
submit notices of calculation error. We believe that 45 days is the 
appropriate timeframe to allow for this process, as it allows for a 
reasonable time to review reconciliation reports and does not seriously 
delay payment of reconciliation payments. Specifically, CMS currently 
uses the following established operational procedures for appeals in 
both BPCI and CJR that we are finalizing in section III.D.8. of this 
final rule.
    The procedures for processing and issuing reconciliation payments 
and repayments require that we submit the payment files for EPM 
participants to the payment systems in batches. CMS uses this batch 
processing method for several reasons. It is administratively more 
efficient to continue to use MACs to issue payments to all providers 
and suppliers that furnish services to beneficiaries during an EPM, so 
as not to disrupt the timing of FFS payments that providers and 
suppliers normally receive. For reconciliation payments and repayments, 
CMS has developed and implemented a process for handling these 
payments, which is already in use for other CMS models. This current 
process is the result of a substantial number of infrastructure changes 
to payment and recoupment procedures that were made over a period of 
several years. As a result, we believe it is appropriate to utilize 
those processes for the EPMs, given that the challenges associated with 
establishing these processes, as well as the fact that they were 
created for other CMS models.
    The effect of these processes is that the batches are sent at 
specified intervals. The first batch is sent after the calculation 
error timeframe closes. The second batch is sent after CMS has 
responded to the notices of calculation error of EPM participants and 
those EPM participants choose to not proceed with the dispute 
resolution process detailed in section III.D.8.c. of this final rule. 
The final batch is sent after CMS has adjudicated all of the 
reconsideration reviews for those participants that selected to utilize 
the dispute resolution process.
    Given these established operating processes, any extension in the 
timeframe allowed for submission of notices of calculation error delays 
payment not only to EPM participants that choose to utilize the 
calculation error and dispute resolution processes, but also those EPM 
participants that choose not to engage in these processes. 
Historically, 90 percent of BPCI awardees do not file a notice of 
calculation error form. As such, we believe the need for extending the 
deadline for submission of notices of calculation error should be 
balanced with CMS' goal to issue reconciliation payments and repayments 
promptly, as an extension for these submissions would delay the 
processing of reconciliation payments for all participants for a 
significant period of time. EPM participants have stated these monies 
will be used for implementing both IT and care redesign. We believe 
that an extension beyond the 45 days proposed would cause undue burden 
on non-appealing EPM participants.
    We also considered the commenters' requests to extend the time 
frame for notice of participant-caused errors that are greater than 20 
percent of the payment amount to 90 or 180 days, but we rejected these 
recommendations because we note that the calculation error form 
represents the first step in a two-step appeals process. Where an EPM 
participant submits a calculation form and is dissatisfied with CMS' 
response, the dispute resolution option is available to the EPM 
participant via a reconsideration review request. Upon receipt of a 
reconsideration review request, the date of such a review would be 
scheduled by CMS approximately 115 days from the issue date of the 
reconciliation report. Thus, we believe that the option for 
reconsideration review, at a much later date, provides EPM participants 
with adequate additional time to analyze the data on reconciliation 
reports, that a 90 or 180 day submission deadline for the calculation 
error form is unnecessary. Finally, we believe the 45 days 
appropriately balances the goal of CMS to process reconciliation 
payments on a timely basis with the needs of EPM participants to have 
adequate time to review their reconciliation reports and submit notices 
of calculation error.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to allow 45 days for 
participants to advise CMS of errors without modification.
c. Dispute Resolution Process (Second Level of Appeal)
    We proposed the following dispute resolution process. First, we 
proposed that only an EPM participant may utilize the dispute 
resolution process. Second, in order to access the dispute resolution 
process a participant must have timely submitted a calculation error 
form, as previously discussed, for any matters related to payment. We 
proposed these matters would include any amount or calculation 
indicated on a reconciliation report or CR incentive payment report, 
including calculations not specifically reflected on a reconciliation 
report or CR incentive payment report but which generated figures or 
amounts reflected on a reconciliation report or a CR incentive payment 
report. The following is a non-exhaustive list of the matters that we 
proposed would need to be first adjudicated by the calculation error 
process as previously detailed: Calculations of reconciliation or 
repayment amounts; calculation of CR incentive payment amounts; 
calculations of NPRA; and any calculations or percentile distribution 
involving quality measures that we proposed that could affect 
reconciliation or repayment amounts. If an EPM participant wants to 
engage in the dispute resolution process with regard to one of these 
matters, we proposed it would first need to submit a calculation error 
form. Where the EPM participant does not timely submit a calculation 
error form, we proposed the dispute resolution process would not be 
available to the EPM participant with regard to those matters for the 
reconciliation report or CR incentive payment report for that 
performance year.
    If the EPM participant did timely submit a calculation error form 
and the EPM participant is dissatisfied with CMS' response to the EPM 
participant's notice of calculation error, the EPM participant 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 
EPM participant's assertion that CMS or its representatives did not 
accurately calculate the NPRA, the CR incentive payment, or post-
episode spending amount in accordance with EPM rules. The following is 
a non-

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exhaustive list of representative payment matters:
     Calculations of NPRA, calculations of the CR incentive 
payment, post-episode spending amount, target prices or any items 
listed on a reconciliation report or CR incentive payment report.
     The use of quality measure results in determining the 
composite quality score, the application of the composite quality score 
during reconciliation, or the successful reporting of the voluntary PRO 
THA/TKA data.
     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, we proposed that the EPM participant need not submit a 
calculation error form. We proposed to require the EPM participant to 
timely submit a request for reconsideration review, in a form and 
manner to be determined by CMS. Where such a request is timely 
received, we proposed CMS would process the request as discussed later 
in this section.
    We proposed 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 
EPM participant in writing within 15 calendar days of receiving the EPM 
participant'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 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 final rule) would apply to reviews conducted pursuant to the 
reconsideration review process for EPM. 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 solicited 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 sought 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.F. of the 
proposed rule, and if so, whether the process for such appeals should 
differ from the processes proposed here.
    In summary, we proposed the following requirements in Sec.  
512.310(b) for the reconsideration process:
     If the EPM participant is dissatisfied with CMS' response 
to the notice of a calculation error, the EPM participant may request a 
reconsideration review in a form and manner as specified by CMS.
     The reconsideration request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the EPM participant's assertion that CMS or its 
representatives did not accurately calculate the NPRA, the 
reconciliation payment, the CR incentive payment or the repayment 
amount in accordance with subpart D of this part.
     If CMS does not receive a request for reconsideration from 
the EPM participant within 10 calendar days of the issue date of CMS' 
response to the EPM participant's notice of calculation error, then 
CMS' response to the calculation error is deemed final and CMS proceeds 
with reconciliation payment or repayment processes, as applicable, as 
described in Sec.  512.305.
     The CMS reconsideration official notifies the EPM 
participant in writing within 15 calendar days of receiving the EPM 
participant's review request of the following:
    ++ The date, time, and location of the review.
    ++ The issues in dispute.
    ++ The review procedures.
    ++ The procedures (including format and deadlines) for submission 
of evidence.
     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 notification.
     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 the EPM.
     The CMS reconsideration official issues a written 
determination within 30 days of the review. The determination is final 
and binding.
    Only EPM participants may utilize the dispute resolution process 
described in this subpart. We sought comment on the proposed 
reconsideration process for the EPMs.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters were concerned with the timing proposed in the 
second level appeal to submit a reconsideration request, arguing 10 
calendar days is insufficient. Commenters stated that 10 calendar days 
is grossly inadequate for providers to analyze and seek any necessary 
clarification from CMS on the response, to conduct any further 
necessary analysis and to submit the reconsideration request. 
Commenters stated that the timeframe should be no less than 60 calendar 
days. Commenters believed this should provide sufficient time for 
providers to gather the necessary information and make the request. 
Commenters also stated that this extension accounts for other timing 
issues, such as holidays, that do not make 10 calendar days reasonable. 
Commenters also criticized the proposal regarding timeframes required 
for CMS responses, arguing these are not firm timeframes and that they 
are contradictory to those timeframes that CMS is proposing to 
implement for EPM participants. Commenters stated that while CMS states 
they will make every reasonable effort to meet these timeframes, there 
are no proposed consequences to CMS should they not meet them.
    Response: We appreciate these comments and are sympathetic to the 
requests from commenters for more time to resubmit a reconsideration 
request. However, we believe that a longer timeframe for submission of 
the reconsideration request is not appropriate for the EPMs. We note 
the EPM participant must make the request within this timeframe and 
provide an explanation of the basis of the dispute. CMS will make all 
reasonable efforts to schedule the review to occur no later than 30 
days after the date of receipt of the notification. This rule does not 
prevent an EPM participant from supplying supplemental documentation 
after they submit the request to support their basis. As such we 
believe that 10 days to make the request is sufficient since this 
deadline requires only that the EPM participant submit the request and 
an explanation of the basis for the dispute. Upon submitting the 
request for dispute resolution, the rule allows the EPM participant to 
submit additional supporting documentation in the interim period prior 
to the final review by the CMS reconsideration official.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification.
d. Exception to the Notice of Calculation Error Process and Notice of 
Termination
    Similar to the CJR model and BPCI initiative, if the EPM 
participant

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contests a matter that does not involve an issue contained in, or a 
calculation which contributes to, an EPM reconciliation report or a CR 
incentive report, a notice of calculation error is not required. 
Consistent with III.D.8(c) in the proposed rule (81 FR 50878), in 
instances where a notice of calculation error is not required, for 
example an EPM participant's termination from the EPM, we proposed the 
EPM participant provide a written notice to CMS requesting review 
within 10 calendar days of the notice. CMS has 30 days to respond to 
the EPM participant's request for review. If the EPM participant fails 
to notify CMS, the decision is deemed final.
    In summary, we proposed the following requirements in Sec.  
512.310(c) for an exception to the notice of calculation error process:
     If the EPM participant contests a matter that does not 
involve an issue contained in, or a calculation which contributes to a 
reconciliation report or CR incentive payment report, a notice of 
calculation error is not required. In these instances, if CMS does not 
receive a request for reconsideration from the EPM participant within 
10 calendar days of the notice of the initial determination, the 
initial determination is deemed final and CMS proceeds with the action 
indicated in the initial determination. This does not apply to the 
limitations on review in sub-paragraph (e).
    In summary, we proposed the following requirements in Sec.  
512.310(d) for notice of termination:
     If an EPM participant receives notification that it has 
been terminated from the EPM and wishes to appeal such termination, it 
must provide a written notice to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the EPM participant's request for review. If the participant 
fails to notify CMS, the termination is deemed final.
    We sought comment on the proposed exception to the notice of 
calculation error process and notice of termination.
    The following is a summary of the comments received and our 
responses.
    Final Decision: CMS did not receive any comments regarding this 
section. Therefore, we are finalizing the proposal without 
modification.
e. Limitations on Review
    In summary, we proposed the following requirements in Sec.  512.310 
(e) for 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:
    ++ 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 section 
1115A(b)(3) of the Act.
    ++ The termination or modification of the design and implementation 
of a model under section 1115A(b)(3)(B) of Act.
    ++ Decisions to expand 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.
    We sought comment on the proposed limitations on review.
    The following is a summary of the comments received and our 
responses.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.

E. EPM Quality Measures, Public Display, and Use of Quality Measures in 
the EPM Payment Methodology

1. Background
    As discussed in the CJR model final rule, Medicare payment policy 
has moved away from FFS payments unlinked to quality and towards 
payments that are linked to quality of care (80 FR 73358). Through the 
Medicare Modernization Act and the Affordable Care Act, we have 
implemented specific IPPS programs like the HIQR Program (section 
1886(b)(3)(B) of the Act), the HVBP Program (subsection (o) of section 
1886), the Hospital Acquired Condition Reduction Program (HACRP) 
(subsection (q) of section 1886), and the Hospital Readmissions 
Reduction Program (HRRP) (subsection (p) of section 1886), where 
quality of care is linked to payment. We have also implemented the 
Shared Savings Program, an ACO program that links shared savings 
payment to quality performance. The CJR model similarly incorporates 
pay-for-performance through the potential for financial reward to 
participants based on the hospital's level of quality performance, 
while also including an incentive for quality improvement if the 
hospital's current level of quality is relatively low (80 FR 73374).
    We proposed pay-for-performance methodologies similar to the CJR 
model for the proposed EPMs. Specifically, we proposed to financially 
reward higher quality in an EPM episode by reducing the effective 
discount factor used to calculate EPM quality-adjusted target prices at 
reconciliation. We would establish the effective discount factor based 
on the EPM participant's overall quality performance and improvement on 
the EPM's quality measures as reflected in the EPM participant's EPM 
composite quality score. We would calculate the EPM participant's 
composite quality score for each EPM performance year at the time of 
reconciliation. The EPM composite quality score would also determine 
whether an EPM participant is eligible for a reconciliation payment if 
savings are achieved beyond the EPM quality-adjusted target price by 
setting a minimum EPM composite quality score for reconciliation 
payment eligibility.
    We note that we continue to believe that EPMs should include pay-
for-performance methodologies that incentivize improvements in patient 
outcomes while simultaneously lowering health care spending (80 FR 
73465). We believe that improved quality of care, specifically achieved 
through coordination and communication among providers in conjunction 
with patients and their caregivers, can favorably influence performance 
on patient outcomes. Like the CJR model, we also believe that the 
proposed three new EPMs would provide the opportunity for EPM 
participants to improve the quality of care based on timely reported 
patient experience, including communications with doctors and nurses, 
and responsiveness of hospital staff (80 FR 7065). Finally, we strive 
to align as many measures as possible in CMS's proposed new EPMs with 
those in ongoing models and programs. Our goal is to focus provider 
improvement efforts and minimize burden on EPM participants in needing 
to become familiar with and report new measures, while still allowing 
us to appropriately capture meaningful quality data and use it in the 
EPMs' pay-for-performance methodologies.
    More specifically, similar to our final decision for the CJR model, 
we did not propose to use any readmissions measures that could apply to 
clinical conditions in these EPMs but that are already in place or have 
been finalized for the HRRP, specifically the Hospital 30-day all-cause 
risk-standardized readmission rate (RSRR) following AMI hospitalization 
(NQF #0505) and the Hospital 30-day all-cause, unplanned,

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RSRR following CABG surgery (NQF #2515), due to the incentives, already 
in place by the HRRP, for hospitals to lower excess readmission rates 
(80 FR 73479). While we consider these readmissions measure rates to be 
important metrics for providing information about AMI and CABG hospital 
performance in the HRRP and HIQR Program for payment and public 
reporting, respectively, other proposed measures for the AMI and CABG 
models support the intent of these models to reduce actual payments in 
an EPM episode while ensuring that quality of care for AMI and CABG 
model beneficiaries is improved.
    Furthermore, while we recognize the lack of complete alignment 
between EPM beneficiaries and the proposed cohorts for the EPM quality 
measures, we believe the proposed measures provide meaningful 
information about EPM participant quality performance and improvement 
that are relevant to EPM beneficiaries. For the AMI and CABG models in 
particular, beneficiaries included in the proposed episode-specific 
measures would significantly overlap with beneficiaries in AMI and CABG 
model episodes. We note that for purposes of the EPMs where we need to 
identify episodes that are included in the EPMs, we proposed to use the 
term anchor to identify hospitalizations that initiate EPM episodes for 
beneficiaries whose care is included in the EPMs. In describing the 
quality measures in detail in section III.E.4. of this final rule, we 
use the term index hospitalization to identify hospitalizations of 
beneficiaries whose outcomes are included in the measures. Thus, anchor 
hospitalizations and index hospitalizations would have varying degrees 
of overlap depending on the specific quality measure.
    Moreover, we note that hospitals are the unit of analysis for the 
EPMs and that the proposed measures are hospital-centric measures, both 
because these are currently available measures that are aligned with 
those in other CMS programs and because one of the major goals of the 
EPMs is to encourage collaboration among different types of providers 
in order to achieve better care and reduced expenditures, while holding 
acute care hospitals financially responsible. For further discussion of 
our proposal that hospitals be accountable for EPM episodes, we refer 
to section III.B.3. of this final rule.
    We recognized that there are also some gaps in the current proposed 
measures relative to other settings in which patients receive care 
post-hospital discharge during EPM episodes, as well as around 
important complications of care for clinical conditions included in the 
three models. However, we believe that these hospital-level measures 
reasonably assess how well EPM participants provide care for EPM 
beneficiaries since the measures, depending on the EPM, assess--(1) 
important patient outcomes, including mortality as well as 
complications and days of acute care following discharge from the index 
hospitalization which can be costly; and (2) patients' perspectives on 
their hospital experience, which include patient feedback on 
communication with doctors, communication with nurses, responsiveness 
of hospital staff, communication about medicines, discharge 
information, cleanliness of the hospital environment, quietness of the 
hospital environment, and transition to post-hospital care. As we gain 
more experience with the EPMs, as well as the CJR model currently in 
testing, and future EPMs, we plan to work to create a more robust set 
of episode quality measures for these and future models. As we stated 
in the proposed rule, we will continue to assess the evolving inventory 
of measures and will continue to refine quality measures for potential 
future rulemaking based on public comments, changes to the EPMs' 
payment methodologies, recommendations from EPM participants and their 
collaborators, and new CMS episode measure development activities as we 
learn more about the impact of EPMs on quality improvement and episode 
efficiency. We refer to section III.E.4.e. of this final rule for a 
discussion of potential future EPM episode measures.
2. Selection of Quality Measures for the EPMs
a. Overview of Quality Measure Selection
    The outcome and patient experience measures proposed for the EPMs 
were selected in order to: (1) Promote alignment with the financial and 
quality goals of the EPMs; (2) leverage hospitals' familiarity with the 
measures due to their use in other CMS hospital quality programs, 
including programs that tie payment to performance such as the HVBP 
Program; (3) streamline EPM measures for EPM participants testing more 
than one EPM; and (4) ensure consistency with CMS's priorities to 
reduce AMI and CABG mortality and complications while improving patient 
experience, as well as with CMS's priorities to reduce major LEJR 
surgery complications while improving the patient experience for SHFFT 
model beneficiaries, like those in the CJR model.
b. AMI Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of AMI model beneficiaries, we proposed three required measures and one 
measure that relies on voluntary data submission, in order to determine 
AMI model participant episode quality performance and improvement that 
would be linked to the AMI model payment methodology as discussed in 
section III.E.3.f.(2) of this final rule. We proposed the following 
measures for the AMI model:
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) (MORT-30-
AMI).
     Excess Days in Acute Care after Hospitalization for AMI 
(AMI Excess Days).
     HCAHPS Survey (NQF #0166).
     Voluntary Hybrid Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #2473) (Hybrid AMI Mortality) data submission.
    I. We refer to sections III.E.4.a. and d. of this final rule for a 
detailed discussion of our proposals regarding these measures for the 
AMI model, including their importance as measures of the quality-of-
care for beneficiaries treated for AMI. The proposals for the AMI model 
measures are included in Sec.  512.411, and the proposals for reporting 
the measures are included in Sec.  512.400. We sought comment on our 
proposals for AMI model quality measures.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters supported the selection of these measures 
as good indicators of quality for AMI patients under the model. 
Commenters expressed an appreciation for the small size of the proposed 
measure set, compared to the larger more burdensome set of measures 
that have been proposed in previous demonstrations and CMS programs.
    Response: We appreciate the support expressed for the small, yet 
comprehensive, set of measures selected for this model. Our goal is to 
focus provider improvement efforts and minimize burden on EPM 
participants in needing to become familiar with and report new 
measures, while still allowing us to appropriately capture meaningful 
quality data and use it in the EPMs' pay for performance methodologies 
and we believe the small

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set of measures we proposed will enable us to achieve this goal.
    Comment: Several commenters expressed concern that the 30-Day All 
cause Risk Standardized Mortality Rate (RSMR) following Acute 
Myocardial Infarction is not a good indicator of quality for the EPM 
episode 90 day episode of care. They stated that the quality metrics 
proposed for AMI are too hospital centric and will not assess quality 
across the full continuum of care. In contrast, a few other commenters 
recommended that CMS narrow the window for the AMI episode from 90 days 
to 30 days, stating that it is known from large randomized trials of 
therapies for AMI patients that the overwhelming majority of disease 
related complications and poor outcomes occur within the first 30 days. 
Additionally, some commenters expressed concern that reporting quality 
data could discourage the treatment of the most vulnerable and frail 
AMI patients. Other commentators stated that patients with AMI and 
serious disability, frailty and concurrent illnesses would not benefit 
from the model quality measures as these patients may have much higher 
mortality rates. Commenters also expressed concern that the proposed 
quality metrics do not offer useful ways to risk adjust for local 
patterns of care regarding end of life care in hospitals for these 
frail, high-risk patients. Several commenters expressed concern that 
the measures that were proposed are misaligned with the cohort for this 
model. Additionally, commenters were concerned that the quality metrics 
as proposed may not provide a meaningful measure of the quality of care 
for those targeted under the model.
    Response: We appreciate comments regarding the use of this measure 
in the model, and the duration of the episodes. While previous studies 
indicate that most complications occur during the 30-Day post discharge 
period, under this model we are evaluating the impact of a bundled 
payment on quality of care for a 90 day episode. For consistency sake 
across the model, we intend to evaluate the impact of such payment 
across a full 90 day period to ensure we capture longer term outcomes 
for patients. The models we proposed define hospitals as the episode 
initiators and financially accountable entities and while we 
acknowledge that the measures we proposed are hospital-centric, we 
believe they are appropriate for these hospital initiated models. We 
are appreciative of the concern regarding the quality of care for the 
beneficiaries including the frail, severely ill beneficiaries that may 
be included in the population on which this model is focused and that 
is why we proposed a comprehensive set of measures that rely on quality 
metrics that are readily available for use under the model. While we 
recognize the lack of complete alignment between EPM beneficiaries and 
the proposed cohorts for the EPM quality measures, we believe the 
proposed measures provide meaningful information about EPM participant 
quality performance and improvement that are relevant to EPM 
beneficiaries. We acknowledge that longer measures are needed and will 
begin investigating the development of measures to assess the quality 
of care across the full 90 day episode and if feasible, will 
incorporate such measures into model if deemed appropriate.
    Comment: We received a mix of comments for and against the proposed 
EDAC measure for the AMI model. A few commenters urged CMS to remove 
the EDAC measures from the AMI model measure set, noting that the 
proposed EDAC measure was adopted for the FY 2018 hospital IQR program, 
and is intended to capture ``all-cause acute care utilization'' in the 
30 days after discharge for patients with a discharge diagnosis of AMI. 
Commenters further stated that in contrast to the existing AMI hospital 
readmission measure in IQR, the AMI EDAC measure includes both 
emergency department (ED) visits and observation stays, in addition to 
hospital readmissions. Commenters stated the purpose of the bundled 
payment is to create a financial incentive that aligns with the care 
goal of improving the patients' health to the point where a return to 
the hospital is unnecessary. Measuring EDAC may be important when the 
financial incentives push toward greater numbers of hospital 
encounters, as they do in the fee for service system. However, in a 
bundled payment model, the commenters stated that this measure may not 
be as meaningful. Commenters urged CMS to alter how we think about what 
to measure in the bundle, stating that excess days in hospital care 
should not be the focus. Additionally, commenters were concerned that 
this measure inappropriately overlaps with the HRRP, thereby creating 
inconsistent incentives to reduce readmissions. Some stakeholders 
believe the use of this measure may lead to mixed performance signals 
between the existing HRRP and EPM model, potentially leading to 
hospitals doing well in one program and poorly in another. Some of 
these commenters expressed concern that the EDAC measure lacks NQF 
endorsement and has not yet been publicly reported on Hospital Compare. 
Commenters stated the hospital field has limited insight on whether the 
measure is accurate and reliable and also noted the lack of socio-
demographic adjustment in the EDAC measure as a potential problem.
    Alternatively, commenters in support of patients' rights endorsed 
the EDAC measure stating that it will capture all hospital contact 
including emergency room and observation stays. These commenters 
supported EDAC as it measures the full experience of a patient's stay 
which should be a meaningful measure of hospital care quality. Another 
commenter offering support for the EDAC from a patients' rights point 
of view stated that mortality and excess days in acute care are 
undoubtedly outcomes that matter to beneficiaries and their families 
and should absolutely be measured.
    Response: We appreciate stakeholder concerns regarding inclusion of 
the EDAC measure in the model. Although we received fewer comments 
supporting the inclusion of this measure in the model, we believe the 
points made in favor of patients' rights and the need to measure the 
full hospital experience from the patient point of view are valid and 
relevant to this model that is designed to improve quality of care for 
the beneficiaries. We also note that the AMI EDAC measure has been 
recommended for endorsement without risk adjustment for 
sociodemographic status (SDS) and it will be publicly reported starting 
July 2017.
    Regarding concerns for measure overlap with HRRP, we conducted 
additional comparison analysis to determine the degree to which the 
EDAC and readmission measures provide distinct information about 
hospitals' performance. In our analysis we compared hospitals' outlier 
status using results from both sets of measures. The findings 
demonstrate that more hospitals are characterized as outliers by the 
EDAC measures compared with the readmission measures. Therefore, the 
two sets of measures provide different and directionally consistent 
information about hospitals performance. Very few hospitals are 
characterized in opposing directions by the two sets of measures, 
meaning that those few hospitals with poorer performance on the 
readmission measures tend to also perform poorly on the EDAC measures.
    We conclude that, with the inclusion of this measure in the AMI 
EPM, nearly all hospitals that are currently penalized in the HRRP will 
also be poor performers on the EDAC measure. However, most poor 
performers on the

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AMI EDAC measure will not be identified as poor performers on the AMI 
readmissions measure. The total overlap is minimal although there is a 
risk that some hospitals will be penalized in both the HRRP and AMI EPM 
programs.
    While some commenters suggest that measuring EDAC may only be 
important when the financial incentives push toward greater numbers of 
hospital encounters, as they do in the FFS system, we believe tracking 
return visits to the hospital is a good indicator of the overall 
quality of care in an episode payment model as well.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modifications, to the 
AMI measure set as proposed.
c. CABG Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of CABG model beneficiaries, we proposed two required measures, in 
order to determine CABG model participant episode quality performance 
and improvement that would be linked to the CABG model payment 
methodology as discussed in section III.E.3.f.(3) of this final rule. 
We proposed the following measures for the CABG model:
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 
2558) (MORT-30-CABG).
     HCAHPS Survey (NQF #0166).
    We refer to sections III.E.4.b. and d. of this final rule for a 
detailed discussion of our proposals regarding these measures for the 
CABG model, including their importance as measures of the quality-of-
care for beneficiaries treated with CABG.
    II. The proposals for the CABG model measures are included in Sec.  
512.412., and the proposals for reporting the measures are included in 
Sec.  512.400. We sought comment on our proposals for CABG model 
quality measures.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters support our proposed CABG measures 
stating that the measures represent a brief, focused and relevant set 
of quality metrics. They expressed support for the use of the Thirty 
(30) day mortality measure, stating that this measure appropriately 
focuses on the key quality metrics that matter in the domain of cardiac 
care.
    Response: We appreciate the support for the model and quality 
metrics proposed and we also believe that these measures reflect key 
quality metrics that matter for cardiac care.
    Comment: A commenter suggested that CMS should also consider 
including a quality measure to evaluate blood transfusion rates during 
and after CABG procedures, stating that unnecessary blood transfusions 
during and after CABG procedures are costly to patients and to 
hospitals. Perioperative red blood cell transfusion is the single 
factor most reliably associated with increased perioperative morbidity 
events after CABG, such as serious infections, prolonged ventilation 
support and renal failure.
    Response: We thank the commenter for their suggestion. CMS believes 
the 30 Day All Cause Risk Standardized Mortality rate will capture 
complications that lead to death related to the CABG procedures 
performed under the model.
    Comment: A group of commenters recommended that the Society of 
Thoracic Surgeons (STS) consensus based outcomes be included for the 
CABG measure set. The STS has a robust, risk adjusted National Adult 
Cardiac Database that tracks measures for CABG Commenters stated that 
the vast majority of cardiothoracic programs and provides already 
report to and participate in the Database.
    Response: We agree with commenters that the STS measure set is a 
comprehensive NQF-endorsed composite measure with strong potential to 
meaningfully improve quality. Although the STS measures were not 
proposed as a measure initially we intend to amend the measure set for 
CABG to include a voluntary data submission for various measures (there 
are 11 distinct measures) within the STS composite measure. Reporting 
of this measure data will be voluntary and will only help model 
participants. This measure will count for 10 percent of the score which 
will be worth 2 points. We have re-weighted the CABG and HCAHPS scores 
out of a total point basis of 18. We will rank the overall scores out 
of 18 to set the performance ranges and then we offer 2 points on top 
of that if participants voluntarily submit data for this measure. The 
revised scoring and weighting methodology for the CABG model is 
discussed in detail in the linking quality payment section III E.4.f of 
this final rule.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
incorporate the STS composite measure data submission as a voluntary 
option (would only help participants) weighted at 10 percent of the 
composite quality score as discussed in detail in section III E.4.f of 
this final rule. CMS does not anticipate significant operational 
difficulties as we plan to work collaboratively with the STS Registry 
to receive the data files following each data collection period as 
prescribed by the STS Registry. EPM participants who are not members of 
the STS Proprietary Registry, but are a HQR participating facility 
would have access to Secure File Transfer (SFT). Data files can be 
securely sent via SFT in a transitional submission format available to 
systems using a spreadsheet-based approach.
d. SHFFT Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of SHFFT model beneficiaries, we proposed two required measures and one 
measure that relies on voluntary data submission, in order to determine 
SHFFT model participant episode quality performance and improvement 
that would be linked to the SHFFT model payment methodology as 
discussed in section III.E.3.f.(4) of this final rule. While we 
recognize that none of the proposed measures specifically target the 
care of SHFFT model beneficiaries, these measures are the same as those 
used for the CJR model because SHFFT model episodes will be tested 
along with the LEJR episodes in the CJR model (80 FR 73501 and 73507) 
at mostly the same hospitals. In addition, as discussed further in 
section III.E.3.e.(3) of this final rule, we propose to calculate a 
hospital-level composite quality score that would apply to episode 
payment for both the CJR and SHFFT models, consistent with our proposal 
of the same measures for the two models. We believe that due to the 
inclusion of beneficiaries with hip fracture in both the CJR and SHFFT 
models and our desire to streamline EPM participant measure reporting, 
as well as the focus of both models on major lower extremity orthopedic 
surgery, the same set of quality measures can be used for both models 
to incentivize quality improvement in lower extremity orthopedic 
surgery care and episode efficiency. We are also considering future 
measure development focused specifically on hip and femur fracture 
patients. We expect that many of the physicians and other providers 
collaborating with participant hospitals in the SHFFT and CJR models 
will be the same, such that certain care pathways and episode 
efficiencies may be coordinated for SHFFT and CJR model beneficiaries 
regardless of the model, potentially resulting in quality improvement 
for beneficiaries in both

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models. We proposed the following measures for the SHFFT model:
     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550) (Hip/Knee Complications).
     HCAHPS Survey (NQF #0166).
     Total Hip Arthroplasty (THA)/Total Knee Arthroplasty (TKA) 
voluntary patient-reported outcome (PRO) and limited risk variable data 
submission (Patient-reported outcomes and limited risk variable data 
following elective primary THA/TKA).
    We considered an alternative approach to the required quality 
measures for the SHFFT model given that the proposed measures do not 
specifically target the SHFFT model beneficiaries. This alternative 
approach would not account for any hip-specific measures (such as, 
Hospital-level RSCR following elective primary THA and/or TKA (NQF 
#1550) (Hip/Knee Complications)) and would instead only measure patient 
experience through the HCAHPS Survey (NQF #0166). Although there may be 
some rationale for excluding measures that do not specifically target 
SHFFT model beneficiaries, we did not propose this approach to SHFFT 
model quality measures because we believe that it is critical to 
include a measure of both clinical and patient experience outcomes in 
the setting of lower extremity orthopedic surgery episodes. 
Additionally, we believe that using quality measures for SHFFT model 
episodes that do not align with those in the CJR model could generate 
confusion at CJR model participant hospitals where we proposed that the 
SHFFT model be tested as discussed in section III.B.4. of the proposed 
rule (81 FR 50794).
    We refer to sections III.E.4.c. and d. of this final rule for a 
detailed discussion of our proposals regarding these measures for the 
SHFFT model, including their importance as measures of the quality-of-
care for beneficiaries undergoing major lower extremity joint 
replacement surgery.
    The proposals for the SHFFT model measures are included in Sec.  
512.413, and the proposals for reporting the measures are included in 
Sec.  512.400. We sought comment on our proposals for SHFFT model 
quality measures.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concern that using the 
Hospital-level Risk Standardized Complication Rate (RSCR) measure of 
elective THA and/or TKA outcomes as an elective measure is an 
inappropriate proxy of SHFFT quality, as improving quality for the 
emergency procedures covered under SHFFT has no impact on RSCR. These 
commenters stated that the program effectively incentivizes only 
cutting costs without any beneficiary protection related to the quality 
of care. There is concern that use of this measure may distort 
incentives toward improving measures unrelated to care with no regard 
for the actual quality of an emergency SHFFT episode of care.
    Response: We do not agree that the measure only incentivizes cost 
cutting. While we recognize that none of the proposed measures 
specifically target the care of SHFFT model beneficiaries, these 
measures are the same as those used for the CJR model because SHFFT 
model episodes will be tested along with the LEJR episodes in the CJR 
model (80 FR 73501 and 73507) at mostly the same hospitals. In 
addition, as discussed further in section III.E.3.e.(3) of this final 
rule, we proposed to calculate a hospital-level composite quality score 
that would apply to episode payment for both the CJR and SHFFT models, 
consistent with our proposal of the same measures for the two models. 
We continue to believe that due to the inclusion of beneficiaries with 
hip fracture in both the CJR and SHFFT models and our desire to 
streamline EPM participant measure reporting, as well as the focus of 
both models on major lower extremity orthopedic surgery, the same set 
of quality measures can be used for both models to incentivize quality 
improvement in lower extremity orthopedic surgery care and episode 
efficiency. We recognize that more robust measures better targeted to 
the SHFFT population are desirable and will considering future measure 
development focused specifically on hip and femur fracture patients.
    Comment: Several commenters expressed support for the use of 
Patient Reported Outcome Measures (PROM) in SHFFT, and were supportive 
of plans to incentivize model participants who report PROMs.
    Response: We appreciate the support for collection of PRO data in 
this model and believe that patient outcome data which will help 
develop quality PROMs can be helpful in measuring the quality of care 
rendered under this model.
    Comment: A few commenters expressed concern that the model doesn't 
include functional outcome measures and quality of life measures to 
assess the quality of life for the patient population. Commenters 
recommend that we consider performance-measures of function for the 
population such as the Six-Minute Walk Test. Including functional 
performance measures will give CMS better data on the functional 
outcome of this patient population. Commenters expressed concern that 
while the measures proposed for use in this model mirror those in the 
CJR model, and considering the SHFFT model will be operating alongside 
the CJR episodes the SHFFT model composition of mostly non-elective 
cases precludes that the population between the two models have stark 
differences. Therefore, simply transferring the data from one EPM to 
another is not appropriate. Commenters urged CMS to develop measures 
that more accurately reflect the populations included in the model 
specifically.
    Response: We appreciate the commenter thoughts regarding utilizing 
quality metrics to accurately measure and account for the patient 
population served under the SHFFT model specifically, in contrast to 
those in the concurrent CJR model. We believe that we have proposed a 
measure set of readily available measures to assess the quality of care 
across the SHFFT episodes. We will continue to investigate utilizing 
measures to more accurately reflect the patient population in this 
model.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to the 
quality measures proposed in the SHFFT model.
3. Use of Quality Measures in the EPM Payment Methodologies
a. Overview of EPM Composite Quality Score Methodology
    We believe that the proposed EPMs provide another mechanism for 
hospitals to improve quality of care, while also achieving cost 
efficiency. Incentivizing high-value care through episode payments for 
AMI, CABG, and hip fracture care is a primary objective of these 
proposed EPMs. Therefore, incorporating quality performance into the 
episode payment structure is an essential component of the proposed 
EPMs, just as it is for the CJR model (80 FR 73370). For the reasons 
stated previously, we believe it is important for the AMI, CABG, and 
SHFFT models to link the financial reward opportunity with performance 
and improvement in the quality of care for Medicare beneficiaries 
treated for AMI, CABG, and hip fracture.
    As discussed in section III.D.4.a. of the proposed rule (81 FR 
50794), which outlines the pricing methodologies for EPM episodes, for 
each EPM participant we proposed to set an EPM-episode benchmark price 
for each EPM episode. We would apply the EPM participant's effective 
discount factor based on the

[[Page 358]]

participant's quality performance and improvement for the EPM 
performance year to the EPM-episode benchmark episode price to 
calculate the quality-adjusted target price for each EPM episode. We 
refer to section III.E.3.f. of this final rule for further discussion 
of the relationship between an EPM participant's quality performance 
and improvement and the effective discount factor. As discussed in 
section III.C.4.a.(5) of this final rule, we are not finalizing our 
proposed AMI model inpatient-to-inpatient transfer episode initiation 
and attribution policy so we will not use the terms chained anchor 
hospitalization and price MS-DRG in the final AMI episode definition 
and quality discussion. Each EPM episode includes an anchor 
hospitalization for either AMI (AMI MS-DRG or PCI MS-DRG with AMI ICD-
10-CM diagnosis code in the principal or secondary diagnosis code 
position), CABG (CABG MS-DRG), or SHFFT (SHFFT MS-DRG) and a 90-day 
period after discharge from the anchor hospitalization. An EPM quality-
adjusted target price would represent expected spending on all related 
Part A and Part B items and services furnished during EPM episodes 
based on historical EPM episodes, and would incorporate the EPM 
participant's effective discount factor for the EPM performance year. 
Participants that achieve actual EPM-episode payments below the 
quality-adjusted target price for a given performance year may be 
eligible for a reconciliation payment from CMS, subject to the proposed 
stop-gain limit policy as discussed in section III.D.7.b. of the 
proposed rule (81 FR 50794). Participants that achieve actual EPM-
episode payments that exceed the quality-adjusted target price for a 
given performance year may be required to repay Medicare a portion or 
all of the excess EPM-episode spending.
    We proposed an EPM composite quality score methodology for linking 
quality and payment in the EPMs that is similar to that methodology 
finalized for the CJR model (80 FR 73363 to 73381). Similar to the CJR 
model, the EPM-specific composite quality score methodology would allow 
both performance and improvement on each EPM's required quality measure 
to be meaningfully valued in the EPMs' pay-for-performance methodology, 
incentivizing and rewarding cost savings in relation to the quality of 
episode care provided by the EPM participant (80 FR 73374 and 73370). 
Specifically, the EPM composite quality score is made up of the 
composite performance score (which includes both patient experience and 
outcome measures, including points for voluntarily reported measures) 
and an improvement score.
    We believe the actual level of quality performance achieved should 
be most highly valued in the EPM composite quality score to reward 
those EPM participants furnishing high quality care to EPM 
beneficiaries, with a smaller contribution to the EPM composite quality 
score made by improvement points if measure result improvement is 
achieved. We acknowledge that substantial improvement on a quality 
measure result is not the sole indicator that an EPM episode-of-care is 
high quality; yet, the improvement spurred by the hospital's 
participation in the EPM deserves to be valued as the EPM participant's 
performance is moving in a direction that is good for the health of 
beneficiaries. Like the CJR model, the EPMs involve a wide range of 
participants that must participate if they are located in the selected 
MSAs, and the participants would be starting from many different 
current levels of quality performance. We note that the Shared Savings 
Program utilizes a similar scoring and weighting methodology, which is 
described in detail in the CY 2011 Shared Savings Program Final Rule 
(see Sec.  425.502). The HVBP Program and the HACRP 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). 
Despite the small number of quality measures proposed for the EPMs, the 
measures represent both clinical outcomes and patient experience, and 
each carries substantial value in the EPM composite quality score.
    Although performance and improvement on each measure would be 
valued in the EPM composite quality score methodology, it is the EPM 
participant's overall quality performance under the EPM that would be 
considered in the pay-for-performance approach, rather than performance 
on each quality measure individually determining the financial 
opportunity under the EPM. The EPM composite score methodology also 
provides a framework for incorporating additional measures of 
meaningful outcomes for EPM episodes in the future. Finally, while we 
believe that high performance on all of the quality measures represents 
goals of clinical care that should be achievable by all EPM 
participants that heighten their focus on these measures, we appreciate 
that many participants have room for significant improvement in their 
current measure performance. The EPM composite score methodology would 
provide the potential for financial reward for more EPM participants 
that reach overall acceptable or better quality performance, thus 
incentivizing their continued efforts to improve the quality and 
efficiency of EPM episodes.
    We sought comment on our proposal to use an EPM-specific composite 
quality score in the pay-for-performance methodologies of the AMI, 
CABG, and SHFFT models.
    Final Decision: No comments were received on the EPM-specific 
composite quality score in the pay-for-performance methodologies of the 
AMI, CABG, and SHFFT models. Therefore, we are finalizing the proposal, 
without modification.
b. Determining Quality Measure Performance
    Similar to our reasoning in the CJR model, we believe that relative 
measure performance for the EPM measures would be the most appropriate 
way to incorporate quality performance into the EPMs because we do not 
have sufficient information about participant performance to set and 
use an absolute performance result on each measure (80 FR 73371). 
Moreover, we believe that participants nationally are currently working 
to improve their performance on the quality measures proposed for the 
EPMs on an ongoing basis as these are included in other CMS programs 
such as the HIQR and HVBP Programs. Therefore, while we expect that EPM 
participants would have a heightened focus on performance on these 
measures as a result of the financial incentives resulting from the EPM 
payment methodology, we are not yet certain what performance outcomes 
can be achieved under best practices.
    Thus, at the time of reconciliation for an EPM performance year, we 
proposed to assign each EPM participant's measure point estimate from 
the most recent year as discussed in section III.E.5. of this final 
rule to a performance percentile based on the national distribution of 
measure results for subsection (d) hospitals that are eligible for 
payment under the IPPS reporting the measure that meet the minimum 
patient case or survey count. This proposal applies to the MORT-30-AMI 
(NQF #0230) and AMI Excess Days measure results for the AMI model; the 
MORT-30-CABG (NQF #2558) measure result for the CABG model; the Hip/
Knee Complications (NQF #1550) measure result for the SHFFT model; and 
the HCAHPS Survey (NQF #0166) measure result for all of the EPMs.

[[Page 359]]

    The measure-specific parameters that would apply to developing the 
national distributions are displayed in Table 22.

   Table 22--Requirements for Use of Subsection (d) Hospitals That Are
    Eligible for Payment Under the IPPS Measure Results in Developing
           National Distribution of Required Measures for EPMS
------------------------------------------------------------------------
                                             Requirements for use in
                Measure                       national distribution
------------------------------------------------------------------------
MORT-30-AMI (NQF #0230)................  At least 25 patient cases in
                                          the 3-year measure performance
                                          period.
AMI Excess Days........................  At least 25 patient cases in
                                          the 3-year measure performance
                                          period.
MORT-30-CABG (NQF #2558)...............  At least 25 patient cases in
                                          the 3-year measure performance
                                          period.
Hip/Knee Complications (NQF #1550).....  At least 25 patient cases in
                                          the 3-year measure performance
                                          period.
HCAHPS Survey (#0166)..................  At least 100 completed surveys
                                          in the 4-quarter reporting
                                          period.
------------------------------------------------------------------------

    We would assign any low volume EPM participant without a reportable 
value for the measure, new hospitals that are identified as EPM 
participants, or EPM participants where We have suppressed the measure 
value due to an error in the data used to calculate the measure to the 
50th performance percentile of the measure result, so as not to 
disadvantage an EPM participant based on its low volume or lack of 
applicable cases because that participant may in actuality provide high 
quality care. We believe that relative measures of quality performance 
are most appropriate for the EPMs as participants continue to make 
progress nationally on improving patient outcomes and experience. 
Proposed measure-specific assignment of points in the EPMs' composite 
quality scores based on relative quality measure performance are 
discussed in sections III.E.3.e.(1), (2), and (3) of the proposed rule 
(81 FR 50794).
    We sought comment on our proposed overall approach to determining 
quality measure performance based on assigning the EPM participant's 
measure point estimate to a measure performance percentile based on the 
national distribution of measure results from subsection (d) hospitals 
eligible for payment under the IPPS.
    No comments were received on this proposal so we are finalizing 
without modification.
c. Determining Quality Measure Improvement
    Consistent with our reasoning for the CJR model, we believe it 
would be important in the EPMs to directly reward EPM participants for 
quality improvement, similar to the pay-for-performance policies under 
other programs such as the HVBP Program and the Shared Savings Program, 
in order to provide a significant incentive for quality improvement for 
EPM participants at all current levels of quality performance (70 FR 
73379). For the CJR model, we adopted a refinement to the composite 
quality score methodology that would supplement the composite quality 
score's valuing of quality performance in the pay-for-performance 
methodology of the CJR model (80 FR 73379). As in the CJR model, we 
believe the heightened focus on EPM episode cost and quality 
performance by participants in the EPMs may lead to substantial year-
over-year quality measure improvement over the EPM performance years. 
Nevertheless, we believe that the actual level of quality performance 
achieved in the EPMs should be most highly valued in the EPM composite 
quality score to reward those participants furnishing high-quality care 
to EPM beneficiaries, with a small contribution to the composite 
quality score made by improvement points if measure result improvement 
is achieved. Thus, we proposed adding into the EPM-specific composite 
quality score up to 10 percent of the maximum value for each EPM 
quality measure to which improvement could apply (excluding the 
voluntary data submission measures) for those EPM participants that 
demonstrate substantial improvement from the prior year's measure 
performance on that measure (80 FR 73379 through 73380). The maximum 
EPM composite quality score would be capped at 20 points under this 
proposal. Proposed measure-specific assignment of points for 
improvement in the EPMs' composite quality scores are discussed in 
sections III.E.3.e.(1), (2), and (3).
    For the AMI and CABG models, we proposed to define measure 
improvement differently than in the CJR model, using an approach that 
is more similar to the methodologies of other CMS programs such as the 
HVBP Program. The CJR model defined measure improvement for model 
participants relative to a national performance distribution (80 FR 
73380). In contrast, we proposed to define measure improvement as any 
improvement in an AMI or CABG model participant's own measure point 
estimate from the previous year, regardless of the participant's 
measure point estimate starting and ending values, if the AMI or CABG 
model participant falls into the top 10 percent of participants based 
on the national distribution of measure improvement over the 2 years 
for subsection (d) hospitals that are eligible for payment under the 
IPPS reporting the measure that meet the minimum patient case or survey 
count. We proposed this approach because it represents the greatest 
confidence that we are capturing meaningful improvement on a measure by 
an AMI or CABG model participant in comparison with performance changes 
of other hospitals yet, unlike the CJR and proposed SHFFT model 
methodologies, is founded on an AMI or CABG model participant's own 
measure performance change from year-to-year. We believe that moving 
toward incorporating a model participant's own measure performance 
improvement in the pay-for-performance methodologies for EPMs 
strengthens the incentives in the models for quality improvement, 
especially for EPM participants at the lower end of current measure 
performance.
    For the SHFFT model, we proposed to modify the definition of 
improvement used in the CJR model in two ways (80 FR 73379 through 
73380). First, we proposed to define measure improvement as improving 2 
deciles or more in comparison to the national distribution of measure 
results from the prior year, based on a comparison of relative quality 
measure performance over the most recent 2 years of available quality 
measure result data. This is the same methodology as finalized for the 
CJR model, except that it reduces the threshold for improvement from 3 
deciles to 2 deciles in order to reward a broader range of improvement. 
Second, we proposed to award up to 10 percent of the maximum measure 
performance score on the outcome and patient experience measures 
described in III.E.3.e.(3) of the proposed rule (81

[[Page 360]]

FR 50794), with a cap of the SHFFT model composite quality score at 20 
points. This alters the CJR model methodology, which calculates the 
measure performance score, voluntary reporting points, and measure 
improvement score separately for a total potential maximum score of 22. 
Taken together, these two changes bring calculation of the SHFFT model 
composite quality score into greater alignment with existing CMS 
programs, such as the HVBP Program, by expanding the number of SHFFT 
model participants eligible for quality improvement points but reducing 
the number of participants who receive both the highest quality 
performance score on a measure and points for measure improvement 
simultaneously.
    In section V.E. of the proposed rule (81 FR 50794), we proposed 
changes to the CJR model composite quality score calculation consistent 
with the SHFFT model methodology described here, allowing use of the 
same definition of quality improvement for the SHFFT and CJR models, 
because these models would be tested in mostly the same hospitals. We 
believe this approach would provide SHFFT model participants at all 
current levels of quality performance, including those historically 
lagging, with significant incentives to achieve improvement quality of 
care under the SHFFT model. Using a common approach to measuring 
quality improvement for the SHFFT and CJR models would provide a single 
participant-level composite quality score that can be applied at 
reconciliation for each model to determine the payment policies that 
would apply to the participant for the CJR and SHFFT model episodes, 
taking into consideration the different model performance years.
    The proposals to determine quality measure improvement for the AMI, 
CABG, and SHFFT models are included in Sec.  512.315(b)(3), (c)(3), and 
(d)(3), respectively. We sought comment on our proposals to determine 
quality measure improvement for the AMI, CABG, and SHFFT models.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters expressed concern that the improvement 
thresholds are inappropriate, and are not feasible to allow a hospital 
to earn improvement points. Commenters suggested the CMS consider a 
scoring methodology similar to the Hospital Value Based Purchasing 
scoring methodology in this model.
    Response: We appreciate the concern regarding measuring improvement 
under the model. We did not propose to use the HBVP methodology that 
assigns either improvement or performance points to quality measures. 
We believe the actual level of quality performance achieved should be 
most highly valued in the EPM composite quality score to reward those 
EPM participants furnishing high quality care to EPM beneficiaries, 
with a smaller contribution to the EPM composite quality score made by 
improvement points if measure result improvement is achieved. We 
acknowledge that substantial improvement on a quality measure result is 
not the sole indicator that an EPM episode-of-care is high quality; 
yet, the improvement spurred by the hospital's participation in the EPM 
deserves to be valued as the EPM participant's performance is moving in 
a direction that is good for the health of beneficiaries. Thus, the EPM 
methodology, in comparison with HVBP, provides improvement points as a 
bonus on top of performance points. We believe improvement points 
should be awarded only when meaningful improvement is achieved and 
hospitals will be able to receive improvement points when they achieve 
meaningful improvement performance For example, if the AMI or CABG 
model participant falls into the top 10 percent of participants based 
on the national distribution of measure improvement over the 2 years 
for subsection (d) hospitals that are eligible for payment under the 
IPPS reporting the measure that meet the minimum patient case or survey 
count. We propose this approach because it represents the greatest 
confidence that we are capturing meaningful improvement on a measure by 
an AMI or CABG model participant in comparison with performance changes 
of other hospitals yet, unlike the CJR and proposed SHFFT model 
methodologies, is founded on an AMI or CABG model participant's own 
measure performance change from year-to-year.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to 
methodology to determine quality measure improvement for AMI, CABG and 
SHFFT models.
d. Determining Successful Submission of Voluntary Data for AMI and 
SHFFT Models
(1) Hybrid AMI Mortality (NQF #2473) Voluntary Data
    Similar to the CJR model, we proposed that AMI model participants 
that successfully submit the Hybrid AMI Mortality (NQF #2473) measure 
voluntary data would be eligible for points in the AMI model composite 
quality score (80 FR 73375, 73381). Encouraging collection and 
submission of the Hybrid AMI Mortality (NQF #2473) measure voluntary 
data through the AMI model would increase hospital familiarity with 
submitting hybrid quality measures based on claims data and data 
submitted from electronic health records; further develop an outcome 
measure that provides meaningful information on outcomes for AMI 
hospitalizations that are commonly experienced by Medicare 
beneficiaries; provide another quality measure that may be incorporated 
into the AMI model pay-for-performance methodology in future years, 
pending successful implementation testing of the measure; and inform 
the quality strategy of future payment models.
    The proposed requirements for determining successful submission of 
Hybrid AMI Mortality (NQF #2473) measure voluntary data are included in 
Sec.  512.411(b)(2) and discussed in detail in section 
III.E.4.a.(3)(vii) of the proposed rule (81 FR 50794). We sought 
comment on our proposals for determining successful submission of 
voluntary data for each AMI model performance year.
    Final Decision: No comments were received on this proposal. 
Therefore we are finalizing the proposal, without modification.
(2) Patient-Reported Outcomes and Limited Risk Variable Voluntary Data 
Following Elective Primary THA/TKA
    Like the CJR model, we proposed that SHFFT model participants that 
successfully submit Patient-reported outcomes and limited risk variable 
voluntary data following elective primary THA/TKA be eligible for 
points in the SHFFT model composite quality score (80 FR 73375, 73381). 
We note that SHFFT model participants that are also participating in 
the CJR model would not need to submit data twice to satisfy the 
successful submission requirements of both models. If those hospitals 
successfully submit voluntary data for the CJR model they would be 
credited with successful submission under the SHFFT model.
    The proposed requirements for determining successful submission of 
Patient-reported outcomes and limited risk variable voluntary data 
following elective primary THA/TKA are included in Sec.  512.13(b)(2) 
and discussed in detail in section III.E.4.c.(2)(viii) of the proposed 
rule (81 FR 50794). We sought comment on our proposals for determining 
successful submission of voluntary data for each SHFFT model 
performance year.

[[Page 361]]

    Final Decision: No comments were received on this proposal. 
Therefore we are finalizing the proposal without modification.
e. Calculation of the EPM-Specific Composite Quality Score
(1) AMI Model Composite Quality Score
    We proposed to assign each participant an AMI model composite 
quality score, calculated as the sum of the individual quality measure 
performance scores (including successful submission of Hybrid AMI 
Mortality (NQF #2473) measure voluntary data if applicable) and 
improvement scores. The quality measure performance scores would be set 
to reflect the intended weights for each of the quality measures and 
the successful submission of the Hybrid AMI Mortality (NQF #2473) 
voluntary data in the AMI model composite quality score. Each quality 
measure performance would be assigned a weight in the AMI model 
composite quality score, and possible scores for the measures would be 
set to reflect those weights. We would weight AMI model participant 
performance on each of the three required measures and successful 
submission of Hybrid AMI Mortality (NQF #2473) voluntary data according 
to the measure weights displayed in Table 23.

   Table 23--Measures and Associated Performance Weights in AMI Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
                                       composite       Quality domain/
          Quality measure            quality score         weight
                                          (%)
------------------------------------------------------------------------
MORT-30-AMI (NQF #0230)...........              50  Outcome/80%.
AMI Excess Days...................              20
Hybrid AMI Mortality (NQF #2473)                10
 Voluntary Data.
HCAHPS Survey (NQF #0166).........              20  Patient Experience/
                                                     20%.
------------------------------------------------------------------------

    We would assign the lowest weight of 10 percent to the submission 
of Hybrid AMI Mortality (NQF #2473) measure voluntary data because 
these data represent an AMI model participant's meaningful 
participation in advancing the quality measurement of AMI outcomes in 
keeping with our goal to move toward the use of electronic health 
records (EHRs) for measures, and in response to stakeholder feedback to 
include clinical data in outcome measures. Given the importance of AMI 
mortality as an extremely serious AMI outcome, we proposed to assign 
the highest individual measure weight of 50 percent to the MORT-30-AMI 
(NQF #0230) measure. We proposed to assign another 20 percent of the 
weight to the AMI Excess Days measure that is also included in the 
outcome quality domain. The remaining 20 percent of the AMI model 
composite quality score weight would be assigned to the HCAHPS Survey 
(NQF #0166) 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 meaningful patient experience measure of AMI model 
episode quality. This proposal of weights for the outcome and patient 
experience quality domains for the AMI model composite quality score is 
similar to the proposal of weights for the CABG model composite quality 
score described later in this section. We would assign the highest 
overall weight to the outcome quality domain (consisting of two 
measures and voluntary data submission) because the measures in this 
quality domain are specific to meaningful outcomes for AMI model 
beneficiaries. We did not propose to assign the HCAHPS survey (NQF 
#0166) measure the highest weight of the quality and patient experience 
domains, as the measure is not specific to AMI model episodes, but 
rather to all clinical conditions treated by AMI model participants. 
Unlike the CJR model where the quality measure weights in the CJR model 
composite quality score relatively evenly balance the outcome and 
patient experience quality domains, we would assign the highest weight 
in the AMI model to the outcome quality domain (consisting of two 
measures and voluntary data submission) because the measures in this 
quality domain are specific to meaningful, serious outcomes for AMI 
model beneficiaries, especially mortality which is not an outcome 
measure used in the CJR model composite quality score (80 FR 73375).
    Under such an approach, we would first score individually each AMI 
model participant on the MORT-30-AMI (NQF #0230) measure; AMI Excess 
Days measure; and HCAHPS Survey (NQF #0166) measure based on the AMI 
model participant's performance percentile as compared to the national 
distribution of subsection (d) hospitals that are eligible for payment 
under the IPPS measure performance, assigning scores according to the 
point values displayed in Table 24. These individual measure scores 
have been set to reflect the measure weights included in Table 23 so 
they can ultimately be summed without adjustment in calculating the AMI 
model composite quality score.

            Table 24--Individual Measure Performance Scoring for Three Required AMI Quality Measures
----------------------------------------------------------------------------------------------------------------
                                                                    MORT-30-AMI     AMI excess     HCAHPS survey
                     Performance percentile                          (points)      days (points)     (points)
----------------------------------------------------------------------------------------------------------------
>=90th..........................................................           10.00            4.00            4.00
>=80th and <90th................................................            9.25            3.70            3.70
>=70th and <80th................................................            8.50            3.40            3.40
>=60th and <70th................................................            7.75            3.10            3.10
>=50th and <60th................................................            7.00            2.80            2.80
>=40th and <50th................................................            6.25            2.50            2.50
>=30th and <40th................................................            5.50            2.20            2.20
<30th...........................................................            0.00            0.00            0.00
----------------------------------------------------------------------------------------------------------------


[[Page 362]]

    Given the current national distribution of subsection (d) hospitals 
eligible for payment under the IPPS 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 AMI model 
composite quality score. 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 
under the AMI model.
    Additionally, we would assign a measure quality score of 2 points 
for AMI model participants that successfully submit Hybrid AMI 
Mortality (NQF #2473) measure voluntary data and 0 points for 
participants that do not successfully submit these data. Because we 
would not use the actual Hybrid AMI Mortality (NQF #2473) measure 
result as an outcome measure in assessing AMI episode quality 
performance under the AMI model, we proposed this straightforward 
binary approach to scoring the submission of Hybrid AMI Mortality (NQF 
#2473) measure voluntary data for hybrid outcome measure testing.
    CMS may, in future regulations, require hospitals to report 
additional data elements from EHRs and proposed additional hybrid 
measures in this and other models and programs, such as the HIQR 
Program. If, in future regulations, hospitals are required to report 
these same five data elements (age; heart rate; systolic blood 
pressure; troponin, creatinine) and six linking variables (CMS 
Certification Number (CCN), Medicare Health Insurance Claim (HIC) 
Number, date of birth, sex, admission date, and discharge date) that 
are included in the Hybrid AMI Mortality (NQF #2473) measure to support 
measurement through another CMS program, such as the HIQR Program, CMS 
may propose changes to the AMI model measures and the methodology for 
assigning the AMI model composite quality score.
    Finally, we would award improvement scores on a measure-by-measure 
basis to those AMI model participants that demonstrate improvement on 
the measure; improvement points would be awarded for up to 10 percent 
of the maximum measure performance points available, with the total AMI 
model composite quality score capped at 20. Thus, improvement scores 
would be up to 1.0 points for the MORT-30-AMI (NQF #0230) measure; up 
to 0.4 points for the AMI Excess Days measure; and up to 0.4 points for 
the HCAHPS Survey (NQF #0166) measure.
    We would sum the performance and improvement scores on the three 
quality measures and the score on successful submission of Hybrid AMI 
Mortality (NQF #2473) measure voluntary data to calculate an AMI 
composite quality score for each AMI model participant.
    The proposal for the methodology to calculate the AMI model 
composite quality score is included in Sec.  512.315(b)(1)-(4). We 
sought comment on our proposed methodology to calculate the AMI model 
composite quality score.
    The following is a summary of the comments received and our 
responses.
    Comment: A group of commenters believe the 30 Day Mortality measure 
is weighted too heavily under the proposed model. Several commenters 
expressed concern that this measure will not accurately measure quality 
of care across the proposed 90-day episode of care and therefore should 
not be weighted so heavily.
    Response: We appreciate the comments regarding the heavy weighting 
that was proposed for the 30-Day Mortality measure. Mortality is a very 
serious outcome for AMI care and is one that model participants should 
manage to avoid. We have chosen to weight this measure so heavily 
because there at not many measures that will accurately measure quality 
for the EPM model. The mortality measure will assess a specific serious 
outcomes for these episodes, therefore we proposed high weights for 
this measure in the scoring methodology.
    Comment: Several commenters expressed concerned that HCAHPS are 
inappropriate and misaligned quality metric for this model. Several 
commenters have stated that this measure is hospital centric and will 
not address the patient experience of care for the entire episode 
therefore weighting this measure in the scoring methodology is an 
inappropriate approach to hold participants accountable for the overall 
beneficiary satisfaction during an episode. There is a general 
consensus that these measures are poorly aligned with the proposed 
cohorts.
    Response: We appreciate the concern that the use of HCAHPS may not 
accurately assess patient satisfaction and quality related to the model 
specifically. However we have proposed the use of this instrument to 
access the patient satisfaction under the model as a readily available 
instrument to assess quality of care for patients. We will include the 
HCAHPS survey measure instrument until other alternative measures are 
available.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to the 
AMI composite quality scoring methodology.
(2) CABG Model Composite Quality Score
    We proposed to assign each participant a CABG model composite 
quality score, calculated as the sum of the individual quality measure 
performance and improvement scores. The quality measure performance 
scores would be set to reflect the intended weights for each of the 
quality measures. Each quality measure performance would be assigned a 
weight in the CABG model composite quality score and possible scores 
for the measures would be set to reflect those weights. We would weight 
CABG model participant performance on each of the two required measures 
according to the measure weights displayed in Table 25.

   Table 25--Measures and Associated Performance Weights in CABG Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
                                       composite       Quality domain/
          Quality measure            quality score         weight
                                          (%)
------------------------------------------------------------------------
MORT-30-CABG (NQF #2558)..........              75  Outcome/75%.
HCAHPS Survey (NQF #0166).........              25  Patient Experience/
                                                     25%.
------------------------------------------------------------------------


[[Page 363]]

    We proposed to assign 75 percent of the weight in the CABG model 
composite quality score to the outcome quality domain, assigning all 
weight to the MORT-30-CABG (NQF #2558) measure, and the remaining 25 
percent of the CABG model composite quality score weight to the HCAHPS 
Survey (NQF #0166) measure representing the patient experience quality 
domain. This proposal of weights for the outcome and patient experience 
quality domains for the CABG model composite quality score is similar 
to the proposal of weights for the AMI model composite quality score 
described previously in this section. CABG mortality is an extremely 
serious outcome and, like our proposal for the Mort-30-AMI (NQF #230) 
measure in the AMI model composite quality score, we proposed that the 
MORT-30-CABG (NQF #2558) measure would have the highest individual 
measure weight in the CABG model composite quality score. We would 
assign 25 percent of the weight to the HCAHPS survey measure (NQF 
#0166) 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 meaningful patient experience measure of CABG model episode 
quality. We would assign the highest overall weight to the outcome 
quality domain (consisting of one measure) because it is specific to 
meaningful outcomes for CABG surgery for CABG model beneficiaries. We 
did not propose to assign the HCAHPS survey (NQF #0166) measure the 
highest weight of the quality and patient experience quality domains, 
as the measure is not specific to CABG model episodes, but rather to 
all clinical conditions treated by CABG model participants. Unlike the 
CJR model where the measure weights in the CJR model composite quality 
score relatively evenly balance the outcome and patient experience 
quality domains, CABG mortality representing the outcome quality domain 
is a serious outcome specific to CABG model beneficiaries such that we 
believe it deserves a high weight in the proposed CABG model composite 
quality score (80 FR 73375).
    Under such an approach, we would first score individually each CABG 
model participant on the MORT-30-CABG (NQF #2558) measure; and HCAHPS 
Survey (NQF #0166) measure based on the participant's performance 
percentile as compared to the national distribution of subsection (d) 
hospitals that are eligible for payment under the IPPS measure 
performance, assigning scores according to the point values displayed 
in Table 26. These individual measure scores have been set to reflect 
the measure weights included in Table 25 so they can ultimately be 
summed without adjustment in calculating the CABG model composite 
quality score.

   Table 26--Individual Scoring for Two Required CABG Quality Measures
------------------------------------------------------------------------
                                           MORT-30-CABG    HCAHPS survey
         Performance percentile              (points)        (points)
------------------------------------------------------------------------
>=90th..................................           15.00            5.00
>=80th and <90th........................           13.88            4.63
>=70th and <80th........................           12.75            4.25
>=60th and <70th........................           11.63            3.88
>=50th and <60th........................           10.50            3.50
>=40th and <50th........................            9.38            3.13
>=30th and <40th........................            8.25            2.75
<30th...................................            0.00            0.00
------------------------------------------------------------------------

    Given the current national distribution of subsection (d) hospitals 
that are eligible for payment under the IPPS 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 two 
measures reflect the intended weight of the measure in the CABG model 
composite quality score. These two 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 
under the CABG model.
    Finally, we would award improvement scores on a measure-by-measure 
basis to those CABG model participants that demonstrate improvement on 
the measure; improvement points would be awarded for up to 10 percent 
of the maximum measure performance points available, with the total 
CABG model composite quality score capped at 20. Thus, improvement 
scores would be up to 1.5 points for the MORT-30-CABG (NQF #2558) 
measure; and up to 0.5 points for the HCAHPS Survey (NQF #0166) 
measure.
    We would sum the performance and improvement scores on the two 
quality measures to calculate a CABG model composite quality score for 
each CABG model participant.
    The proposal for the methodology to calculate the CABG model 
composite quality score is included in Sec.  512.315(c)(1) through (4). 
We sought comment on our proposed methodology to calculate the CABG 
model composite quality score.
    The following is a summary of the comments received and our 
responses.
    Comment: A group of commenters believe the 30 Day Mortality measure 
is weighted too heavily under the proposed model. Several commenters 
expressed concern that this measure will not accurately measure quality 
of care across the proposed 90-day episode of care and therefore should 
not be weighted so heavily. Several commenters expressed concern about 
the proposed weighting of the MORT-30-CABG at 50 percent pf the 
composite quality score because the high weight assigned to the (RSMR) 
30 day-mortality rate could encourage inappropriate treatment such as 
total revascularization even when not clinically indicated at the time 
of the acute event.
    Response: We appreciate the comments regarding the heavy weighting 
that was proposed for the 30-Day Mortality measure. Mortality is a very 
serious outcome for CABG care and is one that model participants should 
manage to avoid. We have chosen to weight this measure so heavily 
because there at not many measures that will accurately measure quality 
for the EPM model. The mortality measure will assess a specific serious 
outcomes for these episodes, therefore we proposed

[[Page 364]]

high weights for this measure in the scoring methodology. We do not 
believe the use of this measure will lead to inappropriate treatment 
and intend to monitor for such activities under the model. However, we 
note that we will be making a slight downward adjustment in the weight 
this measure carries, from 75 percent to 70 percent in response to 
comments asking us to incorporate the STS composite CABG measure in our 
CABG model.
    Comment: Several commenters expressed that the use of HCAHPS is 
inappropriate in the model and recommended removal of these measures. 
These is concern that the HCAHP scores reflect an entire patient 
population and not just those included in the EPM episodes 
specifically. There is also concern that HCAHPS fail to address several 
important aspects of the EPM episode, and instead focus on aspects of 
care that not are germane to the episode like ``quietness'' of a 
hospital for example. Commenters believe the use of these measures and 
weighting of the measures for this model is inappropriate and a 
misaligned approach to linking quality of care to payment under the 
model.
    Response: We appreciate the concerns regarding HCAHPS and as 
mentioned in the proposed rule recognizes the misalignment of measures 
that exists for the patient population and cohort under the model. 
However, there are limited instruments available to measure patient 
experience available at this time. We have chosen to rely on these 
metrics to assess patient satisfaction under the model. The HCAHPS are 
a reliable set of metrics widely accepted to adequately measure patient 
experience. However, we note that we will be making a slight downward 
adjustment in the weight this measure carries, from 25 percent to 20: 
Percent in response to comments asking us to incorporate the STS 
composite CABG measure in our CABG model.
    Comment: A group of commenters recommended that the STS measure set 
be included in the CABG measure set as a comprehensive set of measures 
currently utilized by several providers to access the quality of care 
for patients.
    Response: We appreciate the feedback regarding the inclusion of the 
STS measures into the CABG model to offer a more comprehensive measure 
set. As a result the CABG quality composite score will be revised to 
include these measures be reported as a voluntary measures. Following 
our standing policy for CJR and for the other models in this final 
rule, voluntary measures are set to a composite score weight of 10 
percent. Since we had previously allocated 100 percent of the composite 
weight over the two proposed measures, to be responsive to these 
comments we also need to adjust the proposed weighting for the 
mortality and HCAHPS measures. The revised weighting for the CABG 
measures is shown in the following revised tables 27 and 28:

   Table 27--Measures and Associated Performance Weights in CABG Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
                                       composite       Quality domain/
          Quality measure            quality score         weight
                                          (%)
------------------------------------------------------------------------
MORT-30-CABG (NQF #2558)..........              70  Outcome/80%.
STS Composite CABG voluntary data               10
 submission (NQF #0696).
HCAHPS Survey (NQF #0166).........              20  Patient Experience/
                                                     20%.
------------------------------------------------------------------------


   Table 28--Individual Scoring for Two Required CABG Quality Measures
------------------------------------------------------------------------
                                           MORT-30-CABG    HCAHPS survey
         Performance percentile              (points)        (points)
------------------------------------------------------------------------
>=90th..................................              14               4
>=80th and <90th........................           12.95             3.7
>=70th and <80th........................           11.90             3.4
>=60th and <70th........................           10.85             3.1
>=50th and <60th........................            9.80             2.8
>=40th and <50th........................            8.75             2.5
>=30th and <40th........................            7.70             2.2
<30th...................................               0               0
------------------------------------------------------------------------

    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to include 
the STS measures as voluntary measures with the revised weights 
displayed in Tables 27 and 28.
(3) SHFFT Model Composite Quality Score
    We proposed to adopt the same calculation of the SHFFT model 
composite quality score as the CJR model, including the proposed 
changes to the CJR model composite quality score methodology described 
in section V.E. of the proposed rule (81 FR 50794). For those 
participants in both SHFFT and CJR models, the SHFFT model composite 
quality score calculated each year would be the same as the CJR model 
composite quality score (80 FR 73370 through 73381). We proposed to 
assign each SHFFT model participant a SHFFT model composite quality 
score, capped at 20 points and calculated as the sum of the individual 
quality measure and improvement scores as well as successful submission 
of THA/TKA voluntary PRO and limited risk variable data if applicable. 
The quality measure performance scores would be set to reflect the 
intended weights for each of the quality measures. Each quality measure 
performance would be assigned a weight in the SHFFT model composite 
quality score and possible scores for the measures would be set to 
reflect those weights. We would weight SHFFT model participant 
performance on each of the two required measures and successful 
submission of THA/TKA voluntary PRO and limited risk variable data 
according to the measure weights displayed in Table 41.

[[Page 365]]



  Table 29--Measures and Associated Performance Weights in SHFFT Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
                                       composite       Quality domain/
          Quality measure            quality score         weight
                                          (%)
------------------------------------------------------------------------
Hip/Knee Complications (NQF #1550.              50  Outcome/50%.
THA/TKA voluntary PRO and limited               10  Patient Experience/
 risk variable submission.                           50%.
HCAHPS Survey (NQF #0166).........              40
------------------------------------------------------------------------

    Consistent with the CJR model, we proposed to assign 50 percent of 
the weight in the SHFFT model composite quality score to the outcome 
quality domain, assigning 50 percent of the weight to the Hip/Knee 
Complications (NQF #1550) measure. We proposed to assign 50 percent of 
the weight to the patient experience quality domain, specifically 10 
percent of the weight in that quality domain to the THA/TKA voluntary 
PRO and limited risk variable submission. We would assign 40 percent of 
the weight to the HCAHPS survey measure (NQF #0166) representing the 
patient experience (80 FR 73375). We would assign 40 percent to the 
HCAHPS survey measure (NQF #0166) 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 SHFFT 
episode quality under the SHFFT model, and because doing so ensures 
that there is a consistent methodology for linking quality performance 
and improvement to payment for SHFFT model participants that are also 
participating in the CJR model. As in the CJR model, we believe this 
weighting appropriately balances patient experience with meaningful 
health outcomes for beneficiaries (80 FR 73375).
    Under such an approach, we would first score individually each 
SHFFT model participant on the Hip/Knee Complications (NQF #1550) 
measure; and HCAHPS Survey (NQF #0166) measure based on the 
participant's performance percentile as compared to the national 
distribution of subsection (d) hospitals that are eligible for payment 
under the IPPS measure performance, assigning scores according to the 
point values displayed in Table 30. These individual measure scores 
have been set to reflect the measure weights included in Table 29 so 
they can ultimately be summed without adjustment in calculating the 
SHFFT model composite quality score. We note that the point score for 
each decile for the two measures for the SHFFT model is the same as 
that used for other CJR model.

  Table 30--Individual Scoring for Two Required SHFFT Quality Measures
------------------------------------------------------------------------
                                             Hip/Knee      HCAHPS survey
         Performance percentile            complications   quality score
                                             (points)        (points)
------------------------------------------------------------------------
>=90th..................................           10.00            8.00
>=80th and <90th........................            9.25            7.40
>=70th and <80th........................            8.50            6.80
>=60th and <70th........................            7.75            6.20
>=50th and <60th........................            7.00            5.60
>=40th and <50th........................            6.25            5.00
>=30th and <40th........................            5.50            4.40
<30th...................................            0.00            0.00
------------------------------------------------------------------------

    Given the current national distribution of subsection (d) hospitals 
that are eligible for payment under the IPPS 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 SHFFT model 
composite quality score. These two 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 
under the SHFFT model.
    As in the CJR model, we proposed to assign a measure quality score 
of 2 points for SHFFT model participants that successfully submit THA/
TKA voluntary PRO and limited risk variable data and 0 points for 
participants that do not successfully submit these data (80 FR 73376).
    Finally, we would award improvement scores on a measure-by-measure 
basis to those SHFFT model participants that demonstrate improvement on 
the measure (defined as year-over-year improvement of 2 or more deciles 
in the performance distribution); improvement points would be awarded 
for up to 10 percent of the maximum measure performance points 
available, with the total SHFFT model composite quality score capped at 
20. Thus, improvement scores would be up to 1.0 points for the Hip/Knee 
Complications (NQF #1550) measure; and up to 0.8 points for the HCAHPS 
Survey (NQF #0166) measure.
    We would sum the performance and improvement scores on the two 
required quality measures and the score on successful submission of 
THA/TKA voluntary PRO and limited risk variable data to calculate a 
SHFFT model composite quality score for each SHFFT model participant. 
For those CJR model participants (the majority of SHFFT model 
participants), the SHFFT model composite quality score would be the 
same as the participant's score for the CJR model.
    The proposal for the methodology to calculate the SHFFT model 
composite

[[Page 366]]

quality score is included in Sec.  512.315(d)(1) through (4). We sought 
comment on our proposed methodology to calculate the SHFFT model 
composite quality score.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed that the use of HCAHPS is 
inappropriate in the model and recommended removal of these measures. 
These is concern that the HCAHP scores reflect an entire patient 
population and not just those included in the EPM episodes 
specifically. There is also concern that HCAHPS fail to address several 
important aspects of the EPM episode, and instead focus on aspects of 
care that not germane to the episode like ``quietness'' of a hospital 
for example. Commenters believe the use of these measures and weighting 
of the measures for this model is inappropriate and a misaligned 
approach to linking quality of care to payment under the model.
    Response: We appreciate the concerns regarding HCAHPS and as 
mentioned in the proposed rule recognizes the misalignment of measures 
that exists for the patient population and cohort under the model. 
However, there are limited instruments available to measure patient 
experience available at this time. We have chosen to rely on these 
metrics to assess patient satisfaction under the model. The HCAHPS are 
a reliable set of metrics widely accepted to adequately measure patient 
experience.
    Comment: Several commenters urged CMS to use the CJR composite 
scoring methodology.
    Response: We appreciate the support for utilizing the CJR composite 
scoring methodology in the SHFFT model as proposed. We believe the 
SHFFT model composite scoring methodology accurately reflects the 
quality measures that will be assessed under the model.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification.
f. EPM Pay-for-Performance Methodologies to Link Quality and Payment
(1) Overview of Pay-for-Performance Proposals Applicable to the EPMs
    As in the CJR model, we proposed that the maximum effective 
discount factor for all EPM participants that could be incorporated in 
quality-adjusted target prices would be 3.0 percent (80 FR 733760). We 
refer to section III.D.4.b.(10) of this final rule for further 
discussion of the application of the effective discount factor to EPM-
episode benchmark prices in calculating quality-adjusted target prices. 
EPM participants that provide high-quality episode care would have the 
opportunity to reduce the effective discount factor used to calculate 
their quality-adjusted prices at reconciliation. The effective discount 
factors are displayed in tables in the following EPM-specific sections, 
based on the EPM-specific composite quality score that would place each 
EPM participant into one of four quality categories, specifically 
``Below Acceptable,'' ``Acceptable,'' ``Good,'' and ``Excellent,'' for 
each EPM performance year. Three tables are required to display the 
proposed effective discount factor and applicable discount factor (the 
discount factor that represents the phase-in of repayment 
responsibility in performance years 2 (DR) and 3) for each quality 
category due to the phase-in of EPM participant repayment 
responsibility from no responsibility in performance year 1 and 
performance year 2 (NDR), to partial responsibility in performance 
years 2 (DR) and 3, and finally full responsibility in performance 
years 4 and 5 as discussed in section III.D.2.c. Note that the 
applicable discount factor only applies to EPM performance years 2 (DR) 
and 3.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter suggests that CMS heavily skew the point 
distributions for the models so that the majority of the hospitals fall 
into the ``good'' category of performance. There is concern that the 
disparity between excellent and good would be great across the model 
using the proposed methodology. Commenters believe the bar for 
achieving ``excellent'' care is set too high and strongly recommended 
that threshold be lowered to allow for more hospitals to be placed into 
the ``excellent'' category under the three models. Lowering the 
``excellent'' threshold would correctly recognize additional 
institutions that are achieving high levels of quality of care for 
their patients.
    Response: We disagree with the commenters that the bar for 
achieving excellent care is set too high. In modeling the score ranges 
for the different improvement categories, we are assuming that the 
majority of model participants will score within the 'good' category. 
We have proposed to award up to 10 percent of the maximum measure 
points available and believe that the standard for providing excellent 
quality of care should be high.
    Comment: A commenter supports CMS's stated belief that the EPM 
models should use the pay for performance methodologies that 
simultaneously reward improvement in patient outcomes and lower health 
care spending. The commenter supports the proposal to pay on a quality 
first principle: Only sharing saving with hospitals that achieve 
quality scores above the 30th percentile and weighting the discount 
percentage based on quality performance.
    Response: We acknowledge and appreciate your support for the 
payment methodology and quality driven focus of this model. CMS is 
committed to linking payments to the quality of care delivered across 
this model.
    Comment: A commenter urged CMS to explore a reward for higher 
quality, and consider paying bonuses to hospitals which improve quality 
while keeping costs stable. Under the proposed model there is no reward 
for a hospital that achieves better outcomes for its patients at the 
same cost. Under the proposed model, quality measurement only comes 
into play as a punitive measure. If spending is the same but quality is 
higher, there is no bonus.
    Response: The basic design of the EPMs requires savings to Medicare 
first, before any payment would be made to EPM participants for future 
savings Thus, the payments to EPM participants are not ``bonus'' 
Payments to participants may vary based on episode quality. Quality is 
not used as a ``punitive'' measure but, rather, improved quality allows 
EPM participants to receive a higher amount of their savings achieved. 
No payment is made to any EPM participant under the design when there 
are no measurable savings to the Medicare program. Rewarding hospitals 
who achieve higher quality at the same cost is not within the scope of 
this model or the intent.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification.
(2) AMI and CABG Model Pay-for-Performance Methodologies
(a) AMI Model Pay-for-Performance Methodology
    We proposed to incorporate the AMI model composite quality score in 
the AMI model payment methodology by (1) requiring a minimum AMI model 
composite quality score for reconciliation payment eligibility if the 
AMI model participant's actual episode payments are less than the 
quality-adjusted target price and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the AMI model

[[Page 367]]

participant in the reconciliation process. The payment policies we 
would apply are displayed in Tables 31, 32, and 33 for the performance 
years of the AMI model. Under the AMI model as proposed, there is no 
AMI model participant repayment responsibility in performance year 1 
and performance year 2 (NDR) and this responsibility begins to be 
phased-in in performance year 2 (DR), with full implementation in 
performance year 4. Because repayment responsibility is phased-in, in 
performance years 2 (DR) and 3, repayment responsibility only applies 
to a portion of the amount of excess AMI model episode spending that 
results from the quality-adjusted target prices that include the AMI 
model participant's effective discount factor. We, therefore, refer in 
the repayment column to the applicable discount factor for repayment 
amount in performance years 2 (DR) and 3. The effective discount factor 
applies to both the reconciliation payment and the repayment amount in 
performance years 4 and 5. We note that the average Medicare payment 
for historical AMI episodes beginning in CYs 2012 to 2014 was 
$24,200.\91\
---------------------------------------------------------------------------

    \91\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.

 Table 31--Performance Year 1 (All Participants) and Performance Year 2 (for Participants who Do Not Elect Early
 Downside Risk): Relationship of AMI Model Composite Quality Score To Reconciliation Payment Eligibility and the
                             Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                               Effective
                                      AMI model           Eligible for         discount      Effective discount
  AMI model composite quality     composite quality      reconciliation       factor for    factor for repayment
        score (proposed)            score (final)           payment         reconciliation         amount
                                                                              payment (%)
----------------------------------------------------------------------------------------------------------------
<3.6...........................  <3.8..............  No...................             3.0  Not applicable.
>=3.6 and <6.9.................  >=3.8 and <6.3....  Yes..................             3.0  Not applicable.
>=6.9 and <=14.8...............  >=6.3 and <=15.0..  Yes..................             2.0  Not applicable.
>14.8..........................  >15.0.............  Yes..................             1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


  Table 32--Performance Years 2 (for Participants who Elect Early Downside Risk only), 3 and 4: Relationship of
    AMI Model Composite Quality Score To Reconciliation Payment Eligibility and the Effective Discount Factor
                                          Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                    AMI model composite                              discount        discount
AMI model composite quality score      quality score           Eligible for         factor for      factor for
            (propose)                     (final)         reconciliation payment  reconciliation     repayment
                                                                                    payment (%)    amount * (%)
----------------------------------------------------------------------------------------------------------------
<3.6.............................  <3.8................  No.....................             3.0             2.0
>=3.6 and <6.9...................  >=3.8 and <6.3......  Yes....................             3.0             2.0
>=6.9 and <=14.8.................  >=6.3 and <=15.0....  Yes....................             2.0             1.0
>14.8............................  >15.0...............  Yes....................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
* The applicable discount factor for the repayment amount only applies in performance years 2 (for participants
  who choose early downside risk) and 3 (for all other participants) when repayment responsibility is being
  phased-in.


    Table 33--Performance Year 5: Relationship of AMI Model Composite Quality Score To Reconciliation Payment
                   Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                    AMI model composite                              discount        discount
AMI model composite quality score      quality score           Eligible for         factor for      factor for
            (proposed)                    (final)         reconciliation payment  reconciliation     repayment
                                                                                    payment (%)     amount (%)
----------------------------------------------------------------------------------------------------------------
<3.6.............................  <=3.7...............  No.....................             3.0             3.0
>=3.6 and <6.9...................  >3.7 and <= 6.25....  Yes....................             3.0             3.0
>=6.9 and <=14.8.................  >6.25 and <=15.0....  Yes....................             2.0             2.0
>14.8............................  >15.0...............  Yes....................             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Under this approach, the maximum AMI model effective discount 
factor included in the quality-adjusted target price would be 3.0 
percent, consistent with the CJR model (80 FR 73365). We believe that a 
maximum effective discount factor of 3.0 percent 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 BPCI participants are testing AMI episodes 
subject to the 3.0 percent discount factor. AMI model participants that 
provide high quality episode care would have the opportunity for a 
lower effective discount factor to be included in their quality-
adjusted target prices at reconciliation as displayed in Tables 31, 32, 
and 33.
    Under this methodology, we proposed to require AMI model 
participants to achieve a minimum AMI model

[[Page 368]]

composite quality score of >=3.6 to be eligible for a reconciliation 
payment if actual episode payments were less than the quality-adjusted 
target price based on the 3.0 percent maximum effective discount 
factor. Participants with below acceptable quality performance 
reflected in an AMI model composite quality score <3.6 would not be 
eligible for a reconciliation payment if actual AMI model episode 
payments were less than the quality-adjusted target price. A level of 
quality performance that is below acceptable would not affect AMI model 
participants' repayment responsibility if actual AMI model episode 
payments exceed the quality-adjusted target price. We believe that 
excessive reductions in utilization that lead to low actual AMI model 
episode payments and that could result from the financial incentives of 
an EPM would be limited by a requirement that this minimum level of AMI 
model episode quality be achieved for reconciliation payments to be 
made. This policy would encourage AMI model participants to focus on 
appropriate reductions or changes in utilization to achieve high 
quality care in a more efficient manner. Therefore, these participants 
would be ineligible to receive a reconciliation payment if actual AMI 
model episode payments were less than the quality-adjusted target 
price.
    We proposed that AMI model participants with an acceptable AMI 
model composite quality score of >=3.6 and <6.9 would be eligible for a 
reconciliation payment if actual AMI model episode payments were less 
than the quality-adjusted target price based on a 3.0 percent effective 
discount factor because their quality performance was at the acceptable 
level established for the AMI model. Therefore, these AMI model 
participants would be eligible to receive a reconciliation payment if 
actual AMI model episode payments were less than the quality-adjusted 
target price.
    We proposed that AMI model participants with a good AMI model 
composite quality score of >=6.9 and <=14.8 would be eligible for a 
reconciliation payment if actual AMI model episode payments were less 
than the quality-adjusted target price based on a 2.0 percent effective 
discount factor that reflects their good quality performance. Thus, 
participants achieving this level of quality for AMI episodes under the 
AMI model would either have less repayment responsibility (that is, the 
reduced effective discount factor would offset a portion of their 
repayment responsibility) or receive a higher reconciliation payment 
(that is, the reduced effective discount factor would increase the 
reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual AMI model episode payments to 
quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Finally, we proposed that AMI model participants with an excellent 
AMI model composite score quality score of >14.8 would be eligible to 
receive a reconciliation payment if actual AMI model episode payments 
were less than the quality-adjusted target price based on a 1.5 percent 
effective discount factor that reflects their excellent performance. 
Thus, participants achieving this level of quality for AMI episodes 
under the AMI model would either have less repayment responsibility 
(that is, the reduced effective discount factor would offset a portion 
of their repayment responsibility) or receive a higher reconciliation 
payment (that is, the reduced effective discount factor would increase 
the reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual AMI model episode payments to 
quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this final rule will not change. We 
believe this approach to quality incentive payments based on the AMI 
model composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
AMI model to the potential benefit of AMI model participants and their 
collaborators as well as CMS, and would be consistent with the CJR 
model methodology linking quality and payment.
    The proposal to link quality to payment in the AMI model pay-for-
performance methodology is included in Sec.  512.315(b)(5). We sought 
comment on our proposal to link quality to payment in the AMI model 
pay-for-performance methodology.
    We did not receive comments which uniquely addressed the proposed 
AMI model pay-for-performance methodology.
    Final Decision: Although we did not receive comments on the 
proposed AMI model pay-for-performance methodology, adjustments to our 
proposal are necessary due to the final selection of actual EPM MSAs 
and our policy for participants who elect early downside risk as 
discussed in section III.D.2.c. of this final rule. Specifically, in 
our proposed rule we created composite quality score ranges for the AMI 
measure based on historical performance of a representative group of 
hospitals within 98 potentially EPM-eligible MSAs. However, for the 
final rule we have randomly selected 98 MSAs in which to officially 
conduct the EPM models. Therefore, the composite quality score ranges 
associated with each quality performance category we are finalizing in 
this rule are based on a model of historical performance in the actual 
98 MSAs selected for this model. Final AMI model composite quality 
score ranges, associated quality performance categories and discounts 
are reflected in tables 31, 32, and 33. After consideration of the 
public comments received, we are finalizing the proposal, with 
modification to final composite quality score ranges to reflect 
selection of MSAs, as discussed here.
(b) CABG Model Pay-for-Performance Methodology
    We proposed to incorporate the CABG model composite quality score 
in the CABG model payment methodology by--(1) requiring a minimum CABG 
model composite quality score for reconciliation payment eligibility if 
the CABG model participant's actual episode payments are less than the 
quality-adjusted target price; and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the CABG model participant in the reconciliation 
process. The payment policies we would apply are displayed in Tables 
34, D24, and D25 for the performance years of the CABG model. Under the 
CABG model as proposed, there is no CABG model participant repayment 
responsibility in performance year 1 and performance year 2 (NDR) and 
this responsibility begins to be phased-in in performance year 2 (DR), 
with full implementation in performance year 4. Because repayment 
responsibility is phased-in, in performance years 2 (DR) and 3, 
repayment responsibility only applies to a portion of the amount of 
excess CABG model episode spending that results from the quality-
adjusted target prices that include the CABG model participant's 
effective discount factor. We, therefore, refer in the repayment column 
to the applicable discount factor for repayment amount in performance 
years 2 (DR) and 3. The effective discount factor applies to both the 
reconciliation payment and the repayment amount in performance years 4 
and 5. We note that the average Medicare payment for historical CABG

[[Page 369]]

episodes beginning in CYs 2012 to 2014 was $47,000.\92\
---------------------------------------------------------------------------

    \92\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.

 Table 34--Performance Year 1 (all Participants) and Performance Year 2 (for Participants who Do Not Elect Early
Downside Risk): Relationship of CABG Model Composite Quality Score To Reconciliation Payment Eligibility and the
                             Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                               Effective
                                     CABG model           Eligible for         discount      Effective discount
  CABG model composite quality    composite quality      reconciliation       factor for    factor for repayment
        score (proposed)            score (final)           payment         reconciliation         amount
                                                                              payment (%)
----------------------------------------------------------------------------------------------------------------
<2.8...........................  <=2.2.............  No...................             3.0  Not applicable.
>=2.8 and <4.8.................  >2.2 and <=3.4....  Yes..................             3.0  Not applicable.
>=4.8 and <=17.5...............  >3.4 and <=16.2...  Yes..................             2.0  Not applicable.
>17.5..........................  >16.2.............  Yes..................             1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


  Table 35--Performance Years 2 (for Participants who Elect Early Downside Risk Only), 3 and 4: Relationship of
   CABG Model Composite Quality Score To Reconciliation Payment Eligibility and the Effective Discount Factor
                                          Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                   CABG model composite                              discount        discount
   CABG model composite quality        quality score           Eligible for         factor for      factor for
         score (proposed)                 (final)         reconciliation payment  reconciliation     repayment
                                                                                    payment (%)    amount * (%)
----------------------------------------------------------------------------------------------------------------
<2.8.............................  <2.5................  No.....................             3.0             2.0
>=2.8 and <4.8...................  >=2.5 and <3.5......  Yes....................             3.0             2.0
>=4.8 and <=17.5.................  >=3.5 and <=16.2....  Yes....................             2.0             1.0
>17.5............................  >16.2...............  Yes....................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
* The applicable discount factor for the repayment amount only applies in performance years 2 (for participants
  who choose early downside risk) and 3 (for all other participants) when repayment responsibility is being
  phased-in.


   Table 36--Performance Year 5: Relationship of CABG Model Composite Quality Score to Reconciliation Payment
                   Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                   CABG model composite                              discount        discount
   CABG model composite quality        quality score           Eligible for         factor for      factor for
         score (proposed)                 (final)         reconciliation payment  reconciliation     repayment
                                                                                    payment (%)     amount (%)
----------------------------------------------------------------------------------------------------------------
<2.8.............................  <2.5................  No.....................             3.0             3.0
>=2.8 and <4.8...................  >=2.5 and <3.5......  Yes....................             3.0             3.0
>=4.8 and <=17.5.................  >=3.5 and <=16.2....  Yes....................             2.0             2.0
>17.5............................  >16.2...............  Yes....................             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Under this approach, the maximum CABG model effective discount 
factor included in the quality-adjusted target price would be 3.0 
percent, consistent with the CJR model (80 FR 73365). We believe that a 
maximum effective discount factor of 3.0 percent is reasonable as it is 
within the range of discount percentages included in the Medicare Acute 
Care Episode (ACE) demonstration and it is the Model 2 BPCI discount 
factor for 30 and 60 day episodes, where BPCI participants are testing 
CABG episodes subject to the 3.0 percent discount factor. CABG model 
participants that provide high quality episode care would have the 
opportunity for a lower effective discount factor to be included in 
their quality-adjusted target prices at reconciliation as displayed in 
Tables 34, 35, and 36.
    Under this methodology, we proposed that we would require CABG 
model participants to achieve a minimum CABG model composite quality 
score of >=2.8 to be eligible for a reconciliation payment if actual 
episode payments were less than the quality-adjusted target price based 
on the 3.0 percent maximum effective discount factor. We proposed that 
participants with below acceptable quality performance reflected in an 
CABG model composite quality score <2.8 would not be eligible for a 
reconciliation payment if actual CABG model episode payments were less 
than the quality-adjusted target price. A level of quality performance 
that is below acceptable would not affect participants' repayment 
responsibility if actual CABG model episode payments exceed the 
quality-adjusted target price. We believe that excessive reductions in 
utilization that lead to low actual CABG model episode payments and 
that could result from the financial incentives of an EPM would be 
limited by a requirement that this minimum level of CABG model episode 
quality be achieved for reconciliation payments to be made.

[[Page 370]]

This policy would encourage CABG model participants to focus on 
appropriate reductions or changes in utilization to achieve high 
quality care in a more efficient manner. Therefore, these participants 
would be ineligible to receive a reconciliation payment if actual CABG 
model episode payments were less than the quality-adjusted target 
price.
    We proposed that CABG model participants with an acceptable CABG 
model composite quality score of >=2.8 and <4.8 would be eligible for a 
reconciliation payment if actual CABG model episode payments were less 
than the quality-adjusted target price based on a 3.0 percent effective 
discount factor because their quality performance was at the acceptable 
level established for the CABG model. Therefore, these CABG model 
participants would be eligible to receive a reconciliation payment if 
actual CABG model episode payments were less than the quality-adjusted 
target price.
    We proposed that CABG model participants with a good CABG model 
composite quality score >=4.8 and <=17.5 would be eligible for a 
reconciliation payment if actual CABG model episode payments were less 
than the quality-adjusted target price based on a 2.0 percent effective 
discount factor that reflects their good quality performance. Thus, 
participants achieving this level of quality for CABG episodes under 
the CABG model would either have less repayment responsibility (that 
is, the reduced effective discount factor would offset a portion of 
their repayment responsibility) or receive a higher reconciliation 
payment (that is, the reduced effective discount factor would increase 
the reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual CABG model episode payments 
to quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Finally, we proposed that CABG model participants with an excellent 
CABG model composite score quality score of >17.5 would be eligible to 
receive a reconciliation payment if actual CABG model episode payments 
were less than the quality-adjusted target price based on a 1.5 percent 
effective discount factor that reflects their excellent performance. 
Thus, participants achieving this level of quality for CABG model 
episodes would either have less repayment responsibility (that is, the 
reduced effective discount factor would offset a portion of their 
repayment responsibility) or receive a higher reconciliation payment 
(that is, the reduced effective discount factor would increase the 
reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual CABG model episode payments 
to quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this final rule will not change. We 
believe this approach to quality incentive payments based on the CABG 
model composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
CABG model to the potential benefit of CABG model participants and 
their collaborators as well as CMS, and would be consistent with the 
CJR model methodology linking quality and payment.
    The proposal to link quality to payment in the CABG model pay-for-
performance methodology is included in Sec.  512.315(c)(5). We sought 
comment on our proposal to link quality to payment in the CABG model 
pay-for-performance methodology.
    We did not receive comments which uniquely addressed our proposed 
CABG model pay-for-performance methodology.
    Final Decision: Although we did not receive comments on the 
proposed CABG model pay-for-performance methodology, adjustments to our 
proposal are necessary due to selection of the EPM MSAs and our policy 
for participants who elect early downside risk as discussed in section 
III.D.2.c. of this final rule. Specifically, in our proposed rule we 
created composite quality score ranges for the CABG measure based on 
historical performance of a representative group of hospitals within 98 
potentially EPM-eligible MSAs. However, for the final rule we have 
randomly selected 98 MSAs in which to officially conduct the EPM 
models. Therefore, the composite quality score ranges associated with 
each quality performance category we are finalizing in this rule are 
based on a model of historical performance of in the actual 98 MSAs 
selected for this model. Final CABG model composite quality score 
ranges, associated quality performance categories and discounts are 
reflected in tables 34, 35, and 36. After consideration of the public 
comments received, we are finalizing the proposal, with modification to 
final composite quality score ranges to reflect selection of MSAs, as 
discussed here
(c) Alignment Between the AMI and CABG Model Methodologies
    The AMI and CABG models are closely related, given that they both 
are based on a significant event or procedure for a beneficiary with 
CAD. As discussed in sections III.D.2.b. and III.D.2.c. of the proposed 
rule (81 FR 50794), we proposed the use of a 30-day mortality measure 
in both models, specifically MORT-30-AMI (NQF #0230) with a weight of 
50 percent in the AMI model composite quality score and MORT-30-CABG 
(NQF #2558) with a weight of 75 percent in the CABG model quality 
score. The beneficiaries included in the measure have some overlap, 
because some beneficiaries with AMI will have a CABG during their 
hospitalization that begins an episode. Analysis of both the MORT-30-
AMI (NQF #0230) and MORT-30-CABG (NQF #2558) measure national 
distributions suggests that improving from the 25th percentile to 75th 
percentile represents roughly a 1 percentage point decrease in 
mortality rates for both measures.
    In addition, we note that for historical episodes beginning in 2012 
to 2014, the average Medicare spending for an AMI episode that extends 
90 days post-hospital discharge was approximately $24,200 and for a 
CABG episode was approximately $47,000.\93\ However, because we 
proposed the same 1.5 percent to 3.0 percent effective discount factor 
range based on quality performance and improvement for the AMI and CABG 
models (and, to a lesser degree, because of the modestly lower weight 
assigned to the mortality measure under the AMI model), the absolute 
dollar amounts tied to changes in AMI or CABG mortality rates are 
different in the two models. A larger absolute financial incentive is 
associated with improvement in CABG mortality than AMI mortality under 
our proposal. We recognize that mortality is a serious outcome for 
beneficiaries with CAD who have a significant event or procedure, and 
we considered setting a wider effective discount factor range based on 
quality in the AMI model than the CABG model to align the absolute 
financial incentives to improve mortality under both models. For 
example, to create a more similar absolute financial incentive between 
the lowest and highest effective discount percentages in the AMI and 
CABG models, we could set the effective

[[Page 371]]

discount factor range for the AMI model at 0.75 percent to 3.75 percent 
and the CABG model range at 1.5 percent to 3 percent. Alternatively, we 
could set the AMI model effective discount factor range at 1.5 percent 
to 3 percent and compress the CABG effective discount factor range. 
While we did not propose different effective discount factor ranges for 
the AMI and CABG models in order to retain consistency with the CJR 
model and the BPCI initiative, we sought comments about the potential 
benefits and drawbacks of establishing the same absolute dollar 
incentive for similar improvements in quality across different models 
that have similar measures but vary in average episode cost. This 
feedback will be useful as we consider future episode payment models 
and candidate quality measures for potential new and existing models, 
as well as consider future refinements to the pay-for-performance 
methodologies under the models. Our goal in all of our episode payment 
models is to create strong financial incentives for quality performance 
and improvement for participants at all level of current quality 
performance and to rationalize the strength of the financial incentives 
in the context of the specificity and importance of the quality 
measures used under the models.
---------------------------------------------------------------------------

    \93\ Episodes for AMI and CABG beneficiaries initiated by all 
U.S. IPPS hospitals and constructed using standardized Medicare FFS 
Parts A and B claims, as proposed in this rule that began in CYs 
2012-2014.
---------------------------------------------------------------------------

    Final Decision: No comments were received on the proposed pay for 
performance methodology. Therefore, we are finalizing the proposal, 
without modification.
(3) SHFFT Model Pay-for-Performance Methodology
    We proposed to incorporate the SHFFT model composite quality score 
in the SHFFT model payment methodology by (1) requiring a minimum SHFFT 
model composite quality score for reconciliation payment eligibility if 
the SHFFT model participant's actual episode payments are less than the 
quality-adjusted target price and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the SHFFT model participant in the reconciliation 
process. The payment policies we would apply are displayed in Tables 
37, 38, and 28 for the performance years of the SHFFT model. Under the 
SHFFT model as proposed, there is no SHFFT model participant repayment 
responsibility in performance year 1 and performance year 2 (NDR) and 
this responsibility begins to be phased-in in performance year 2 (DR), 
with full implementation in performance year 4. Because repayment 
responsibility is phased-in, in performance years 2 (DR) and 3, 
repayment responsibility only applies to a portion of the amount of 
excess SHFFT model episode spending that results from the quality-
adjusted target prices that include the SHFFT model participant's 
effective discount factor. We, therefore, refer in the repayment column 
to the applicable discount factor for repayment amount in performance 
years 2 (DR) and 3. The effective discount factor applies to both the 
reconciliation payment and the repayment amount in performance years 4 
and 5. We note that the average Medicare payment for historical SHFFT 
episodes beginning in CYs 2012 to 2014 was $43,000.\94\
---------------------------------------------------------------------------

    \94\ Episodes for SHFFT beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.
---------------------------------------------------------------------------

    We refer to section V.E. of this final rule for discussion of the 
correction to the composite quality score ranges for the four quality 
categories from what was presented in the CJR final rule (80 FR 73378). 
The SHFFT model composite quality score ranges displayed in Tables 37 
through 39 are the corrected ranges that also apply to the CJR model.

 Table 37--Performance Year 1 (All Participants) and Performance Year 2 (For Participants Who Do Not Elect Early
  Downside Risk): Relationship of SHFFT Model Composite Quality Score to Reconciliation Payment Eligibility and
                           the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                               Effective
                                     SHFFT model          Eligible for         discount      Effective discount
 SHFFT model composite quality    composite quality      reconciliation       factor for    factor for repayment
        score (proposed)            score (final)           payment         reconciliation         amount
                                                                              payment (%)
----------------------------------------------------------------------------------------------------------------
<5.0...........................  <5.0..............  No...................             3.0  Not applicable.
>=5.0 and <6.9.................  >=5.0 and <6.9....  Yes..................             3.0  Not applicable.
>=6.9 and <=15.0...............  >=6.9 and <=15.0..  Yes..................             2.0  Not applicable.
>15.0..........................  >15.0.............  Yes..................             1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


  Table 38--Performance Years 2 (For Participants Who Elect Early Downside Risk Only), 3 and 4: Relationship of
   SHFFT Model Composite Quality Score to Reconciliation Payment Eligibility and the Effective Discount Factor
                                          Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                        SHFFT model                                  discount        discount
  SHFFT model composite quality      composite quality         Eligible for         factor for      factor for
         score (proposed)              score (final)      reconciliation payment  reconciliation     repayment
                                                                                    payment (%)    amount * (%)
----------------------------------------------------------------------------------------------------------------
<5.0.............................  <5.0................  No.....................             3.0             2.0
>=5.0 and <6.9...................  >=5.0 and <6.9......  Yes....................             3.0             2.0
>=6.9 and <=15.0.................  >=6.9 and <=15.0....  Yes....................             2.0             1.0
>15.0............................  >15.0...............  Yes....................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
* The applicable discount factor for the repayment amount only applies in performance years 2 (for participants
  who choose early downside risk) and 3 (for all other participants) when repayment responsibility is being
  phased-in.


[[Page 372]]


   Table 39--Performance Year 5: Relationship of SHFFT Model Composite Quality Score to Reconciliation Payment
                   Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective       Effective
                                        SHFFT model                                  discount        discount
  SHFFT model composite quality      composite quality         Eligible for         factor for      factor for
         score (proposed)              score (final)      reconciliation payment  reconciliation     repayment
                                                                                    payment (%)     amount (%)
----------------------------------------------------------------------------------------------------------------
<5.0.............................  <5.0................  No.....................             3.0             3.0
>=5.0 and <6.9...................  >=5.0 and <6.9......  Yes....................             3.0             3.0
>=6.9 and <=15.0.................  >=6.9 and <=15.0....  Yes....................             2.0             2.0
>15.0............................  >15.0...............  Yes....................             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Under this methodology, we proposed that we would require SHFFT 
model participants to achieve a minimum SHFFT model composite quality 
score of >=5.0 to be eligible for a reconciliation payment if actual 
episode payments were less than the quality-adjusted target price based 
on the 3.0 percent maximum effective discount factor. We proposed that 
participants with below acceptable quality performance reflected in a 
SHFFT model composite quality score <5.0 would not be eligible for a 
reconciliation payment if actual SHFFT model episode payments were less 
than the quality-adjusted target price. A level of quality performance 
that is below acceptable would not affect participants' repayment 
responsibility if actual SHFFT model episode payments exceed the 
quality-adjusted target price. We believe that excessive reductions in 
utilization that lead to low actual SHFFT model episode payments and 
that could result from the financial incentives of an EPM would be 
limited by a requirement that this minimum level of SHFFT model episode 
quality be achieved for reconciliation payments to be made. This policy 
would encourage SHFFT model participants to focus on appropriate 
reductions or changes in utilization to achieve high quality care in a 
more efficient manner. Therefore, these participants would be 
ineligible to receive a reconciliation payment if actual SHFFT model 
episode payments were less than the quality-adjusted target price.
    We proposed that SHFFT model participants with an acceptable SHFFT 
model composite quality score of >=5.0 and <6.9 would be eligible for a 
reconciliation payment if actual SHFFT model episode payments were less 
than the quality-adjusted target price based on a 3.0 percent effective 
discount factor because their quality performance was at the acceptable 
level established for the SHFFT model. Therefore, these SHFFT model 
participants would be eligible to receive a reconciliation payment if 
actual SHFFT model episode payments were less than the quality-adjusted 
target price.
    We proposed that SHFFT model participants with a good SHFFT model 
composite quality score of >=6.9 and <=15.0 would be eligible for a 
reconciliation payment if actual SHFFT model episode payments were less 
than the quality-adjusted target price based on a 2.0 percent effective 
discount factor that reflects their good quality performance. Thus, 
participants achieving this level of quality for SHFFT model episodes 
under the SHFFT model would either have less repayment responsibility 
(that is, the reduced effective discount factor would offset a portion 
of their repayment responsibility) or receive a higher reconciliation 
payment (that is, the reduced effective discount factor would increase 
the reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual SHFFT model episode payments 
to quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Finally, we proposed that SHFFT model participants with an 
excellent SHFFT model composite score quality score of >15.0 would be 
eligible to receive a reconciliation payment if actual SHFFT model 
episode spending was less than the quality-adjusted target price based 
on a 1.5 percent effective discount factor that reflects their 
excellent performance. Thus, participants achieving this level of 
quality for SHFFT model episodes would either have less repayment 
responsibility (that is, the reduced effective discount factor would 
offset a portion of their repayment responsibility) or receive a higher 
reconciliation payment (that is, the reduced effective discount factor 
would increase the reconciliation payment) at reconciliation than they 
would have otherwise based on a comparison of actual SHFFT model 
episode payments to quality-adjusted target prices that include the 
maximum 3.0 percent effective discount factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this final rule will not change. We 
believe this approach to quality incentive payments based on the SHFFT 
model composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
SHFFT model to the potential benefit of SHFFT model participants and 
their collaborators as well as CMS, and would be consistent with the 
CJR model methodology linking quality and payment.
    The proposal to link quality to payment in the SHFFT model pay-for-
performance methodology is included in Sec.  512.315(d)(5). We sought 
comment on our proposal to link quality to payment in the SHFFT model 
pay-for-performance methodology.
    We did not receive comments on the proposed SHFFT model pay-for-
performance methodology.
    Final Decision: We are finalizing without modification our proposal 
for SHFFT model pay-for-performance methodology.
4. Details on Quality Measures for the EPMs
a. AMI Model-Specific Measures
(1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230)(MORT-30-AMI)
(a) Background
    AMI is one of the most common principal hospital discharge 
diagnoses among older adults and is associated with high mortality. AMI 
was the tenth most common principal discharge diagnosis among patients 
with Medicare in 2012.\95\ Each year, over 600,000 Americans will 
experience an AMI. Despite improvements in treatments, 30-day mortality 
rates following AMI exceed 7 percent. CMS pays

[[Page 373]]

approximately $11.7 billion annually for in-hospital costs for Medicare 
beneficiaries with coronary heart disease, of which AMI is a major 
contributor. The high prevalence and considerable morbidity and 
mortality associated with AMI create an economic burden on the health 
care system.\96\
---------------------------------------------------------------------------

    \95\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) http://hcupnet.ahrq.gov/.
    \96\ American Heart Association. Heart Disease and Stroke 
Statistics--2010 Update. Dallas, Texas: American Heart Association; 
2010. c2010, American Heart Association.
---------------------------------------------------------------------------

    Hospital mortality is an outcome that is likely attributable to 
care processes and is an important outcome for patients. Complex and 
critical aspects of care, such as communication between providers, 
prevention of and response to complications, patient safety, and 
coordinated transitions to the outpatient environment, all contribute 
to patient outcomes. Many current hospital interventions are known to 
decrease the risk of death within 30 days of hospital 
admission.97 98 We believe it is important to assess the 
quality of care provided to Medicare beneficiaries who are hospitalized 
for AMI.
---------------------------------------------------------------------------

    \97\ Jha AK, Orav EJ, Li Z, Epstein AM. The inverse relationship 
between mortality rates and performance in the Hospital Quality 
Alliance measures. Health Aff (Millwood). 2007 Jul-Aug; 26(4):1104-
10.
    \98\ Rathore SS, Curtis JP, Chen J, Wang Y, Nallamothu BK, 
Epstein AJ, Krumholz HM; National Cardiovascular Data Registry. 
Association of door-to-balloon time and mortality in patients 
admitted to hospital with ST elevation myocardial infarction: 
National cohort study. BMJ. 2009 May 19; 338:b1807.
---------------------------------------------------------------------------

    The measure developed by CMS, and currently implemented in the HIQR 
and HVBP Programs, assesses a hospital's risk-standardized mortality 
rate, which is the rate of death after admission to a hospital with a 
principal diagnosis of AMI. The measure outcome is the rate of 
mortality occurring after admission with a principal diagnosis of AMI 
for patients 65 and older during a 30-day period that begins with the 
date of the index admission for the specific hospital. An index 
admission is the hospitalization which is included in the measure 
cohort because it meets all inclusion criteria and does not meet any 
exclusion criteria. The index admission is the hospitalization to which 
the mortality outcome is attributed. The median hospital-level risk-
standardized mortality rate for 2016 public reporting on Hospital 
Compare was 14.2 percent, with an interquartile range from 13.7 percent 
to 14.6 percent in hospitals. The variation in mortality rates suggests 
that important differences in the quality of care delivered across 
hospitals exist, and there is room for quality improvement.
    We developed the measure of hospital-level risk-standardized 
mortality rate (RSMR) following AMI hospitalization, which is endorsed 
by the NQF (NQF #0230). The measure has been publicly reported on 
Hospital Compare since FY 2007, and was incorporated into what is now 
the HIQR Program since FY 2008 (FY 2008 IPPS/LTCH final rule 71 FR 
67960), and the HVBP Program since FY 2014 (FY 2011 IPPS/LTCH final 
rule 76 FR 26510).
(b) Data Sources
    We proposed to use Medicare Part A and Part B FFS claims submitted 
by the AMI model participant as the data source for calculation of the 
MORT-30-AMI (NQF #0230) measure. Index admission diagnoses and in-
hospital comorbidities are assessed using Medicare Part A claims. 
Additional comorbidities prior to the index admission are assessed as 
Part A inpatient, outpatient, and Part B office visit Medicare claims 
in the 12 months prior to the index (initial) admission. Enrollment and 
post-discharge mortality status are obtained from Medicare's enrollment 
database which contains beneficiary demographics, benefits/coverage, 
and vital status information.
(c) Cohort
    The MORT-30-AMI (NQF #0230) measure includes Medicare FFS 
beneficiaries, aged 65 years or older, discharged from non-federal 
acute care hospitals with a principal discharge diagnosis of AMI and 
with a complete claims history for the 12 months prior to admission. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2119, I2111, I2119, I2129, I214, and I213.
    We proposed that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all AMI model 
participants. Hospital performance will only be publically reported for 
hospitals with 25 or more index admissions in the 3-year measurement 
period. The AMI model cohort would differ from the hospital cohort that 
is currently captured in the measure through the HIQR Program. Although 
performance on the measure will not be publically reported for 
hospitals with fewer than 25 cases, they will receive information about 
their performance. We refer readers to section III.B.5. of this final 
rule for participant selection for the AMI model. For eligible 
hospitalizations defined using ICD-9-CM codes, we refer readers to the 
CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(d) Inclusion and Exclusion Criteria
    We proposed that an index admission is the hospitalization to which 
the mortality outcome is attributed. We note that for purposes of the 
EPMs where we need to identify episodes that are included in the EPMs, 
we use the term anchor hospitalization to identify hospitalizations 
that initiate EPM episodes for beneficiaries whose care is included in 
the EPMs. In describing the quality measures themselves in detail in 
section III.E.4. of the proposed rule (81 FR 50794), we use the term 
index hospitalization to identify hospitalizations of beneficiaries 
whose outcomes are included in the measures. Thus, anchor 
hospitalizations and index hospitalizations would have varying degrees 
of overlap depending on the specific quality measure. The measure 
includes the following index admissions for patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    This measure excludes the following index admissions for patients:
     Discharged alive on the day of admission or the following 
day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age and gender) data;
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission;
     Discharged against medical advice American Medical 
Association (AMA); or
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day mortality outcome cannot be assessed for 
these patients.
    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, only one index admission for AMI per beneficiary is 
randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the MORT-30-AMI (NQF #0230) measure under the 
HIQR Program in accordance with section 1886(b)(3)(B)(viii)(VIII) of 
the Act, as

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finalized in FY 2008 IPPS/LTCH final rule (2008 IPPS/LTCH final rule 71 
FR 67960). We also note that the measure risk adjustment takes into 
account patient age, sex, and comorbidities to allow a fair assessment 
of hospital performance. The measure defines the patient risk factors 
for mortality using diagnosis codes collected from all patient claims 1 
year prior to patient index hospitalization for AMI. As previously 
noted in the MORT-30-AMI measure (NQF #0230), ICD-10-CM codes on 
Medicare Parts A and B administrative claims 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 Parts A and B data 
does not mean the measure is applicable to post-acute care settings, 
only that it uses 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 
(HCCs), which are clinically relevant diagnostic groups of codes. The 
CCs used in the risk-adjustment model for this measure are provided on 
the CMS QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069856694.
    In summary, age, sex, 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.
(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We proposed to calculate hospital 30-day, all-cause, risk-
standardized mortality rates consistent with the methodology used to 
risk standardize all readmission and mortality measures used in CMS 
hospital quality programs. Using HLM, we calculate the hospital-level 
risk-standardized mortality rate following AMI hospitalization by 
producing a ratio of the number of ``predicted'' deaths (that is, the 
adjusted number of deaths at a specific hospital) to the number of 
``expected'' deaths (that is, the number of deaths if an average 
quality hospital treated the same patients) for each hospital and then 
multiplying the ratio by the national raw mortality rate.
    A 3-year rolling period for calculating measure results would be 
consistent with the time frame used for the HIQR Program (FY 2008 IPPS/
LTCH final rule 71 FR 67960). Section III.E.5. of the proposed rule (81 
FR 50794), Form, Manner, and Timing of Quality Measure Submission, 
summarizes the proposed measure performance periods for AMI model 
performance years 1 through 5. We note that, for each performance year, 
improvement on the MORT-30-AMI (NQF #0230) measure would be determined 
by comparing measure results from that performance year to results in 
the 3-year rolling measurement period immediately preceding each AMI 
model performance year to results from the 3-year period from July 1, 
2014 through June 30, 2017, for performance year 2 by comparing measure 
results in this year to results from the 3-year period from July 1, 
2015 through June 30, 2018, in performance year 3 by comparing measure 
results in this year to results from the 3-year period from July 1, 
2016 and June 30, 2019, in performance year 4 by comparing measure 
results in this year to results from the 3-year period from July 1, 
2017 and June 30, 2020, and in performance year 5 by comparing measure 
results in this year to results from the 3-year period from July 1, 
2018 and June 30, 2021.
    The proposal to include Hospital-level 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) following AMI hospitalization (NQF 
#0230) measure in the AMI model is included in Sec.  512.411(a)(1). We 
sought comment on this proposal to include Hospital-level 30-Day, All-
Cause, Risk-Standardized Mortality Rate (RSMR) following AMI 
hospitalization (NQF #0230) measure in the AMI model to assess quality 
performance.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter supported the proposal to use mortality 
rates as the principal outcome measure for the cardiac EPMs. The 
commenter agreed that mortality is an extremely serious outcome for 
these episodes, and it has the added benefit of not requiring 
adjustment for SES, demographic, or environmental risk factors.
    Response: We thank the commenter for their support.
    Comment: Several commenters expressed concern about the proposed 
weighting of the 30-day risk-standardized mortality rate (RSMR) at 50 
percent of the composite quality score because the high weight assigned 
to the risk-standardized 30-day mortality rate could encourage 
inappropriate treatment such as total revascularization even when not 
clinically indicated at the time of the acute event. One commenter was 
also concerned that with this weighting proposal, hospitals with fewer 
AMI cases would be further disadvantaged since there will be less data 
used to calculate the hospital's quality score.
    Response: To ensure hospitals have enough cases to produce a valid 
quality score, the AMI mortality measure uses 3 years of claims data to 
calculate the measure. Hospitals must have at least 25 qualifying index 
admissions within the 3-year measurement period to calculate and 
publically report a measure result. We do not believe these measures 
disadvantage smaller volume hospitals. We have found hospitals with 
fewer cases tend to have measure results that are close to the national 
average, hospital rate and are therefore rarely identified as poor 
performing outliers.
    Comment: One commenter recommended excluding cardiogenic shock and 
sepsis patients because patients with either of these conditions and 
AMI have a higher mortality rate than those who do not.
    Response: In order to account for differences in patient mix among 
hospitals, the measures adjust for variables (for example, age, 
comorbid diseases, and indicators of patient frailty) that are 
clinically relevant and have relationships with the outcome. In the 
case of the AMI measure, we risk adjust for cardio-respiratory failure 
or shock. However the measure's risk model does not include a risk 
variable for sepsis.
    Comment: Several commenters requested clarification or expressed 
concern about attribution of the measure outcome to hospitals when 
patients are transferred among acute-care hospitals. One commenter 
suggested that hospitalizations that include transfers among 
institutions be excluded or that the AMI mortality measure not be used 
in cases where there was a transfer. Another commenter suggested that 
the current method within the AMI mortality measure of attributing the 
outcome to the transferring hospital, rather than the receiving 
hospital should be changed.
    Response: In the AMI mortality measures, for patients transferred 
from one short-term acute care hospital to another, only the first 
admission in the transfer chain is eligible for inclusion in the 
cohort. The subsequent admissions are not included. The measures assign 
a death that occurs within 30 days to the hospital that initially 
admitted the patient as an inpatient. For example, if a patient is 
admitted to Hospital A for AMI and then transfers to Hospital B,

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only the Hospital A admission (the index admission) would be included 
in the cohort, and death within 30 days of the Hospital A admission 
would be captured in Hospital A's AMI mortality outcome. The rationale 
for this approach is that the initial admitting hospital makes 
diagnostic and treatment decisions which exert great influence on a 
patient's risk of mortality in AMI cases even when patient transfers 
are warranted, for example, for interventions that cannot be provided 
at the initial admitting institution, such as cardiac catheterization.
    Comment: One commenter expressed concern that having 50 percent of 
an EPM participant's quality score for AMI and 75 percent of a 
participant's quality score for CABG based upon 30-day hospital 
mortality places a heavy reliance on only a few quality measures. 
Furthermore, the commenter believed that the heavy emphasis on 30-day 
mortality could disadvantage smaller hospitals with relatively low AMI/
CABG admissions, such that a few adverse outcomes could 
disproportionately impact the hospital's quality score.
    Response: To ensure hospitals have enough cases to produce a valid 
quality score, the AMI mortality measure uses 3 years of claims data to 
calculate the measure. Hospitals must have at least 25 qualifying index 
admissions within the 3-year measurement period to calculate and 
publically report a measure result. We do not believe these measures 
disadvantage smaller volume hospitals. We have found hospitals with few 
cases tend to have measure results that are close to the average 
hospital rate and are therefore rarely identified as poor performing 
outliers.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include Hospital-level 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) following AMI hospitalization (NQF #0230) measure in the 
AMI model to assess quality performance.
(2) Excess Days in Acute Care After Hospitalization for Acute 
Myocardial Infarction (AMI Excess Days)
(a) Background
    The Excess Days in Acute Care after Hospitalization for Acute 
Myocardial Infarction (AMI) measure (AMI Excess Days) is a risk-
standardized outcome measure that compares the number of days that 
patients are predicted to spend in acute care across the full spectrum 
of possible acute care events (hospital readmissions, observation 
stays, and ED visits) after discharge from a hospital for AMI, to the 
days patients are expected to spend in acute care based on their degree 
of illness.
    Some of the costs for AMI can be attributed to high acute care 
utilization for post-discharge AMI patients in the form of 
readmissions, observation stays, and emergency department (ED) visits. 
We note that patients admitted for AMI have disproportionately high 
readmission rates, and that readmission rates following discharge for 
AMI are highly variable across hospitals in the United 
States.99 100
---------------------------------------------------------------------------

    \99\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \100\ Bernheim SM, Grady JN, Lin Z, et al.: National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-46
---------------------------------------------------------------------------

    For the previously adopted HIQR Program measure, Hospital 30-Day, 
All-Cause Risk-Standardized Readmission Rate (RSRR) following Acute 
Myocardial Infarction (AMI) Hospitalization (NQF #0505) (CY 2009 OPPS/
ASC final rule with comment period; 73 FR 68780 through 68781), 
publicly reported 30-day risk-standardized readmission rates for AMI 
ranged from 17.5 percent to 30.3 percent for the time period between 
July 2011 and June 2012.\101\ However, in addition to an increased risk 
of requiring readmission in the post-discharge period, patients are 
also at risk of returning to the hospital for both observation stays 
and ED visits which also characterize potentially preventable acute 
care. ED visits represent a significant proportion of post-discharge 
acute care utilization for all conditions, including patients with AMI. 
Two recent studies conducted in patients of all ages showed that 9.5 
percent of patients return to the ED within 30 days of hospital 
discharge; additionally, about 12 percent of these patients are 
initially discharged from the ED and are not captured by the previously 
adopted HIQR Program readmission measures.102 103 The rising 
use of observation stays among Medicare beneficiaries between 2001 and 
2008 sparked concern among patients, providers, and policymakers that 
the AMI 30-day Readmission (NQF #0505) measure does not capture the 
full range of unplanned acute care events that occur in the post-
discharge period. In order to address the rising use of observation 
stays amongst Medicare beneficiaries CMS proposed the Excess Days in 
Acute Care after Hospitalization for AMI (AMI Excess Days) measure for 
use in the AMI model. The AMI Excess Days measure comprehensively 
captures all post-discharge, unplanned acute care events as a count of 
the excess days a hospital's patients spent as inpatients, in 
observation, or in the ED over a 3-year measurement period.
---------------------------------------------------------------------------

    \101\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
    \102\ Rathore SS, Curtis JP, Chen J, Wang Y, Nallamothu BK, 
Epstein AJ, Krumholz HM; National Cardiovascular Data Registry. 
Association of door-to-balloon time and mortality in patients 
admitted to hospital with ST elevation myocardial infarction: 
national cohort study. BMJ. 2009 May 19; 338:b1807. Krumholz HM, 
Merrill AR, Schone EM, et al.: Patterns of hospital performance in 
acute myocardial infarction and heart failure 30-day mortality and 
readmission. Circulation. Cardiovascular Quality & Outcomes. Sep 
2009;2(5):407-413.
    \103\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
---------------------------------------------------------------------------

    In 2014, we developed the proposed measure of excess days in acute 
care following AMI hospitalization, supported for use in the Hospital 
Quality Reporting Program by the MAP and submitted to the NQF for 
endorsement. We note that this measure was submitted for endorsement to 
the NQF All-Cause Admissions and Readmissions Committee in January 2016 
with appropriate consideration for sociodemographic status. The measure 
was finalized for the HIQR Program FY 2018 payment determination (FY 
2016 IPPS/LTCH final rule 80 FR 49690).
(b) Data Sources
    We proposed to use Medicare Part A and Part B FFS claims submitted 
by the AMI model participant as the data source for calculation of the 
AMI Excess Days measure as harmonized with the MORT-30-AMI(NQF #0230) 
and READM-30-AMI(NQF #0505) measures. Index admission diagnoses and in-
hospital comorbidities are assessed using Medicare Part A claims. 
Additional comorbidities prior to the index admission are assessed as 
Part A inpatient, outpatient, and Part B office visit Medicare claims 
in the 12 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.

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(c) Cohort
    The AMI Excess Days measure includes Medicare FFS beneficiaries, 
aged 65 years or older, discharged from non-federal acute care 
hospitals with a principal discharge diagnosis of AMI and with a 
complete claims history for the 12 months prior to index admission. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2111, I2119, I2129, I214, and I213.
    We proposed that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all participants in 
the AMI model. Hospital performance will only be publically reported 
for hospitals with 25 or more index admissions in the 3-year 
measurement period. The AMI model cohort would differ from the hospital 
cohort that is currently captured in the measure through the HIQR 
Program. Although performance on the measure will not be publically 
reported for hospitals with fewer than 25 cases, such hospitals will 
receive information about their performance on the measure. We refer 
readers to section III.B.5. of this final rule for a discussion of AMI 
model participant selection.
(d) Inclusion and Exclusion Criteria
    We proposed that an index admission is the hospitalization to which 
the excess days in acute care outcome is attributed. We note that for 
purposes of the EPMs where we need to identify episodes that are 
included in the EPMs, we use the term anchor hospitalization to 
identify hospitalizations that initiate EPM episodes for beneficiaries 
whose care is included in the EPMs. In describing the quality measures 
themselves in detail in section III.E.4. of the proposed rule (81 FR 
50794), we use the term index hospitalization to identify 
hospitalizations of beneficiaries whose outcomes are included in the 
measures. Thus, anchor hospitalizations and index hospitalizations 
would have varying degrees of overlap depending on the specific quality 
measure. The measure includes the following index admissions for 
patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    The measure excludes the following index admissions for patients:
     Discharged alive on the day of index admission or the 
following day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age & gender) data.
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission.
     Discharged AMA.
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day excess days outcome cannot be assessed for 
these patients.
    Finally, for the purpose of this measure, hospitalizations that 
occur within 30 days of discharge from an index admission are not 
eligible to also be index admission. Thus, only one index admission for 
AMI per beneficiary is randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We proposed for the AMI model to align this measure with the risk-
adjustment methodologies adopted for the AMI Excess Days measure under 
the HIQR Program in accordance with section 1886(b)(3)(B)(viii)(VIII) 
of the Act, as finalized in the FY 2016 IPPS/LTCH final rule (80 FR 
49682). We also note that the measure risk adjustment takes into 
account patient age, sex, and comorbidities to allow a fair assessment 
of hospital performance. The measure defines the patient risk factors 
for excess days using diagnosis codes collected from all patient claims 
1 year prior to a patient's index hospitalization for AMI. Accordingly, 
only comorbidities that convey information about the patient at the 
time of index admission or in the 12 months prior, and not 
complications that arise during the course of the index 
hospitalization, are included in the risk-adjustment model. The measure 
does not adjust for patients' index admission source or their discharge 
disposition (for example, SNF) because these factors are associated 
with the structure of the health care system, not solely patients' 
clinical comorbidities. Regional differences in the availability of 
post-acute care providers and practice patterns might also exert undue 
influence on measure results. In addition, data fields that capture 
discharge disposition, for example to post-acute care settings, on 
inpatient claims are not audited and are not as reliable as diagnosis 
codes.
    As previously noted in the AMI Excess Days measure, ICD-10-CM 
diagnosis codes present on Parts A and B administrative claims are used 
to inform the risk prediction for each patient. Diagnostic codes from 
post-acute care settings are utilized in the measure calculation, 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. We note that the patient diagnosis codes are grouped using 
HCCs, which are clinically relevant diagnostic groups of codes. 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, sex, and comorbidities present at the time of 
index admission are adjusted for differences in hospital case mix 
(patient risk factors). The measure uses the HLM statistical 
methodology for risk adjustment.
(f) Calculating the Rate and Performance Period
    We proposed to calculate hospital 30-day excess days in acute care 
with the methodology used to risk standardize all excess days measures 
used in CMS hospital quality programs. The outcome of the measure is a 
count of the number of days the patient spends in acute care within 30 
days of discharge. We define days in acute care as days spent in an ED, 
admitted to an observation unit, or admitted as an unplanned 
readmission for any cause within 30 days from the date of discharge 
from the index AMI hospitalization. Each ED treat-and-release visit is 
counted as 1 half-day (0.5 days). Observation stays are recorded in 
terms of hours and are rounded up to the nearest half-day. Each 
readmission day is counted as 1 full day (1 day). We count all eligible 
outcomes occurring in the 30-day period, even if they are repeat 
occurrences. The measure incorporates ``exposure time'' (the number of 
days each patient survives after discharge, up to 30). This exposure 
time is included to account for differential risk for excess days in 
acute care after discharge among those patients who do not survive the 
full post-discharge period. If a readmission or observation stay 
extends beyond the 30-day window, only those days within the 30-day 
window are counted.
    Using a two-part random effects model, or ``hurdle'' model, we 
account for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
we model the number of acute care days for each patient as: (a) The 
probability that the patient will have a non-zero number of days in 
post-discharge acute care; and (b) the number

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of days the patient is predicted to spend given that this number is 
non-zero. The first part is specified as a legit model, and the second 
part is specified as a Poisson model, with both parts having the same 
risk-adjustment variables and each part having a random effect. This 
model is used to calculate the predicted (including random effects) and 
expected (assuming random effects are zero) number of days in post-
discharge acute care for each patient. The average difference between 
patients' predicted and expected estimates for each hospital is used to 
construct the risk-standardized excess days outcome. The excess days 
outcome is reported at the hospital-level per 100 discharges.
    We define the time period for the measure as within 30 days of the 
date of discharge of the index AMI hospitalization. The 30-day post-
discharge window for assessing the outcome is consistent with the 
claims-based MORT-30-AMI (NQF #0230) and Hybrid AMI Mortality (NQF 
#2473) measures as noted in this final rule.
    A 3-year rolling performance period would be consistent with that 
used for the HIQR Program (FY 2016 IPPS/LTCH final rule 80 FR 49681). 
Section III.E.5., Form, Manner, and Timing of Quality Measure Data 
Submission, of this final rule summarizes the proposed measure 
performance periods for AMI model performance years 1 through 5. We 
note that improvement on the AMI Excess Days measure would be 
determined from the immediate 3-year rolling performance period 
available for the year preceding the AMI model performance year as 
explained in Table 41.
    The proposal to include the Excess Days in Acute Care after 
Hospitalization for AMI measure in the AMI model is included in Sec.  
512.411(a)(2). We sought comment on this proposal to include the Excess 
Days in Acute Care after Hospitalization for AMI measure in the AMI 
model to assess quality performance.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters stated that certain characteristics of 
the patient population, such as patient expectations, health literacy, 
inadequate transportation, lack of caregiver support, and socioeconomic 
status, contribute to the rate of post-discharge hospitalizations and 
disadvantage hospitals serving poorer populations.
    Response: We appreciate the commenters' concerns that socioeconomic 
factors influence patient's risk of post-discharge returns to the 
hospital for acute care. The AMI EDAC measure currently does not 
include socioeconomic factors in the risk-adjustment model. We 
routinely monitor the impact of SDS on providers' differential 
performance on our outcome and payment measure.
    The NQF is currently conducting a 2-year trial, in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. This trial entails temporarily allowing inclusion of 
sociodemographic factors in the risk-adjustment approach for some 
performance measures. At the conclusion of the trial, NQF is expected 
to issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
encouraged to submit information such as analyses and interpretations 
as well as performance scores with and without sociodemographic factors 
in the risk adjustment model. Several measures developed by CMS have 
been brought to NQF since the beginning of the trial, including the AMI 
EDAC measure which was submitted to NQF in January 2016 and is a part 
of the trial. Under the guidance of NQF, we are making every effort to 
be proactive in examining SDS factors in quality measures by testing 
SDS factors in the measures' risk models and making recommendations 
about whether or not to include these factors in the endorsed measure. 
We are still awaiting final recommendations from the NQF and intend to 
continue engaging in the NQF process as we consider the appropriateness 
of adjusting for SDS factors in our outcome measures. For more detailed 
information about measures in the NQF SDS trial period, we refer 
commenters to: http://www.qualityforum.org/SES_Trial_Period.aspx. 
Furthermore, we are awaiting the findings of an ASPE report on SDS 
factors in risk-adjustment. Therefore, we are not currently changing 
our risk-adjustment methodology with respect to SDS factors at this 
time. We will continue to consider such factors in our ongoing measure 
development and maintenance activities.
    Comment: Two commenters opposed the AMI EDAC measure because it 
measures quality based partly on care provided in settings and 
facilities other than those of the initial discharging hospital.
    Response: We believe these measures reflect the actions of 
hospitals and the care their patients receive post-discharge. Hospitals 
providing quality inpatient care, conducting appropriate discharge 
planning, and working with providers and suppliers on appropriate 
follow-up care will likely perform well, because the Medicare 
beneficiaries they serve will have a reduced need for excessive post-
discharge services. The risk adjustment methodology used for these 
measures acknowledge the differences in a given hospital's patient case 
mix, so that their performance can be compared to a national average. 
We recognize that the structure of health care markets and practice 
patterns vary geographically, beyond the variation in patient case mix. 
However, as previously mentioned, we believe that the aforementioned 
opportunities for hospitals to exert control over post-discharge 
services exist, regardless of the degree of integration of a health 
system. In cases where systems are not well-integrated, there may be an 
even greater opportunity for redesign of care processes to achieve high 
performance on these measures. We are collaborating with our postacute 
care quality programs and we will take the commenters' suggestions that 
similar measures should be incorporated into those programs under 
consideration. However, we do not believe that it would be appropriate 
to delay adoption of this measure and the public reporting of this 
valuable and actionable payment information until such time as any 
similar, postacute care measures are implemented.
    Comment: Several commenters expressed concern with the outcome of 
the AMI EDAC measures, questioning whether excess days in acute care 
provides a signal of quality. One commenter opposed the AMI EDAC 
measure because high readmission rates could stem from the need to care 
for chronically ill patients. The commenter stated that hospitals 
should not be punished for high readmission rates when they are 
associated with lower mortality rates and good access to inpatient 
hospital care.
    Response: We disagree that excess days in acute care does not 
provide a signal of quality. Our discussions with patients and the TEP, 
as well as published literature, indicate that acute care utilization 
after discharge (that is, return to the ED, observation stay, and 
readmission), for any reason, is disruptive to patients and caregivers, 
costly to the health care system, and puts patients at additional risk 
of hospital-acquired infections and complications. These measures are 
meant to provide patients with a more complete picture of potential 
post-discharge acute care use as they make choices for their care. We 
are confident that for most patients, remaining home or remaining in a 
non-acute setting rather than returning to the hospital

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indicates a better outcome. Although some hospital returns are 
unavoidable, others may result from poor quality of care, 
overutilization of care or inadequate transitional care. Transitional 
care includes effective discharge planning, transfer of information at 
the time of discharge, patient assessment and education, and 
coordination-of-care and monitoring in the post-discharge period. When 
appropriate care transition processes are in place (for example, a 
patient is discharged to a suitable location, communication occurs 
between clinicians, medications are correctly reconciled, timely 
follow-up is arranged), fewer patients return to an acute care setting, 
either for an ED visit, observation stay, or hospital readmission 
during the 30 days post-discharge. Numerous studies have found an 
association between quality of inpatient or transitional care and early 
(typically 30-day) readmission rates \104\ and ED visits \105\ or a 
wide range of conditions including AMI.
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    \104\ Dean NC, Bateman KA, Donnelly SM, Silver MP, Snow GL, Hale 
D. Improved clinical outcomes with utilization of a community-
acquired pneumonia guideline. Chest. 2006;130(3):794-799.
    Coleman EA, Parry C, Chalmers S, et al. 2006. The care 
transitions intervention: Results of a randomized controlled trial. 
Arch Intern Med 166:1822-1828.
    Coleman EA, Smith JD, Frank JC, Min SJ, Parry C, Kramer AM. 
Preparing patients and caregivers to participate in care delivered 
across settings: The Care Transitions Intervention. J Am Geriatr Soc 
2004;52(11):1817-25.
    Hansen LO, Young RS, Hinami K, et al. Interventions to reduce 
30-day rehospitalization: A systematic review. 2011; 155(8):520-8.
    Leppin AL, Gionfriddo MR, Kessler M, et al. Preventing 30-day 
hospital readmissions: A systematic review and meta-analysis of 
randomized trials. JAMA Internal Med. 2014; 174(7):1095-107.
    Hansen LO, Young RS, Hinami K, et al. Interventions to reduce 
30-day rehospitalization: A systematic review. 2011; 155(8):520-8.
    \105\ Mistiaen P, Francke AL, Poot E. Interventions aimed at 
reducing problems in adult patients discharged from hospital to 
home: A systematic metareview. BMC Health Serv Res 2007;7:47.
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    With respect to the commenter's concern that some hospitals care 
for a greater number of chronically ill patients, although the measures 
cannot capture all reasons for variability among hospitals, the EDAC 
measures incorporate risk adjustment using claims data to account for 
patient factors that could account for the observed variability. The 
measures use claims based risk adjusters that are clinically relevant 
and have strong relationships with the outcome as has been done in 
other claims-based outcome measures in the Hospital IQR Program. This 
approach was supported by the TEP. We understand that hospitals have 
complex patients with varying comorbidities. Although the cohort may 
contain patients with different disease severity, and therefore, 
different levels of risk, the measure accounts for this range of 
severity and risk because it is risk-adjusted for 65 factors that are 
clinically relevant and have strong relationships with the outcome of 
acute care utilization.
    With respect to the comment that hospitals not be punished for 
readmission if they reduce patient mortality, the goal of these 
measures is not to punish hospitals for appropriate readmissions; it is 
to help patients and providers understand variation among hospitals in 
the days that are spent by patients in acute care settings following a 
discharge for AMI. The measures provide a broader perspective on post-
discharge events than the current readmission measures and are intended 
to incentivize improvements in care transitions from the hospital so 
that patients are less likely to return to the acute setting.
    Comment: One commenter recommended the AMI EDAC measure be removed 
from the model to create a better balance of provider risk and reward. 
One commenter noted that costs of a hospital emergency department or 
observation visit following an index admission is already captured and 
will impact a hospital's reimbursement in this EPM. The commenter 
stated that hospitals should not be further penalized by including this 
measure in the quality component. The commenter also opposed the AMI 
EDAC measure because it was not included in the list of recommended 
quality measures in the HCP LAN ``Accelerating and Aligning Clinical 
Episode Payment Models: Coronary Artery Disease'' draft whitepaper 
released in May, 2016.
    Response: We interpreted this commenter's concern to be that 
because visits to the emergency department and observation stays are 
less costly than readmissions, by combining all of these types of 
visits into a single outcome, providers are not incentivized to use the 
lower cost settings to deliver care whenever appropriate. We agree that 
all acute care utilization is not equal in its disruption, cost, or 
risk to patients. In the AMI EDAC measure, the weight of events (such 
as observation or ED care) is determined by the intensity of care 
delivered to patients. Prolonged acute care is more costly and worse 
from a patient perspective than a brief ED visit. That is why we 
elected to report the AMI EDAC measure as a count of days: Events 
lasting longer with more cost and disruption (such as readmissions), 
therefore, naturally weigh more than brief events (such as ED visits) 
in the overall day count. This approach is based on the believe that, 
from a patient perspective, it is the count of total days spent in 
acute care settings that is most meaningful and representative of the 
disruption, which is why we combine day counts for each type of event 
and do not separately report rates of each type of event. This day 
count is also valuable for hospitals, because a hospital with a high 
number of ED visits may still be able to achieve a low number of total 
days in acute care by actively coordinating care from the ED and 
avoiding re-hospitalizations. Because the EDAC measure had not 
previously been publically reported at the time of the HCP LAN report 
in May 2016, they did not consider it for inclusion on the list of 
potential measures to be used in cardiovascular episode of payment 
models. However, the AMI and CABG readmission measures were recommended 
suggesting that the HCP LAN did consider the prevention or reduction of 
post-discharge acute care use as an important quality metric to include 
in cardiovascular episode payment models.
    Comment: One commenter supported inclusion of the AMI EDAC measure 
in the AMI EPM bundle and recommended CMS include a measure of excess 
days in acute care for the CABG and surgical hip and femur fracture 
treatment EPM bundles.
    Response: We thank the commenters for their support and will 
consider additional measure development as was suggested.
    Comment: One commenter stated that the AMI EDAC measure will not be 
helpful to beneficiaries in navigating their care nor will the measure 
be actionable for hospitals given that physicians dictate the discharge 
date.
    Response: We disagree that the AMI EDAC measure will not be helpful 
to beneficiaries. We have developed the AMI EDAC measure to try to 
provide important patient-centered information to providers. The 
measure supports existing hospital incentives to further invest in 
interventions and tools to improve hospital care, better respond to 
individual patient preferences, better assess patient readiness for 
discharge, and facilitate transitions to outpatient status. Such 
interventions and tools will reduce the likelihood of patients having 
any return to the hospital and make it more likely that patients who do 
return have less severe illnesses which may require fewer days of care. 
We disagree that providers do not have the ability to take meaningful 
actions that would have an impact on patient outcomes as a result of 
adopting the AMI EDAC

[[Page 379]]

measure. The measure spotlights the excess number of days patients 
spend in acute care (hospital readmissions, observation stays, and ED 
visits) per 100 discharges during the first 30 days after discharge 
from the hospital, relative to the number spent by the same patients 
discharged from an average hospital. We believe the information 
provided to hospitals through this measure will help inpatient and 
outpatient providers better understand the trajectory of care for 
patients that have been discharged from their facility. Specifically, 
hospitals will be able to assess whether patients discharged from their 
facility have readmissions, observation stays, and/or ED visits during 
the first 30 days after discharge from the hospital.
    Because the measure provides more granular information regarding 
patient discharge outcomes, this will assist hospitals in developing 
targeted quality improvement activities aimed at improving transitions 
of care. We believe that the measure will reduce readmissions, 
observation stays, and/or ED visits by encouraging hospitals to further 
invest in interventions to improve hospital care by better assessing 
the readiness of patients for discharge and facilitating quality 
transitions to outpatient status.
    Comment: One commenter requested that CMS not include outpatient 
care that is beneficial to patients as part of the AMI EDAC measure.
    Response: We do not dismiss the importance of hospital-level care 
in outpatient settings, such as the Emergency Department, and support 
hospitals using the level of care most appropriate for each particular 
patient's condition. We agree with the commenter that some returns to 
the acute care setting are necessary and beneficial to patients. The 
goal is not to avoid all post-discharge acute care service utilization, 
but to identify excess use of acute care post-discharge. Acute care 
utilization after discharge (that is, return to the ED, observation 
stay, and readmission), for any reason, is disruptive to patients and 
caregivers, costly to the health care system, and puts patients at 
additional risk of hospital-acquired infections and complications. 
Although some factors are outside hospitals' control, when appropriate 
care transition processes are in place (for example, a patient is 
discharged to a suitable location, communication occurs between 
clinicians, medications are correctly reconciled, timely follow-up is 
arranged), fewer patients return to an acute care setting, whether for 
an ED visit, observation stay, or hospital readmission during the 30 
days post-discharge period. Numerous studies have found an association 
between quality of inpatient or transitional care and early (typically 
30-day) readmission rates and ED visits for a wide range of conditions 
including AMI.
    Comment: Several commenters opposed the inclusion of the AMI EDAC 
measure because it is not NQF endorsed and wasn't reviewed by the MAP 
for inclusion in this EPM.
    Response: Section 1886(b)(3)(B)(IX)(bb) of the Act provides that in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
While we considered other existing measures related to care transitions 
and post-discharge acute care utilization that have been endorsed by 
NQF or other consensus organizations, we were unable to identify any 
NQF-endorsed (or other consensus organization endorsed) measures that 
assess the full range of post-discharge acute care use that patients 
may experience.
    Existing process measures capture many important domains of care 
transitions such as education, medication reconciliation, and follow 
up, but all require chart review and manual abstraction. Existing 
outcome measures are focused entirely on readmissions or complications 
and do not include observation stays or ED visits. We are not aware of 
any other measures that assess the quality of transitional care by 
measuring 30-day risk-standardized days in acute care (hospital 
readmissions, observation stays, and ED visits) following 
hospitalization for AMI that have been endorsed or adopted by a 
consensus organization, and we have not found any other feasible and 
practical measures on this topic. However, we note that this measure 
has been submitted to NQF for endorsement proceedings and received a 
recommendation for endorsement from the Admissions and Readmissions 
Standing Committee as part of the All-Cause Admissions and Readmissions 
project in January 2016.
    Furthermore, the AMI EDAC measure was reviewed by clinical experts 
and a TEP and was subject to separate public input prior to being 
proposed for the Hospital IQR Program. This measure was also included 
on a publicly available document entitled ``List of Measures under 
Consideration for December 1, 2014'' (available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367) and has 
been reviewed by the NQF MAP Hospital Workgroup. The measure was 
conditionally supported pending the examination of SDS factors and NQF 
review and endorsement of the measure update, as referenced in the MAP 
2015 Final Recommendations Spreadsheet (available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367). We will 
continue to work collaboratively with stakeholders in soliciting input 
on ways to refine this measure in the future.
    Comment: Several commenters opposed the inclusion of the AMI EDAC 
measure because it is not publicly reported.
    Response: CMS understands the commenters concern that the measure 
has not been publicly reported as of yet. We held a dry run to educate 
hospitals on the AMI and HF EDAC measures in September 2015 and we 
reported updated results to hospitals in the IQR Preview Period in 
April 2016. Hospitals results on the measures will be updated with more 
recent data and reported to hospitals in Spring 2017 as part of the IQR 
Preview Period for the public reporting release of the measures in July 
2017.
    Comment: One commenter opposed inclusion of the AMI EDAC measure 
because it overlaps with the AMI readmission measure.
    Response: In response to the commenter's concern about overlap of 
the AMI EDAC and the current readmission measure, we interpret the 
commenter to be referring to the 30-day AMI readmission measure. That 
measure and the AMI EDAC measure assess different outcomes. Although 
both measures count readmission, the 30-day AMI readmission measure 
only informs a hospital if a patient had a readmission, and does not 
include all postdischarge outcomes that matter to patients, such as 
having to return to the ED or spending time in the hospital under 
observation, like the AMI EDAC measure does. The AMI EDAC measure 
provides patients a more comprehensive and patient-centered perspective 
on the 30-day postdischarge experience because it includes not only 
readmissions, but also ED visits and observation stays and captures the 
numbers of days in these settings.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include the Excess Days

[[Page 380]]

in Acute Care after Hospitalization for AMI measure in the AMI model.
(3) Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #2473) 
(Hybrid AMI Mortality)
(a) Background
    In keeping with our goal to move toward the use of EHRs, and in 
response to stakeholder feedback to include clinical data in outcome 
measures, we have developed the hospital 30-day risk-standardized acute 
myocardial infarction (AMI) mortality eMeasure (NQF #2473) (herein 
after referred to as Hybrid AMI Mortality measure). This measure will 
incorporate a combination of claims data and EHR data submitted by 
hospitals, and because of these combined data sources, it is referred 
to as a hybrid measure. The Hybrid AMI Mortality (NQF #2473) measure 
cohort and outcome are identical to those in the hospital 30-day, all-
cause, risk-standardized mortality rate (RSMR) following acute 
myocardial infarction (AMI) (NQF #0230), measure which is also being 
proposed in the AMI model.
    In contrast to the claims-only MORT-30-AMI (NQF #0230) measure, the 
proposed Hybrid AMI Mortality (NQF #2473) measure utilizes five core 
clinical data elements (age; heart rate; systolic blood pressure; 
troponin; creatinine) in the risk-adjustment methodology that are 
obtainable through EHR data. These five core clinical data elements are 
intended to reflect patients' clinical status when they first present 
to an acute care hospital for treatment of AMI. The clinical data 
elements include age at the time of admission, first-captured vital 
signs (heart rate, systolic blood pressure) collected within 2 hours of 
the patient first presenting to the hospital, and the first captured 
laboratory values (troponin, creatinine) collected within 24 hours of 
the patient first presenting to the hospital to which they are 
subsequently admitted. We note that these five data elements are 
routinely collected on hospitalized adults with AMI upon presentation 
to the hospital, consistently captured in medical records under current 
clinical practice, and can be feasibly electronically extracted from 
hospital EHRs.
    In order to prepare for future reporting of the Hybrid AMI 
Mortality (NQF #2473) measure, we proposed to seek and reward voluntary 
data submission of the five core clinical data elements included in the 
risk model for the Hybrid AMI mortality (NQF #2473) measure. We also 
proposed to require submission of six additional linking variables 
(CCN, HIC Number, date of birth, sex, admission date, and discharge 
date) to ensure that the datasets containing administrative claims data 
are correctly linked with EHR datasets containing the core clinical 
data elements for proper risk adjustment. The voluntary data submission 
initiative will allow AMI model participants to build processes to 
extract and report the EHR data elements, as well as support CMS 
testing of systems required for Hybrid AMI Mortality measure (NQF 
#2473) production including data receiving and auditing, the merging 
EHR and claims data, calculation and production of measure results.
    Finally, we are considering using the Hybrid AMI Mortality (NQF 
#2473) measure as a replacement for the current publicly reported MORT-
30-AMI (NQF #0230) measure in CMS models or programs when appropriate. 
In future years CMS may implement the Hybrid AMI Mortality (NQF #2473) 
measure in models and/or programs, such as in the AMI model or HIQR 
Program. In that event, we would propose to adopt the measure through 
notice and comment rulemaking. We refer readers to more detailed 
information on the measure specifications in this final rule and to the 
CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(b) Data Sources
    We proposed to use two sources of data submitted by AMI model 
participants to calculate the Hybrid AMI Mortality (NQF #2473) measure: 
Medicare Part A and Part B (FFS claims to identify index admission 
diagnoses; and EHR-captured clinical information collected at 
presentation for risk-adjustment of patients' severity of illness. 
Deaths are identified using the Medicare Enrollment Database which 
contains beneficiary demographic, benefits/coverage, and vital status 
information.
    For the voluntary data submission initiative, EHR data submission 
will align with existing Electronic Clinical Quality Measure (eCQM) 
standards and data reporting procedures for hospitals. In alignment 
with these standards, we are posting the electronic specifications for 
the Hybrid AMI Mortality (NQF #2473) measure, which include the Measure 
Authoring Tool (MAT) output and value sets for all included data 
elements, on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The Office of the National Coordinator for Health Information 
Technology (ONC) adopted quality reporting document architecture (QRDA) 
as the standard to support both QRDA Category I (individual patient) 
and QRDA Category III (aggregate) data submission approaches for 
Meaningful Use Stage 2 in the Health Information Technology: Standards, 
Implementation Specifications, and Certification Criteria for 
Electronic Health Record Technology, 2014 Edition; Revisions to the 
Permanent Certification Program for Health Information Technology rule 
(77 FR 54163 through 54292). We intend to provide AMI model 
participants with information about how many qualifying admissions are 
submitted successfully. We refer readers to the definition of 
``successful data submission'' in section III. E.4.a.(3)(vii) of this 
final rule.
    We sought comment on our proposal to use the following reporting 
mechanisms in performance year 1: QRDA, a simpler mechanism such as a 
spreadsheet, or both. We proposed using QRDA in AMI model performance 
years 2 through 5. The purpose of the use of a simpler reporting format 
in the first performance year reporting format in the first performance 
year would be to allow hospitals to perfect data extraction with the 
2017 data and postpone mastery of reporting in the QRDA format to the 
following year.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters had concerns or provided suggestions 
about the reporting standard for voluntary reporting of EHR data 
elements. One commenter recommended that CMS require QRDA I file format 
for every year of data submission, as it is already required for the 
Inpatient Quality Reporting and Meaningful Use programs. Another 
commenter recommended that CMS not allow data to be submitted for 
performance year (PY) 1 in a different file format than the other years 
to avoid confusion. Several commenters agreed with CMS in being 
flexible in the voluntary reporting of the clinical data elements by 
allowing multiple reporting formats. One commenter specifically 
appreciated the flexible approach, as it created a better balance of 
provider risk and reward. Another commenter suggested that CMS allow 
both QRDA and Excel reporting in performance years 2 and 3.
    Response: We thank commenters for their suggestion to align 
standards across our programs. We agree that it is important to align 
these data collection requirements to reduce burden on

[[Page 381]]

hospitals and improve interoperability. We will take this feedback into 
consideration as we shape future proposals for hybrid measures. One of 
the main tenets of the 2015 Edition Health IT Certification Criteria 
final rule (80 FR 62601) is to facilitate greater interoperability for 
several clinical health information purposes and enable health 
information exchange through new and enhanced certification criteria, 
standards, and implementation specifications. We note that we have 
worked closely with ONC to enhance testing and validation of certified 
technology's ability to capture, exchange, and report electronic 
patient data, such as improved testing and certification through the 
Cypress CQM testing and certification tool. As another example, we note 
that ONC proposed a 2015 Edition ``CQM--report'' certification 
criterion in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24613 
through 24614). After consideration of stakeholder input on the 
standards for representing and reporting CQM data in certified health 
IT to improve the reliability and consistency of such data reporting, 
we finalized that hospitals can report using either the 2014 or 2015 
edition of CEHRT (80 FR 49708). Furthermore, the 2015 Edition 
certification criteria related to eCQMs offer increased data 
portability and user access using the established QRDA standards. 
Because of the support for testing and certification offered by ONC and 
their certification tools and programs, the widespread deployment of 
the QRDA standard and CMS' own recent experience that QRDA can provide 
superior clinical data for assessing quality and performance, we will 
finalize our selection of QRDA-I as the primary reporting standard for 
the EPM Model Rule for program years 1-3. If QRDA-I cannot be available 
to all participants for year 1, we will make a transitional submission 
format available to systems using a spreadsheet-based approach that 
will allow these sites additional time to meet the QRDA-based reporting 
requirements. We thank commenters for their continued support of 
improving the electronic reporting process and plan to continue to make 
improvements as standards evolve.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to use 
the following reporting mechanisms in performance year 1: QRDA, a 
simpler mechanism such as a spreadsheet, or both. We proposed using 
QRDA in AMI model performance years 2 through 5.
(c) Cohort
    The Hybrid AMI Mortality (NQF #2473) measure includes Medicare FFS 
beneficiaries, aged 65 years or older, discharged from non-federal 
acute care hospitals with a principal discharge diagnosis of AMI. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2111, I2119, I2129, I214, and I213.
    Hospital performance for the Hybrid AMI Mortality (NQF #2473) 
measure will not be publicly reported. However, AMI model participants 
will receive hospital-specific reports for each performance year with 
information about the success of their voluntary submission of EHR 
data.
(d) Inclusion and Exclusion Criteria
    We proposed that an index admission is the hospitalization to which 
the mortality outcome is attributed. The Hybrid AMI mortality (NQF 
#2473) measure includes the following index admissions for patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    This measure excludes the following index admissions for patients:
     Discharged alive on the day of admission or the following 
day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age & gender) data.
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission.
     Discharged AMA.
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day mortality outcome cannot be assessed for 
these patients.
    Finally, for the purpose of this measure, only one index admission 
per patient for AMI is randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the methodology approach 
adopted for the MORT-30-AMI (NQF #0230) measure under the HIQR Program 
in accordance with section 1886(b)(3)(B)(viii)(VIII) of the Act, as 
finalized in FY 2008 IPPS/LTCH final rule (2008 IPPS/LTCH final rule 71 
FR 67960). The Hybrid AMI Mortality (NQF #2473) measure uses EHR data 
and not administrative claims data to adjust for differences across 
hospitals in how at-risk their patients are for death, relative to 
patients cared for by other hospitals. The risk model was developed 
with input from the literature, clinical and EHR experts, and health IT 
vendors. In order to be included as risk variables, clinical data 
elements had to be--(1) consistently obtained in the target population 
(Medicare FFS AMI patients) based on current clinical practice; (2) 
captured with a standard definition and recorded in a standard format 
within the EHR; and (3) entered in structured fields that are feasibly 
retrieved from current EHR systems. The final measure includes five 
variables that meet these feasibility criteria, are present for most 
patients at the time of clinical presentation to the hospital, are 
clinically relevant to patients with AMI, and demonstrate a strong 
statistical association with 30-day mortality. Hospitals will submit 
the first-captured data values of each of the five core clinical data 
elements upon patient presentation to the hospital. They are: Age; the 
first-captured heart rate and systolic blood pressure measured within 2 
hours of a patient presenting to the hospital; and the first captured 
troponin and creatinine values within 24 hours of a patient presenting 
to the hospital. Although EHRs likely will ultimately link across 
clinical episodes of care and contain historical patient data, given 
the EHR environment at the time of measure development and inability to 
reliably obtain data from the outpatient setting prior to admission, we 
only considered for inclusion those measure variables that would be 
available and consistently collected at first presentation to the 
hospital.
    The overall performance of the model was comparable with or better 
than that of current publicly reported outcome measures.\106\ We tested 
measure score validity by correlating the RSMR with that of the 
previously validated, publicly reported, administrative claims-based 
MORT-30-AMI (NQF #0230) measure. For more detailed information on the 
model performance, we refer readers to the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \106\ AMI Mortality Hybrid Measure methodology report. http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.

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[[Page 382]]

(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We calculate hospital 30-day, all-cause, risk-standardized 
mortality rates consistent with the methodology used to risk 
standardize all readmission and mortality measures used in CMS hospital 
quality programs. Using an HLM statistical methodology for risk 
adjustment, we calculate the hospital-level risk-standardized mortality 
rate following AMI hospitalizations by producing a ratio of the number 
of ``predicted'' deaths (that is, the adjusted number of deaths at a 
specific hospital) to the number of ``expected'' deaths (that is, the 
number of deaths if an average quality hospital treated the same 
patients) for each hospital and then multiplying the ratio by the 
national observed mortality rate.
    We proposed defining AMI model performance years as outlined in 
section III.E.5. of the proposed rule (81 FR 50794). A performance 
period for the voluntary data submission are those timeframes in which 
a hospital discharge occurs for an eligible AMI index hospitalization. 
For performance year 1 of the AMI model, participants voluntarily 
submitting data will only be requested to submit data for a 2-month 
period. The 2-month period for AMI voluntary data reporting was 
identified due to data processing and coordination with other proposed 
timelines for this model. Data submitted for the first year would be 
for cases that fulfill the measure specifications described in section 
III.E.4.a.(3) of this final rule, and would be restricted to the data 
elements from eligible AMI index hospitalizations with discharges 
occurring between July 1, 2017 and August 31, 2017.
    For performance year 2 of the AMI model, AMI voluntary data 
reporting would be 10 months of data for discharges from eligible AMI 
hospitalizations occurring between September 1, 2017 and June 30, 2018. 
For subsequent years of the model, the performance periods for 
submission of voluntary data will consist of discharges within 
calendar-year 12-month time periods from July 1 through June 30. The 
proposed performance periods would enable AMI model participants to 
receive points toward the AMI model composite quality score for data 
submission starting in performance year 1. We sought comment on our 
proposal for defining the data reporting period for performance year 1 
episodes for an AMI model participant as eligible AMI index 
hospitalizations with discharges occurring between July 1, 2017 and 
August 31, 2017, and for performance year 2 as eligible AMI 
hospitalizations with discharges occurring between September 1, 2017 
and June 30, 2018, with subsequent performance year data reporting 
periods each being calendar-year 12 month periods and starting every 
July 1st. Refer to Table 41 for summary of performance periods.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters were supportive of including a 
voluntary hybrid AMI mortality measure in the AMI episode payment 
model, but were concerned about the timeline to report clinical data. 
Commenters remarked that hospitals need to redesign their EHRs to 
collect and validate this data, and recommended delaying the 
implementation of this measure until 2018. One commenter recommended 
that CMS delay the start date of the hybrid AMI mortality measure to PY 
2 because the proposed rule indicates that data collection will start 
on July 1, 2017, likely 6 months after release of the final rule, which 
is not enough time for vendors to consume the final rule and 
specifications, as well as develop, package, and release the required 
updates to clients.
    Response: We are aware of the burden to hospitals associated with 
extraction, validation, and submission of EHR data. However, data 
submission for EHR data elements used in the Hybrid AMI Mortality 
Measure is voluntary, with an incentive for hospitals that chose to 
submit clinical data. Hospitals that are unable to consume the 
specifications, develop, package, and submit the EHR data elements will 
not be penalized under this payment program. Hospitals that do not 
submit data in program year one, will have the opportunity to submit 
data and receive the incentive in program years two through five.
    Comment: One commenter noted that, according to CMS's Conditions of 
Participation (CoPs), hospitals have thirty days following discharge to 
complete the medical records with final diagnosis. Since CMS is 
proposing a submission period for the AMI EHR data 60 days following 
the end of the measurement period, this would only allow thirty days 
following final diagnosis to compile, validate, and submit data. The 
commenter recommended that CMS allow a 120 day submission period after 
the end of the measurement period.
    Response: We will use a 30-day claims maturity period to identify 
the index admissions for the voluntary reporting of EHR data for the 
AMI EPM in program year 1. This will allow hospitals 30 days to extract 
data on the appropriate patients and submit the data to CMS. In program 
years 2 through 5 CMS will use the customary 90-day claims maturity 
period to identify the index admissions for the voluntary reporting of 
EHR data for the AMI EPM. This is the same 90-day claims maturity 
period currently used in the claims-based AMI 30-day mortality measure. 
Hospitals will have 60 days to complete EHR data extraction and 
submission to CMS.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to 
define the data reporting period for performance year 1 episodes for an 
AMI model participant as eligible AMI index hospitalizations with 
discharges occurring between July 1, 2017 and August 31, 2017, and for 
performance year 2 as eligible AMI hospitalizations with discharges 
occurring between September 1, 2017 and June 30, 2018, with subsequent 
performance year data reporting periods each being calendar-year 12 
month periods and starting every July 1st.
(g) Requirements for Successful Submission of AMI Voluntary Data
    In order for CMS to assess if AMI model participants that submit 
the AMI voluntary data are eligible for points toward the hospital's 
AMI model composite quality score, we proposed to use the following 
criteria to determine if a participant has successfully submitted AMI 
voluntary data: Submission of the first-captured data values for the 
five core clinical data elements (age; first-captured heart rate and 
systolic blood pressure measured within 2 hours of a patient presenting 
to the hospital; and first-captured troponin and creatinine values 
measured within 24 hours of a patient presenting to the hospitals), and 
six linking variables required to merge with the CMS claims data CCN, 
HIC Number, date of birth, sex, admission date, and discharge date).
    All of these data elements must be submitted for each qualifying 
AMI hospitalization as described in section III.E.5. of the proposed 
rule (81 FR 50794). If troponin was not measured in the patient within 
24 hours of presentation to the hospital, the hospital will still 
receive credit for successful data submission if all other clinical 
data elements (age, heart rate, systolic blood pressure, and 
creatinine) as well as the six linking variables are all reported in 
the submission. We recognize that some patients may have clinical signs 
or symptoms that require emergent treatment; and that in such cases 
treatment might proceed without first obtaining a troponin level. 
However

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hospitals are required to report troponin values on all patients in 
whom a troponin test was performed within the first 24 hours of 
presenting to the hospital and to indicate in their data submission 
each instance in which a troponin value was not measured and therefore 
not available for a patient.
    AMI voluntary data submission must occur within 60 days of the end 
of the most recent data collection period as described in the listing 
of reporting periods for all 5 model performance years in section 
III.E.5. of the proposed rule (81 FR 50794).
    To fulfill AMI voluntary data collection criteria for model 
performance year 1, hospitals must submit valid data on 50 percent of 
qualifying AMI hospitalizations (identified by the denominator in the 
measure authorizing tool (MAT) output). To successfully submit AMI 
voluntary data for performance years 2 through 5, hospitals must submit 
valid data for all five core clinical data elements on over 90 percent 
of qualifying AMI patients (with the exception for troponin values 
described in this section). Further details on scoring of the voluntary 
data submission are discussed in section III.E.3.e.(1) of the proposed 
rule (81 FR 50794).
    Each year, AMI model participants voluntarily submitting data for 
this measure will receive hospital-specific reports that detail 
submission results from the most recent performance period. The reports 
will include the match rate between the hospital's submitted EHR data 
and corresponding claims data, as well as the proportion of patient 
data submitted relative to all qualifying AMI admissions with all five 
core clinical data elements. As the initiative sought to test and 
reward hospitals' ability to submit data, hospitals will not be 
penalized for missing troponin values for patients in whom these values 
were not measured at the time clinical treatment was provided. If 
hospitals successfully submit the remaining four clinical data elements 
and all of the linking variables, a missing troponin value which is due 
to troponin having not been measured in that patient will not result in 
an unsuccessful submission as long as hospitals indicate that the 
troponin value was not measured and therefore not available for that 
patient. Hospitals will still be rewarded for successfully submitting 
data in these cases.
    We previously described a qualifying AMI patient in section 
III.E.4.a.(3)(iii) of the proposed rule (81 FR 50794). This description 
is important, as these patients are those for whom we seek submission 
of voluntary data from AMI model participants. We selected the 
requirement of submitting 90 percent of qualifying AMI patients' data 
for performance years 2 through 5 because this volume of cases will 
result in a high probability that we will have a national sample of AMI 
patient data representative of each hospital's patient case mix. Having 
90 percent of the data for qualifying AMI patients in performance years 
2 through 5 will enable an accurate and reliable assessment of the 
potential implementation of a Hybrid AMI mortality (NQF# 2473) measure 
that utilizes EHR data. In addition, the testing we have performed in 
hospitals' EHR data indicate that these data elements are captured in 
over 90 percent of Medicare FFS patients who are 65 years or older and 
admitted to acute care hospitals for treatment of AMI.
    We sought public comment on the proposed requirements to determine 
successful voluntary submission of AMI data, including the proposal to 
give hospitals credit for data submission if they submit all troponin 
values that were actually measured, each of the other four data 
elements, and all of the linking variables; to not penalize hospitals 
for failure to submit a troponin value if it was not measured during 
the admission; and the proposal on the specific minimum percentage 
requirements for data on the qualifying AMI patients.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters agreed with the potential value of 
hybrid measures, but expressed concern about the ability of hospitals 
to submit accurate and reliable data. Several commenters urged CMS not 
to finalize any data submission requirements beyond the first reporting 
period until hospitals and the agency have gained experience with 
measure submission. Two commenters specifically recommended the percent 
of data submitted be gradually increased over time, instead of 50 
percent in performance year 1, to 90 percent in performance year 2. One 
commenter expressed concern that hospitals that did not participate in 
the Meaningful Use Program that utilized QRDA technology would be 
disadvantaged by being required to submit clinical data in this format. 
One commenter noted that while CMS continues to conduct testing of the 
electronic specifications in a few hospitals, the QRDA format has not 
demonstrated competency, and should therefore not be included in the 
AMI episode payment model.
    Response: We are sensitive to the potential burden on hospitals of 
mapping, extracting, and reporting data elements from their EHRs. 
However, we have tested the accuracy of mapping, extracting, and 
reporting compiled data from the EHRs of four separate health systems, 
although we have not tested data reporting in QRDA format. These tests 
showed that, once instructed on the Measure Authoring Tool output, 
hospitals are able to submit accurate EHR data on nearly all of their 
admitted patients. We validated the electronically extracted data by 
comparing values identified through manual chart review. This suggests 
that hospitals will be able to extract and submit data on the subset of 
their patients admitted with AMI. We intend to require the QRDA format 
beginning in program year two in order to maintain alignment with 
requirements for electronic clinical quality measures. We will continue 
to coordinate with ONC to maintain alignment with standards and 
requirements.
    Comment: Several commenters supported the proposal to include a 
voluntary hybrid AMI mortality measure in the AMI episode payment 
model.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the inclusion of clinical data 
into the risk adjustment model for the Hybrid AMI mortality measure. 
They suggested hospitals submit additional standard laboratory data, 
including white blood cell count and albumin levels, to support this 
measure and the development of other quality measures.
    Response: We thank the commenter for their support. We sought to 
develop a model that included key variables that are clinically 
relevant, demonstrate a strong statistical association with 30-day 
mortality, and are feasible for use in a hybrid measure. We developed 
the following criteria to assess feasibility of candidate variables: 1. 
Data that are consistently obtained in the target population based on 
current clinical practice; 2. Data that are captured with a standard 
definition and recorded in a standard format; 3. Data that are entered 
in structured fields that are feasibly retrieved from current EHR 
systems. During measure development the members of the expert working 
group reviewed the entire list of variables in the National 
Cardiovascular Data Registry ACTION Registry--Get With The Guidelines 
database and selected variables that met these criteria. We then tested 
all candidate variables in multivariate regression models with 30-day 
mortality as the outcome. CMS did

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evaluate white blood cell count as one of the candidate variables. 
However it was not consistently predictive of mortality in the risk 
model and therefore was not included in the final measure. Albumin was 
not considered. We have developed two other hybrid outcome measures 
which use additional clinical data including the Hybrid Hospital-Wide 
Readmission Measure with Claims and Electronic Health Record Data (NQF 
#2879), and the Hybrid Hospital 30-day, All-cause, Risk-standardized 
Mortality Rate (RSMR) Following Acute Ischemic Stroke with Risk 
Adjustment for Stroke Severity (NQF #2877). For descriptions of these 
measures we refer readers to the FY 2016 IPPS/LTCH final rule 80 49698, 
and the FY 2017 IPPS/LTCH final rule 81 57161, respectively.
    Comment: Several commenters referred to the hybrid AMI mortality 
measure as a ``hybrid eCQM''.
    Response: We wanted to clarify the hybrid AMI mortality measure is 
a claims-based measure, and not an electronic clinically quality 
measure (eCQM). The cohort and outcome for the hybrid AMI mortality 
measure is derived from claims and not the EHR.
    Comment: One commenter recommended that CMS release the final 
specifications for the hybrid AMI mortality measure as soon as possible 
following the release of the final EPM rule. The commenter further 
recommended that CMS align the specifications of the hybrid AMI 
mortality measure as closely as possible with other electronically 
submitted CQMs available through the IQR program.
    Response: The measure specifications have been published along with 
this final rule. We refer readers to ``Core Clinical Data Elements and 
Hybrid Measures'' folder on our Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We closely aligned our development process for the hybrid AMI 
mortality measure electronic specifications with the electronic 
clinical quality measures (eCQM) development process, according to the 
MMS Blueprint. This process included a stakeholder public comment on 
the measure specifications, input from experts in the field, Bonnie 
testing, Mitre review, and VSAC review of the value sets. Additionally, 
we tested the electronic specifications in several different health 
systems, which utilized different EHRs. We aligned the electronic 
specifications with eCQMs in use by IQR and MU programs. Where 
appropriate, we harmonized the use of the value sets and logic that are 
currently used in these program measures to ease the implementation of 
the CCDE. We plan to continue these harmonization efforts with each 
annual update cycle.
    Comment: One commenter requested clarification how the hybrid AMI 
mortality measure would be validated using EHR and claims data.
    Response: The hybrid AMI mortality measures has been fully tested 
and validated in merged Medicare claims and registry data from the 
National Cardiovascular Data Registry (NCDR) ACTION Registry-Get With 
The Guidelines. The measure was endorsed by the NQF in 2014. However, 
we plan to perform additional testing as a part of measure 
reevaluation. We have not yet determined when this testing will take 
place.
    Comment: One commenter believed that CMS did not account for a 
small but important population of patients that arrive at a 
participating hospital in an unstable, critical condition by not 
excluding cardiogenic shock. The commenter noted that this population 
is at a higher risk of mortality, and thus should have separate quality 
measures that take into account the severity and complexity of their 
medical conditions.
    Response: In order to account for differences in patient mix among 
hospitals, the measures adjust for variables (for example, age, 
comorbid diseases, and indicators of patient frailty) that are 
clinically relevant and have relationships with the outcome. In the 
case of the AMI measure, we risk adjust for cardio-respiratory failure 
or shock. However, the measure's risk model does not include a risk 
variable for sepsis. A diagnosis of sepsis that occurred during the 
index AMI admission would not be used as a risk variable because we 
cannot know whether sepsis was present at the time a patient first 
presented for care or was a consequence of poor care received during 
the hospitalization. During measure development we did consider 
including sepsis as a risk variable only if it occurred in the 12 
months prior to the index admission. This variable was not consistently 
found to predict mortality in the measure cohort and, therefore, was 
not included in the final risk model.
    Comment: One commenter was supportive of using clinical data and 
claims data to create a hybrid measure, but noted combining these data 
is a laudable endeavor. They noted that determining the measure 
population using administrative data would increase the reporting 
burden on hospitals.
    Response: We acknowledge that the need to identify patients with a 
principal discharge diagnosis of AMI will be required to successfully 
map, extract, and report data for the hybrid AMI mortality measure. 
However, we believe that the added benefit of including clinical data 
in the measure's risk model outweighs the additional burden of EHR data 
extraction and reporting. Many commenters in this and previous public 
comment periods have expressed support for this approach. Additionally, 
we note that reporting of the EHR data elements is voluntary and that 
hospitals will not be penalized if they cannot or choose not to submit 
these data.
    Comment: One commenter requested CMS explore the use of 
sociodemographic factors in improving the risk adjustment for the 
hybrid AMI mortality measure.
    Response: We appreciate the commenters' concerns that socioeconomic 
factors influence patient's risk of post-discharge returns to the 
hospital for acute care. The hybrid AMI mortality measure currently 
does not include socioeconomic factors in the risk-adjustment model. We 
routinely monitor the impact of SDS on providers' differential 
performance on our outcome and payment measure.
    The NQF is currently conducting a 2-year trial, in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. This trial entails temporarily allowing inclusion of 
sociodemographic factors in the risk-adjustment approach for some 
performance measures. At the conclusion of the trial, NQF is expected 
to issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
encouraged to submit information such as analyses and interpretations 
as well as performance scores with and without sociodemographic factors 
in the risk adjustment model. Several measures developed by CMS have 
been brought to NQF since the beginning of the trial, including the AMI 
EDAC measure which was submitted to NQF in January 2016. Under the 
guidance of NQF, we are making every effort to be proactive in 
examining SDS factors in quality measures by testing SDS factors in the 
measures' risk models and making recommendations about whether or not 
to include these factors in the endorsed measure. We are still awaiting 
final recommendations from the NQF and intend to continue engaging in 
the NQF process as we consider the

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appropriateness of adjusting for SDS factors in our outcome measures. 
For more detailed information about measures in the NQF SDS trial 
period, we refer commenters to: http://www.qualityforum.org/SES_Trial_ 
Period.aspx. Furthermore, we are awaiting the findings of an ASPE 
report on SDS factors in risk-adjustment. Therefore, we are not 
currently changing our risk-adjustment methodology with respect to SDS 
factors. We will continue to consider such factors in our ongoing 
measure development and maintenance activities.
    Comment: One commenter requested CMS clarify when they would 
replace the current publically reported AMI mortality measure (NQF 
#0230) with the hybrid AMI mortality measure (NQF #2473).
    Response: We have not yet determined and timeline for replacing the 
claims-only AMI mortality measure (NQF #0230) with the hybrid AMI 
mortality measure (NQF #2473). However, we will make any changes to the 
measures used in payment programs through the notice of proposed 
rulemaking. We point out that the hybrid AMI mortality measure, similar 
to other CMS condition-specific outcome measures, requires a 3-year 
measurement period in order for a sufficient number of hospitals to 
meet the threshold of having discharged at least 25 patients with a 
principal diagnosis of AMI to be included in the measure cohort. 
Therefore, reporting measure results would require a minimum of 3 years 
of EHR data collection.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to give 
hospitals credit for data submission if they submit all troponin values 
that were actually measured, each of the other four data elements, and 
all of the linking variables; to not penalize hospitals for failure to 
submit a troponin value if it was not measured during the admission; 
and the proposal on the specific minimum percentage requirements for 
data on the qualifying AMI patients.
b. CABG Model-Specific Measure
(1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558)(MORT-
30-CABG)
(a) Background
    CABG is a common procedure associated with considerable morbidity, 
mortality, and health care spending. In 2010, the National Hospital 
Discharge Survey (NHDS) estimated that 219,000 patients underwent a 
total of 397,000 CABG procedures. Among Medicare FFS beneficiaries, 
there were 139,133 hospitalizations for isolated CABG surgery between 
July 2012 and June 2015. CABG surgeries are costly procedures that 
account for the majority of major cardiac surgeries performed 
nationally. In FY 2009, isolated CABG surgeries accounted for almost 
half (47.6 percent) of all cardiac surgery hospital admissions in 
Massachusetts. This provides an example of the frequency in which a 
CABG is performed for a patient admitted for cardiac surgery. In 2008, 
the average Medicare IPPS payment was $30,546 for CABG without valve 
replacement and $47,669 for CABG with valve replacement surgeries.
    The proposed Hospital-level 30-Day Risk-Standardized Mortality Rate 
(RSMR) following Coronary Artery Bypass Graft (CABG) Surgery (MORT-30-
CABG) (NQF# 2558) measure developed by CMS and currently implemented in 
the HIQR program, assesses hospitals' 30-day, all-cause risk-
standardized rate of mortality, which is rate of death after admission 
for a CABG procedure for patients 65 and older during a 30-day period 
that begins with the date of the index admission for the specific 
hospital; an index admission is the hospitalization to which the 
mortality outcome is attributed. The data indicate that the median 
hospital-level risk-standardized mortality rate for 2016 public 
reporting on Hospital Compare was 3.2 percent, with a range of 1.4 
percent to 8.3 percent among hospitals. The variation in these rates 
suggests that important differences in the quality of care delivered 
across hospitals exist, and that there is room for improvement.
    More details about the measure can be found in the 2016 Annual 
Updates and Specifications Report for CABG Mortality posted on the CMS 
Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The proposed MORT-30-CABG (NQF# 2558) measure was endorsed by the 
NQF in November 2014. This measure has been publicly reported on 
Hospital Compare since FY 2015 and was incorporated into the HIQR 
Program for FY 2017 (FY 2015 IPPS/LTCH final rule 79 FR 50227).
(b) Data Source
    Measure results for CABG model participants are calculated using 
Medicare Part A and Part B FFS claims submitted by all non-federal 
short-term acute care hospitals for the MORT-30-CABG (NQF# 2558) 
measure. Index admission diagnoses and in-hospital comorbidities are 
assessed using Medicare Part A claims. Additional comorbidities prior 
to the index admission are assessed as Part A inpatient, outpatient, 
and Part B office visit Medicare claims in the 12 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.
(c) Cohort
    The MORT-30-CABG (NQF# 2558) measure includes Medicare FFS 
beneficiaries, aged 65 years and older, discharged from a non-federal 
short-term acute care hospitals, Indian Health Services hospitals, and 
critical access hospitals, who received a qualifying CABG procedure, 
and with a complete claims history for the 12 months prior to admission 
and through 30 days post-procedure.
    We propose that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all hospitals in the 
CABG model. Hospital performance will only be publically reported for 
hospitals with 25 or more index admissions in the 3-year measurement 
period. The CABG model cohort would differ from the hospital cohort 
that is currently captured in the measure through the HIQR Program. 
Although performance on the measure will not be publicly reported for 
hospitals with fewer than 25 cases, such hospitals will receive 
information about their performance. We refer readers to section 
III.B.5. of this final rule for a discussion of CABG model participant 
selection. For eligible hospitalizations defined using ICD-9-CM codes, 
we refer readers to the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    In order to include a clinically coherent set of patients in the 
measure, we sought input from clinical experts regarding the inclusion 
of other concomitant cardiac and non-cardiac procedures, such as valve 
replacement and carotid endarterectomy. Adverse clinical outcomes 
following such procedures are higher than those following ``isolated'' 
CABG procedures, that is, CABG procedures performed without concomitant 
high-risk cardiac and non-cardiac procedures. Limiting the measure 
cohort to ``isolated'' CABG patients is consistent with published 
reports of CABG outcomes; therefore,

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the measure cohort considers only patients undergoing isolated CABG as 
eligible for inclusion in the measure. We defined isolated CABG 
patients as those undergoing CABG procedures without concomitant valve 
or other major cardiac, vascular or thoracic procedures. In addition, 
our clinical experts, consultants, and Technical Expert Panel (TEP) 
members agreed that an isolated CABG cohort is a clinically coherent 
cohort for quality measurement. For detailed information on the cohort 
definition, we refer readers to the 2016 Annual Updates and 
Specifications Report for CABG Mortality on the CMS Web site at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(d) Inclusion and Exclusion Criteria
    We proposed that an index admission is the hospitalization to which 
the mortality outcome is attributed. The measure includes the following 
index admissions for patients:
     Having a qualifying isolated CABG surgery during the index 
admission;
     Enrolled in Medicare FFS Part A and Part B for the 12 
months prior to the date of the index admission, and enrolled in Part A 
during the index admission; and,
     Aged 65 or over.
    Isolated CABG surgeries are defined as those CABG procedures 
performed without the following concomitant valve or other major 
cardiac, vascular, or thoracic procedures:
     Valve procedures.
     Atrial and/or ventricular septal defects.
     Congenital anomalies.
     Other open cardiac procedures.
     Heart transplants.
     Aorta or other non-cardiac arterial bypass procedures.
     Head, neck, intracranial vascular procedures.
     Other chest and thoracic procedures.
    This measure excludes the following index admissions for patients:
     With inconsistent or unknown vital status or other 
unreliable demographic (age and gender) data.
     Discharged AMA.
     For patients with more than one qualifying CABG surgery 
admission in the measurement period, the first CABG admission is 
selected for inclusion in the measure and the subsequent CABG 
admission(s) are excluded from the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the other mortality measures developed by CMS 
and implemented under the HIQR Program in accordance with section 
1886(b)(3)(B)(viii)(VIII) of the Act, as finalized in FY 2008 IPPS/LTCH 
final rule (2008 IPPS/LTCH final rule 71 FR 67960). We also note that 
the measure risk adjustment takes into account patient age, sex, and 
comorbidities to allow a fair assessment of hospital performance. The 
measure defines the patient risk factors for mortality using diagnosis 
codes collected from all patient claims 1 year prior to patient index 
hospitalization for CABG surgery. ICD-10-CM diagnosis codes on Parts A 
and B administrative claims 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 Parts A and B data 
does not mean the measure is applicable to post-acute care settings, 
only that it uses 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 HCCs. 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, sex, and comorbidities present at the time of 
admission are adjusted for differences in hospital case mix (patient 
risk factors). The measure uses the HLM statistical methodology for 
risk adjustment.
(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We proposed to calculate hospital 30-day, all-cause, risk-
standardized mortality rates (RSMR) consistent with the methodology 
used to risk standardize all readmission and mortality measures used in 
CMS hospital quality programs. Using HLM, we calculate the hospital-
level risk-standardized mortality rate following AMI hospitalization by 
producing a ratio of the number of ``predicted'' deaths (that is, the 
adjusted number of deaths at a specific hospital) to the number of 
``expected'' deaths (that is, the number of deaths if an average 
quality hospital treated the same patients) for each hospital and then 
multiplying the ratio by the national raw mortality rate. The RSMR is a 
point estimate--the best estimate of a hospital's mortality rate based 
on the hospital's case mix. For more detailed information on the 
calculation methodology we refer readers to the CMS Web site at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    A 3-year rolling performance period would be consistent with that 
used for the HIQR Program (FY 2015 IPPS/LTCH final rule 79 FR 50227). 
Section III.E.5. of the proposed rule (81 FR 50794), Form, Manner, and 
Timing of Quality Measure Data Submission, summarizes the proposed 
measure performance periods for CABG model performance years 1 through 
5. We note that improvement on the MORT-CABG-30 (NQF #2558) measure 
would be determined from the 3-year rolling performance period 
available for the year preceding the CABG model performance year as 
explained in Table 41.
    We sought comment on this proposal to include Hospital-level 30-
Day,All-Cause, Risk-Standardized Mortality Rate (RSMR) following CABG 
Surgery (NQF #0230) measure in the CABG model to assess quality 
performance.
    The EPM episodes are structured as 90-day periods with the hospital 
as the primary accountable entity, because we believe 90 days is a 
period over which hospitals have substantial ability to influence the 
quality and efficiency of the care that patients receive. We believe 
that there could be significant benefits for the quality of patient 
care from using quality measures that examine patient outcomes over a 
period that extends at least as long as the EPM episode (that is., 90 
days after discharge). In particular, we believe that this approach 
could help ensure that hospitals are held fully accountable for the 
quality of the care they deliver during the period covered by the 
bundle.
    However, as discussed in section III.E. of the proposed rule (81 FR 
50794), several of the outcome measures we proposed for these EPMs 
(MORT-30-AMI (NQF #0230), AMI excess days, and MORT-30-CABG (NQF #2558) 
assess outcomes over a 30-day period following discharge. We proposed 
the use of these existing 30-day measures, at least initially, because 
they are in wide use and have gained acceptance among hospitals and 
because the mortality measures have been reviewed and endorsed by the 
National Quality Forum.
    Nevertheless, we believe that it is appropriate to seek to adapt 
these measures or to develop new related

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measures to assess outcomes over a longer timeframe, including 
timeframes at least as long as the EPM episodes. In developing measures 
that use a longer timeframe, CMS would perform empirical analyses to 
ensure that such measures are scientifically robust and to identify 
appropriate risk-adjustment approaches. Once such measures were 
available, CMS would consider when and how to incorporate these 
measures into the EPM quality payment methodology. We invite public 
comment on refining the existing 30-day measures to extend the period 
of outcome assessment following admission for AMI or CABG surgery, 
including the length of the period that should be examined by an 
extended measure, any important considerations in developing the 
refined measures, and any factors CMS should consider in incorporating 
these measures into the EPM quality payment methodologies.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter suggested that the CABG mortality measure 
not be used in the EPM until it had been reviewed by the NQF in the 
context of the ongoing SDS trial period. The commenter supported the 
use of the CABG mortality measure if CMS includes SDS factors in the 
risk-adjustment because mortality is tied to community factors that are 
typically outside of the direct control of health care providers.
    Response: We appreciate the commenters' concerns that socioeconomic 
factors influence patient's risk of post-discharge returns to the 
hospital for acute care. The CABG mortality measure currently does not 
include socioeconomic factors in the risk-adjustment model. We 
routinely monitor the impact of SDS on providers' differential 
performance on our outcome and payment measure.
    The NQF is currently conducting a 2-year trial, in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is 
appropriate. This trial entails temporarily allowing inclusion of 
sociodemographic factors in the risk-adjustment approach for some 
performance measures. At the conclusion of the trial, NQF is expected 
to issue recommendations on future permanent inclusion of 
sociodemographic factors. During the trial, measure developers are 
encouraged to submit information such as analyses and interpretations 
as well as performance scores with and without sociodemographic factors 
in the risk adjustment model. Although the CABG mortality measure was 
not included in the SDS trial period, several measures developed by CMS 
have been brought to NQF since the beginning of the trial, including 
several mortality. Under the guidance of NQF, we are making every 
effort to be proactive in examining SDS factors in quality measures by 
testing SDS factors in the measures' risk models and making 
recommendations about whether or not to include these factors in the 
endorsed measure. We are still awaiting final recommendations from the 
NQF and intend to continue engaging in the NQF process as we consider 
the appropriateness of adjusting for SDS factors in our outcome 
measures. For more detailed information about measures in the NQF SDS 
trial period, we refer commenters to: http://www.qualityforum.org/SES_Trial_Period.aspx. Furthermore, we are awaiting the findings of an 
ASPE report on SDS factors in risk-adjustment. Therefore, we are not 
currently changing our risk-adjustment methodology with respect to SDS 
factors. We will continue to consider such factors in our ongoing 
measure development and maintenance activities.
    Comment: Once commenter expressed agreement with the decision not 
to include the CABG readmission measure in this EPM stating that 
incentives are already in place for hospitals to lower excess 
readmission rates and it would be duplicative to hold hospitals 
accountable to these measures.
    Response: We thank the commenter for their support.
    Comment: Several commenters suggested alternative measures be used 
in the CABG EPM. One commenter suggested that CMS use the CABG 
Composite Score suggesting that it is more comprehensive because it is 
based on several outcomes, not solely mortality and is used by most 
cardiothoracic surgery programs. They also note that there is more 
variation among hospitals in the Composite Score compared with a 
mortality measure. Another commenter suggested that CMS use measures 
developed by the Society of Thoracic Surgeon (STS) for benchmarking 
instead of the CMS measure.
    Response: We agree with commenters that this is a comprehensive 
NQF-endorsed composite measure with strong potential to meaningfully 
improve quality. The STS CABG Composite Score measures surgical 
performance based on a combination of 11 NQF-endorsed process and 
outcomes measures, grouped into four domains. We are incorporating the 
use of the CABG Composite Score performance measure (NQF #0696) as a 
voluntary option weighted at 10 percent. By including this measure in 
the CABG EPM, we are reducing proposed HCAHPS and mortality weights by 
5 percent each for those hospitals choosing to voluntary submit this 
data. We intend to address the weighting and the use of the actual 
measure score in the next EPM rulemaking cycle. For more information 
about the STS Composite Score, we refer readers here: http://www.sts.org/sts-public-reporting-online/cabg-composite-score.
    Comment: One commenter expressed concern 75 percent of a hospital's 
quality score for CABG based upon 30-day hospital mortality places a 
heavy reliance on only this quality measure. This commenter was also 
concerned that with this weighing propose, hospitals with few CABG 
cases would be further disadvantaged since there will be less data used 
to calculate the hospital's quality score.
    Response: To ensure hospitals have enough cases to produce a valid 
quality score, the CABG mortality measure uses 3 years of claims data 
to calculate the measure. Hospitals must have at least 25 qualifying 
index admissions within the 3-year measurement period to calculate and 
publically report a measure result. We do not believe these measures 
disadvantage smaller volume hospitals. We have found that hospitals 
with few cases tend to have measure results that are close to the 
national average hospital rate and are therefore rarely identified as 
poor performing outliers.
    Comment: One commenter disagreed with the proposal to use the CABG 
mortality measure in the CABG EPM because this measure is used in the 
Hospital Inpatient Quality Reporting program (``HIQR''). The commenter 
suggested that the CABG mortality measure would do little to 
characterize the quality performance beyond what is already reported 
through existing CMS programs. The commenter suggested that CMS develop 
a new measure of complications following CABG surgery.
    Response: We disagree with the suggestion that including the CABG 
mortality measure would do little to characterize the quality 
performance beyond what is already reported through the existing CMS 
programs. Mortality is a very serious outcome for AMI and CABG care and 
is one that EPM model participants should manage to avoid under the AMI 
and CABG models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
incorporate the STS CABG Composite Score measure (NQF

[[Page 388]]

#0696) from the STS Data Registry as a voluntary option weighted at 10 
percent. The measures that were proposed, along with these STS CABG 
measures are highly relevant to the clinical conditions that are the 
focus of the model. To use other measures would increase administrative 
burden on participant hospitals which we do not believe would be 
appropriate for this model. Even though the measures are used in other 
CMS programs, we do not believe their use in this model leads to 
inappropriate financial risk because they are relevant measures of 
patient experience and outcomes.
c. SHFFT Model-Specific Measures
    (1) Hospital-Level Risk-Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total 
Knee Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications)
(a) 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.\107\ 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 \108\ and 1.6 percent in Medicare 
patients undergoing TKA after 2 years of follow up.\109\ Two studies 
reported 90-day death rates following THA at 0.7 percent \110\ and 2.7 
percent, respectively.\111\ Reported rates for pulmonary embolism 
following TKA range from 0.5 percent to 0.9 
percent.112 113 114 Reported rates for septicemia range from 
0.1 percent, during the index admission \115\ to 0.3 percent, 90-days 
following discharge for primary TKA.\116\ Rates for bleeding and 
hematoma following TKA have been reported at 0.94 percent \117\ to 1.7 
percent.\118\ Combined, THA and TKA procedures account for the largest 
payments for procedures under Medicare.\119\ 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.
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    \107\ 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.
    \108\ 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.
    \109\ 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.
    \110\ 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.
    \111\ 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.
    \112\ 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.
    \113\ 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.
    \114\ 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.
    \115\ 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.
    \116\ 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.
    \117\ 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.
    \118\ 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.
    \119\ 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 HIQR and HVBP Programs and the CJR model, 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,\120\ 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 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 there is still room for quality improvement.\121\
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    \120\ 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 16, 2015, page 78.
    \121\ 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.
---------------------------------------------------------------------------

(b) Data Sources
    Measure results are calculated using Medicare Part A and Part B FFS 
claims

[[Page 389]]

submitted by all non-federal acute care hospitals. 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.
(c) Cohort
    The Hip/Knee Complications (NQF #1550) measure 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. The following 24 codes in ICD-10 
correspond to these two ICD-9-CM codes.
     ICD-9 code 81.51 (Total Hip Replacement) = ICD-10 codes 
0SR90J9, 0SR90JA, 0SR90JZ, 0SRB0J9, 0SRB0JA, 0SRB0JZ.
     ICD-9 code 81.54 (Total Knee Replacement) = ICD-10 codes 
0SRC07Z, 0SRC0JZ, 0SRC0KZ, 0SRD07Z, 0SRD0JZ, 0SRD0KZ, 0SRT07Z, 0SRT0JZ, 
0SRT0KZ, 0SRU07Z, 0SRU0JZ, 0SRU0KZ, 0SRV07Z, 0SRV0JZ, 0SRV0KZ, 0SRW07Z, 
0SRW0JZ, 0SRW0KZ.
    We proposed that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all hospitals included 
in the SHFFT model. Hospital performance will only be publicly reported 
for hospitals with 25 or more index admissions in the 3-year 
measurement period. The SHFFT model participant hospital cohort would 
differ from the hospital cohort that is currently captured in the 
measure through the HIQR Program. Although performance on the measure 
will not be publicly reported for hospitals with fewer than 25 cases, 
such hospital will receive information about their performance. We 
refer readers to section III.B.5. of this final rule for discussion of 
the selection of participants for the SHFFT model.
(d) Inclusion and Exclusion Criteria
    An index admission is the hospitalization to which the complication 
outcome is attributed. We note that for purposes of the EPMs where we 
need to identify episodes that are included in the EPMs, we use the 
term anchor hospitalization to identify hospitalizations that initiate 
EPM episodes for beneficiaries whose care is included in the EPMs. In 
describing the quality measures themselves in detail in section 
III.E.4. of the proposed rule (81 FR 50794), we use the term index 
hospitalization to identify hospitalizations of beneficiaries whose 
outcomes are included in the measures. Thus, anchor hospitalizations 
and index hospitalizations would have varying degrees of overlap 
depending on the specific quality measure. The MS-DRGs for the anchor 
or chained hospitalizations included in the SHFFT model will identify 
beneficiaries that do not overlap with the index hospitalizations used 
in the SHFFT model measures, since the SHFFT model measures use the 
elective THA/TKA cases as proxies for hip or femur fracture cases. 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.
     Have 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 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 admission from being 
mutually independent. Therefore only one index admission is selected to 
maintain measure integrity.
    We note that the Hip/Knee Complications (NQF #1550) measure 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-DRGs 469 and 470, which includes partial hip 
arthroplasty procedures, use of this measure will still provide strong 
incentives 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. 
Fiscal year 2014 claims data indicate that among inpatient claims with 
MS-DRG 469 or 470, partial hip arthroplasty (ICD-9-CM procedure code: 
81.52) accounted for 12 percent, while Total Hip Replacement (ICD-9 
code: 81.51) and total knee replacement (ICD-9 code: 81.54) accounted 
for 87 percent (80 FR 73300 and 73474). We also note that the same 
surgeons and care teams frequently perform both procedures. Therefore, 
quality improvement efforts initiated in response to the Hip/Knee 
Complications (NQF #1550) measure are likely to benefit patients 
undergoing similar elective procedures, such as partial hip 
arthroplasty and revision THA/TKA procedures, and possibly even non-
elective lower extremity hip fracture surgery as described in section 
III.E.2.d. of the proposed rule (81 FR 50794).

[[Page 390]]

(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the HIQR Program and 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 HCCs.\122\ The HCCs 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=1228772782693). We note that the measure uses ICD-9-CM diagnosis codes on Parts 
A and B administrative claims for the year prior to and including the 
index admission. The ICD-9-CM codes are used to inform the risk 
prediction for each patient. Diagnostic codes from post-acute care 
settings are utilized for the measure calculation, 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 administrative claims 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 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.
---------------------------------------------------------------------------

    \122\ 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.
---------------------------------------------------------------------------

(f) 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 Program (FY 2015 IPPS/LTCH final rule 79 FR 50208 and 
50209). Section III.E.5. of this final rule summarizes measure 
performance periods for SHFFT model years 1 through 5. We note that 
improvement on the Hip/Knee Complications (NQF #1550) measure would be 
determined from the immediate 3-year rolling performance period 
available for the year preceding the SHFFT model performance year as 
explained in Table 44.
    We sought comment on this proposal to assess quality performance 
for SHFFT model participants 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.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters opposed the elective THA/TKA 
complications measure because the measure's cohort does not align with 
the SHFFT model cohort. Commenters noted that the measure's cohorts do 
not include the patients in the SHFFT model population. Commenters 
requested that CMS provide more justification for including the 
measures in the SHFFT model. Commenters suggested that because the 
measures exclude hip fracture patients, they would provide limited 
insight on the quality of care provided to the patients included in the 
SHFFT model. Commenters raised specific concerns about a lack of 
testing of the measures in non-elective procedures and the potential 
for the rates and types of complications to differ between elective and 
non-elective procedure groups. Commenters noted that patients with hip 
fractures have higher mortality, complication, and readmission rates 
and are generally sicker with multiple comorbidities. As a result, 
patient recovery and rehabilitation pathways may be different for hip 
fracture as compared to patients who have elective procedures. 
Additionally, commenters noted that a hospital's volume of hip fracture 
patients is often much smaller than the volume of elective surgery 
patients causing concern that the use of the measures will unfairly 
assess quality at those hospitals with less arthroplasty experience.
    Response: While we recognize that none of the proposed measures 
specifically target the care of SHFFT model beneficiaries, we provided 
the following rationale in the proposed rule. The proposed measures are 
the same as those used for the CJR model because SHFFT model episodes 
will be tested along with the LEJR episodes in the CJR model (80 FR 
73501 and 73507) at mostly the same hospitals. These measures exclude 
patients with hip and pelvic fractures. However, we expect that many of 
the physicians and other providers collaborating with participant 
hospitals in the SHFFT and CJR models will be the same, such that 
certain care pathways and episode efficiencies may be coordinated for 
SHFFT and CJR model beneficiaries regardless of the model, potentially 
resulting in quality improvement for beneficiaries in both models. 
Therefore, while the quality measures do not specifically assess care 
for hip fracture patients, they will incentivize quality improvements 
that also improve care for hip fracture patients. In addition, as 
discussed further in III.E.3.e.(3) of this final rule, we propose to 
calculate a hospital-level composite quality score that would apply to 
episode payment for both the CJR and SHFFT models, consistent with our 
proposal of the same measures for the two models. We believe that due 
to the inclusion of beneficiaries with hip fracture in both the CJR and 
SHFFT models and our desire to streamline EPM participant measure 
reporting, as well as the focus of both models on major lower extremity 
orthopedic surgery, the same set of quality measures can be used for 
both models to incentivize quality improvement in lower extremity 
orthopedic surgery care and episode efficiency. We are also considering 
future measure development focused specifically on hip and femur 
fracture patients.
    We considered an alternative approach to the required quality 
measures for the SHFFT model given

[[Page 391]]

that the proposed measures do not specifically target the SHFFT model 
beneficiaries. This alternative approach would not account for any hip-
specific measures (such as, Hospital-level RSCR following elective 
primary THA and/or TKA (NQF #1550) (Hip/Knee Complications) and would 
instead only measure patient experience through the HCAHPS Survey (NQF 
#0166). Although there may be some rationale for excluding measures 
that do not specifically target SHFFT model beneficiaries, we do not 
propose this approach to SHFFT model quality measures because we 
believe that it is critical to include a measure of both clinical and 
patient experience outcomes in the setting of lower extremity 
orthopedic surgery episodes. Additionally, we believe that using 
quality measures for SHFFT model episodes that do not align with those 
in the CJR model could generate confusion at CJR model participant 
hospitals where we propose that the SHFFT model be tested as discussed 
in III.B.4. of this final rule.
    Comment: One commenter expressed support for our proposed approach 
of using the same measures in the CJR and SHFFT models given the lack 
of measures specific to the hip fracture population.
    Response: We thank the commenter for their support.
    Comment: Several commenters suggested that we develop measures that 
are specific to the SHFFT model population.
    Response: We thank the commenter for this suggestion and are 
considering future measure development focused specifically on hip and 
femur fracture patients.
    Comment: One commenter suggested that the measures proposed do not 
assess what matters most to patients, such as whether patient's or 
providers' goals were met by the surgery performed.
    Response: We have incorporated the THA/TKA patient-reported 
outcome-based data submission (henceforth referred to as ``THA/TKA 
voluntary data'') into the SHFFT model. The 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 joint replacement episodes, as well as provide them 
with the potential for greater financial benefit from improved episode 
efficiencies.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
assess quality performance for SHFFT model participants 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.
(2) Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty

III. (a) 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/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.123 124 125 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 would 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.
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    \123\ 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.
    \124\ 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.
    \125\ 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.
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    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 
implemented the initial data collection for this measure initially in 
the CJR model in order to test and resolve these measurement 
development issues through the collection of THA and TKA patient-
reported outcome data. We proposed to test SHFFT model episodes in 
mainly the same hospitals as the CJR model as discussed in 
sectionIII.B.4. of the proposed rule (81 FR 50794). We note that 
approximately 50 hospitals currently excluded from CJR model 
participation because they are testing BPCI LEJR episodes would be 
included in the SHFFT model. Access to this data through the SHFFT and 
CJR models 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.

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     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 that is already underway 
in most SHFFT model participants who are also participants in the CJR 
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 nationally 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 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 proposed to seek and reward 
voluntary participation in submission of THA/TKA patient-reported 
outcome-based measure data as outlined in section III.E.4.c.(2)(viii) 
of the proposed rule (81 FR 50794). 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, 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.
(b) Data Sources
    As previously discussed, this measure is under development, and we 
proposed to reward SHFFT model participants 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 proposed using a variety of data sources for measure 
development. We anticipate using the following data sources are:
     Patient-reported data.
     Administrative claims-based data.
     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 proposed to request that 
SHFFT model participants provide administrative claims-based data 
whenever possible, in order to minimize burden on patients, providers, 
and hospitals. Additionally, we proposed to request that SHFFT model 
participants submit either hospital documentation, chart abstraction, 
or abstraction from the electronic health records. We proposed to 
request submission of the following data elements as finalized in the 
CJR model final rule (80 FR 73494 through 73495):
     Pre-operative Assessments (to be collected between 90 and 
0 days prior to THA/TKA procedure):
    ++ Date of Birth.
    ++ Race and Ethnicity.
    ++ Date of admission to anchor hospitalization.
    ++ Date of eligible THA/TKA procedure.
    ++ Unique Identifier (Medicare Health Insurance Claim Number).
    ++ Hip-specific PROM Instrument for THA Procedures.
    Either VR-12 or PROMIS-Global [collected pre-operatively (90 to 0 
days prior to the THA procedure)], the revised list of risk variables 
[Table 39, collected only pre-operatively (90 to 0 days prior to the 
THA procedure)], AND either (A) the HOOS Jr. (6 items total) [collected 
pre-operatively (90 to 0 days prior to the THA procedure)] or (B) the 
original HOOS Pain Subscale (10 items), AND the original HOOS Function, 
Daily Living Subscale (17 items, for a total of 27 items) [collected 
pre-operatively (90 to 0 days prior to the THA procedure).
    ++ Knee-specific PROM instrument for TKA procedures.
    Either (A) the HOOS Jr. (6 items total) [collected both pre-
operatively (90 to 0 days prior to the THA procedure) and post-
operatively (270 to 365 days after the THA procedure] or (B) the 
original HOOS Pain Subscale (10 items), AND the original HOOS Function, 
Daily Living Subscale (17 items, for a total of 27 items) [collected 
both pre-operatively (90 to 0 days prior to the THA procedure) and 
post-operatively (270 to 365 days after the THA procedure].
    ++ Body Mass Index (or height in cm and weight in kg).
    ++ Pre-operative use of narcotics.
    ++ Patient-Reported Pain in Non-operative Lower Extremity Joint.
    ++ Patient-Reported Back Pain (Oswestry Index question).
    ++ Patient-Reported Health Literacy
     Post-operative Assessments (To be collected between 270 
and 365 days following THA/TKA procedure):
    ++ Date of admission to anchor hospitalization.
    ++ Date of eligible THA/TKA procedure.
    ++ Medicare Health Insurance Claim Number (Unique Identifier).
    ++ Generic PROM Instrument for THA and TKA Procedures.
    ++ Knee-Specific PROM Instrument for TKA Procedures.
    Either VR-12 or PROMIS-Global [collected post-operatively (270 to 
365 days after the TKA procedure)], AND either (A) the KOOS Jr. (7 
items total) [collected post-operatively (270 to 365 days after the TKA 
procedure)] OR (B) the original KOOS Stiffness Subscale (2 items), AND 
the original KOOS Pain Subscale (9 items) AND the original KOOS 
Function, Daily Living Subscale (17 items, for a total of 28 items) 
collected post-operatively (270 to 365 days after the TKA procedure)].
    ++ Hip-Specific PROM Instrument for THA Procedures.
    Either VR-12 or PROMIS-Global [collected post-operatively (270 to 
365 days after the THA procedure], the revised list of risk variables 
[Table 39, collected only pre-operatively (90 to 0

[[Page 393]]

days prior to the THA procedure)], AND either (A) the HOOS Jr. (6 items 
total) [collected post-operatively (270 to 365 days after the THA 
procedure] or (B) the original HOOS Pain Subscale (10 items), AND the 
original HOOS Function, Daily Living Subscale (17 items, for a total of 
27 items) [collected post-operatively (270 to 365 days after the THA 
procedure)].
    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, we intend 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-reported outcomes like those previously 
listed (that is, pain, mobility, and quality of life).
    In accordance with, and to the extent permitted by, the HIPAA 
Privacy Rule and other applicable law, we proposed to request that 
participants submit 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 proposed 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 successful submission determination for use in 
assigning the SHFFT composite quality score as described in section 
III.E.3.e.(3). of this final rule(or validated subscales or abbreviated 
versions of these instruments). We believe that voluntary participation 
in the submission of THA/TKA patient-reported outcome-based measure 
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 SHFFT model 
participants to voluntarily submit.
(c) 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. The THA/TKA patient-reported outcome-based measure 
cohort is harmonized with the Hip/Knee Complications (NQF #1550) 
measure and with the cohort definition in the CJR model final rule (80 
FR 73477). THA and TKA patient-reported outcomes will be assessed 
separately but may be combined into a single composite measure for 
reporting.
(d) 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 infeasible 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.
(e) 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 TEP 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.
(f) 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.\126\
---------------------------------------------------------------------------

    \126\ 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.
---------------------------------------------------------------------------

(g) Calculating the Risk-Standardized Rate
    We note that the approach to reporting this measure(s) has yet to 
be

[[Page 394]]

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.
(h) Performance Period for Successful Submission of THA/TKA Patient-
Reported-Outcome-Based Voluntary Data
    We proposed defining data reporting performance periods for each 
performance year of the SHFFT model as outlined in Table 40. 
Performance periods for voluntary reporting of THA/TKA patient-reported 
outcome-based measure data are those timeframes in which a hospital 
admission occurs for an eligible THA/TKA voluntary data submission 
procedure. Data submitted for the first SHFFT model performance year 
would be for cases that fulfill the measure specifications described in 
section III.E.4.c.(2)(i) of the proposed rule (81 FR 50794), and would 
be restricted to the pre-operative data elements on cases performed 
between September 1, 2016 and June 30, 2017. We note that SHFFT model 
participants generally would have the opportunity for voluntary data 
submission on cases performed in this timeframe through the hospitals' 
participation in the CJR model, which uses the same timeframe for 
voluntary submission of pre-operative data elements on cases. 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. For SHFFT 
model performance year 2, THA/TKA voluntary data reporting would be 10 
months of post-operative data for cases performed between September 1, 
2016 and June 30, 2017, and 12 months of pre-operative data for cases 
performed between July 1, 2017 and June 30, 2018. For SHFFT model 
performance year 3 and subsequent years of the model, the performance 
periods for submission of voluntary data will consist of 12-month time 
periods.

     Table 40--Duration of Performance Periods for Pre- and Post-Operative THA/TKA Voluntary Data Submission
----------------------------------------------------------------------------------------------------------------
                                                                                            Requirements for
                                         Duration of           Patient population          successful THA/TKA
   SHFFT model performance year       performance period      eligible for THA/TKA     voluntary data submission
                                                            voluntary data submission              *
----------------------------------------------------------------------------------------------------------------
2017 Performance Year 1...........  10 months............  All patients undergoing      Submit PRE-
                                                            elective primary THA/TKA    operative data on
                                                            procedures performed        primary elective THA/TKA
                                                            between September 1, 2016   procedures for >=60% or
                                                            and June 30, 2017.          >=75 procedures
                                                                                        performed between
                                                                                        September 1, 2016 and
                                                                                        June 30, 2017.
2018 Performance Year 2...........  22 months............  All patients undergoing      Submit POST-
                                                            elective primary THA/TKA    operative data on
                                                            procedures performed        primary elective THA/TKA
                                                            between September 1, 2016   procedures for >=60% or
                                                            and June 30, 2018.          >=75 procedures
                                                                                        performed between
                                                                                        September 1, 2016 and
                                                                                        June 30, 2017.
                                                                                        Submit PRE-
                                                                                        operative data on
                                                                                        primary elective THA/TKA
                                                                                        procedures for >=70% or
                                                                                        >=100 procedures
                                                                                        performed between July
                                                                                        1, 2017 and June 30,
                                                                                        2018.
2019 Performance Year 3...........  24 months............  All patients undergoing      Submit POST-
                                                            elective primary THA/TKA    operative data on
                                                            procedures performed        primary elective THA/TKA
                                                            between July 1, 2017 and    procedures for >=70% or
                                                            June 30, 2019.              >=100 procedures
                                                                                        performed between July
                                                                                        1, 2017 and June 30,
                                                                                        2018.
                                                                                        Submit PRE-
                                                                                        operative data on
                                                                                        primary elective THA/TKA
                                                                                        procedures for >=80% or
                                                                                        >=200 procedures
                                                                                        performed between July
                                                                                        1, 2018 and June 30,
                                                                                        2019.
2020 Performance Year 4...........  24 months............  All patients undergoing      Submit POST-
                                                            elective primary THA/TKA    operative data on
                                                            procedures performed        primary elective THA/TKA
                                                            between July 1, 2018 and    procedures for >=80% or
                                                            June 30, 2020.              >=200 procedures
                                                                                        performed between July
                                                                                        1, 2018 and June 30,
                                                                                        2019.
                                                                                        Submit PRE-
                                                                                        operative data on
                                                                                        primary elective THA/TKA
                                                                                        procedures for >=80% or
                                                                                        >=200 procedures
                                                                                        performed between July
                                                                                        1, 2019 and June 30,
                                                                                        2020.
2021 Performance Year 5...........  24 months............  All patients undergoing      Submit POST-
                                                            elective primary THA/TKA    operative data on
                                                            procedures performed        primary elective THA/TKA
                                                            between July 1, 2019 and    procedures for >=80% or
                                                            June 30, 2021.              >=200 procedures
                                                                                        performed between July
                                                                                        1, 2019 and June 30,
                                                                                        2020.
                                                                                        Submit PRE-
                                                                                        operative data on
                                                                                        primary elective THA/TKA
                                                                                        procedures for >=80% or
                                                                                        >=200 procedures
                                                                                        performed between July
                                                                                        1, 2020 and June 30,
                                                                                        2021.
----------------------------------------------------------------------------------------------------------------

    The proposed performance periods would enable SHFFT model 
participants to receive points toward the SHFFT model composite quality 
score starting in performance year 1, 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 1 year after surgery. We emphasize that SHFFT model 
participants that are also participating

[[Page 395]]

in the CJR model do not need to submit data twice to satisfy the 
successful submission requirements of both models. If those hospitals 
successfully submit voluntary data for the CJR model they will be 
credited with successful submission under the SHFFT model.
    We sought comment on our proposed measure reporting periods for the 
performance years of the SHFFT model.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter expressed support for our proposal to assess 
patient-reported functional status before surgery and again one year 
after surgery as a mechanism to provide insight into the effectiveness 
of these procedures.
    Response: We thank the commenter for their support.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to the 
measure reporting periods for the performance years of the SHFFT model. 
The performance periods will enable SHFFT model participants to receive 
points toward the SHFFT model composite quality score starting in 
performance year 1, 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 1 year after surgery.
(i) Requirements for Successful Submission of THA/TKA Patient-Reported-
Outcome-Based Voluntary Data
    In order for CMS to assign points in the SHFFT model composite 
quality score for successful participant submission of 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 has successfully submitted THA/TKA voluntary data. We 
note that successful THA/TKA voluntary data submission requires 
completion of all of the following:
     Submission of the data elements listed in section 
III.E.4.c.(2)(ii) of the proposed rule (81 FR 50794).
     Data elements listed in section III.E.4.c.(2)(ii) of this 
final rule must be submitted on at least 80 percent of their eligible 
elective primary THA/TKA patients.
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent data collection period.
    To successfully submit THA/TKA voluntary data for performance years 
1 through 5, SHFFT model hospitals must submit both pre-operative and 
post-operative patient reported outcome data on an increasing 
proportion of eligible elective primary THA/TKA patients over the 
performance years as described in Table 29 of the proposed rule (81 FR 
50794). Performance periods for which we proposed to have THA/TKA 
voluntary data submitted are displayed in Table 29 of the proposed rule 
(81 FR 50794). Table 29 also summarizes the performance periods for 
pre-operative and post-operative THA/TKA voluntary data. Finally, SHFFT 
model hospitals volunteering to submit THA/TKA data would 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.E.4.c.(2)(iii) of the proposed rule (81 FR 50794). This description 
is important as these patients are those in which we sought submission 
of voluntary data. We also selected the requirement of submitting an 
increasing percent of eligible elective primary THA/TKA patients' data 
starting at 60 percent in performance year 1 and reaching 80 percent by 
performance years 4 and 5 because this volume of cases would 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 at least 80 percent of the eligible elective primary THA/TKA 
patients would 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. 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 in SHFFT model 
performance year 4 and beyond 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.
    The proposal for voluntary submission of THA/TKA data is included 
in Sec.  512.413(b). We sought public comment of these requirements to 
determine successful voluntary submission of THA/TKA data. We also 
sought comment specifically on the requirement for data collection on 
an increasing percentage of eligible patients starting with at least 60 
percent in SHFFT model performance year 1 and increasing to 80 percent 
of the eligible elective primary THA/TKA patients by SHFFT model 
performance year 4.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter expressed support of our proposal to 
incentivize SHFFT model participants who submit PRO data.
    Response: We thank the commenter for their support.
    Comment: Several commenters expressed concern that the instruments 
used for the proposed Total Hip Arthroplasty (THA)/Total Knee 
Arthroplasty (TKA) voluntary patient-reported outcome (PRO) measure had 
not been validated in hip fracture patients, specifically the Hip 
disability and Osteoarthritis Outcome Score (HOOS), JR.
    Response: The purpose of the voluntary PRO data collection is to 
collect the data required to develop a future PRO-based performance 
measure that will assess hospital quality of care for patients 
undergoing elective primary THA/TKA procedures. Because only patients 
with elective primary THA/TKA procedures will complete these survey 
instruments, there is no need to assess their validity in hip fracture 
patients. Although we plan to develop a PRO-based measure that excludes 
patients with fracture-related THA/TKA, we believe quality improvement 
efforts initiated in response to the future measure 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.
    Comment: Several commenters suggested that hospitals will not be 
able collect PRO data on hip fracture patients

[[Page 396]]

prior to the procedure because hip fractures are acute and 
unanticipated events.
    Response: The PRO data will be collected only for patients 
undergoing elective THA/TKA procedures within hospitals participating 
in the SHFFT model and not for hip fracture patients.
    Comment: One commenter expressed concern that the proposal that 
hospitals seeking credit for voluntary submission of PRO data need only 
submit data on 80 percent of eligible elective primary THA/TKA patients 
could cause hospitals to report data only on those patients who had 
positive outcomes. The commenter requested that CMS raise the 
threshold.
    Response: We appreciate the commenter's suggestion to increase the 
successful criterion based upon the concern that lowering the 
successful criterion (that is, the patient-reported outcome instrument 
response and risk variable submission rates required for successful 
participation) may produce biased data that are not generalizable to 
all patients undergoing elective primary THA/TKA procedures at a given 
hospital. We refer the commenter to our response to this concern in the 
CJR model final rule (80 FR 73499-73500).
    Comment: One commenter suggested that we consider removing the 
Oswestry Index from the list of required variables to be submitted with 
pre-operative PRO data. The commenter suggested that the Oswestry Index 
is lengthy and burdensome to complete and is not relevant for hip and 
knee surgery.
    Response: We note that a joint statement from multiple surgical 
specialty societies received during the public comment of the CJR Model 
Proposed Rule included back pain as a prioritized risk variable for the 
voluntary PRO and risk variable data collection [cite final rule (80 FR 
73496) and Ayers]. The commenter noted that the Oswestry Index requires 
responses to a lengthy set of questions. To minimize data collection 
burden, we have included a single question from the Oswestry Index to 
capture patient-reported back pain: My BACK PAIN at the moment is 
(none, very mild, moderate, fairly severe, very severe, worst 
imaginable).\127\
---------------------------------------------------------------------------

    \127\ Fairbank JC, Pynsent PB. The Oswestry, Disability Index. 
Spine 2000 Nov 15;25(22):2940-52
---------------------------------------------------------------------------

    Comment: One commenter suggested that we reduce the number of 
responses required to satisfy the HOOS and KOOS completion rate.
    Response: In response to the commenter's concern regarding the 
burden of PRO data collection, we have limited the number of PRO survey 
data elements to a minimum of 16 or 17 questions, depending upon 
whether the patient is undergoing a THA or TKA procedure, plus the 
additional risk variable questions, which CMS believes is a reasonable 
burden for elective procedures intended solely for improving pain and 
function. In addition, comments received during the public comment of 
the CJR Model Proposed Rule indicate that high patient-reported outcome 
data collection rates are feasible. For example, a commenter shared 
that its institution reported a reliable 85 percent response rate for 
its PRO data collection (80 FR 73500).
    Comment: Several commenters expressed concerns about hospitals' 
ability to collect post-operative PRO data one year after surgery. One 
concern was about the difficulty of locating patients due to the 
possibility of a beneficiary's death, incapacity, a move, or an 
unwillingness to participate in a survey. One commenter suggested CMS 
shorten the timeframe for assessing the PROs to 6 months and that CMS 
provide a file of CJR/SHFFT patients who are deceased at the start of 
the post-operative data collection period in order to avoid mailing 
reminders or surveys to the families of deceased beneficiaries. One 
commenter suggested extending proposed timing of PRO assessment beyond 
365 days in case patients do not return to their provider within a year 
of surgery.
    Response: The PRO data will be collected only for patients 
undergoing elective THA/TKA procedures within hospitals participating 
in the SHFFT model and not for hip fracture patients. The collection 
time window of 270 to 365 days for post-operative PRO data was 
specified in conjunction with our TEP and based on recovery 
trajectories for primary elective THA/TKA patients. Because experts and 
stakeholders have identified this window as ideal for capturing PROs, 
we encourage hospitals to develop strategies to collect data within the 
time window, such as mailing surveys to patients well before they 
return for their one-year follow up visit.
    Comment: One commenter suggested that PRO performance measures 
should be used to assess quality of post-acute care services as well as 
acute care hospitals.
    Response: We thank the commenter for their suggestion. We will 
consider this feedback during ongoing measure evaluation.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for 
voluntary submission of THA/TKA data as included in Sec.  512.413(b). 
We are also finalizing these requirements for data collection on an 
increasing percentage of eligible patients starting with at least 60 
percent in SHFFT model performance year 1 and increasing to 80 percent 
of the eligible elective primary THA/TKA patients by SHFFT model 
performance year 4.
d. Measure Used for All EPMs
(1) Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey (NQF #0166)
(a) 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 
(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 (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

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items report patients' overall rating of the hospital, and whether they 
would recommend the hospital to family and friends. We proposed to 
adopt a measure in the EPMs that uses HCAHPS survey data to assess 
quality performance and capture patient experience of care.
(b) Data Sources
    The HCAHPS Survey is administered to a random sample of adult 
inpatients between 48 hours and 6 weeks after discharge. 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 as 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.)
(c) Cohort
    Hospitals, or their survey vendors, submit HCAHPS data in calendar 
quarters (3 months). Consistent with other quality reporting programs, 
we proposed 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).
(d) 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 1 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.
(e) 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 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, 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:
     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.
(f) HCAHPS Scoring
    Regarding the HCAHPS Survey (NQF #0166) measure, we identified the 
methodology used to assess hospitals in the HIQR Program as reasonable 
for use in the EPMs since this is a survey that many hospitals and 
patients are familiar with. In determining HCAHPS performance, we 
proposed to utilize the HCAHPS Linear Mean Roll-up (HLMR) score. The 
HLMR summarizes performance across 10 of the 11 publicly reported 
HCAHPS measures for IPPS hospitals with 100 or more completed HCAHPS 
surveys in a 4-quarter period. All of the publicly reported measures 
are included except for how well hospital staff helps patients manage 
pain since revisions are under consideration for that measure. The HLMR 
is calculated by taking the average of the linear mean scores (LMS) for 
each of the 10 publicly reported HCAHPS measures. We note that the HLMR 
is not current publicly reported but may be calculated using the LMS, 
which are publicly reported in the Patient Survey Results in the 
Hospital Compare downloadable database found on Data.Medicare.gov at 
https://data.medicare.gov/data/hospital-compare?sort=relevance&tag=patient%20survey%20results. 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

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Technical Notes, at http://www.hcahpsonline.org/StarRatings.aspx.
    We proposed that EPM participants must have at least 100 completed 
HCAHPS surveys over a given 4-quarter period to be evaluated on HCAHPS 
for the EPMs. The responses to the survey items used in each of the 10 
HCAHPS measures described previously are combined and converted to a 0 
to 100 linear-scaled score as follows:
     ``Never'' = 0; ``Sometimes'' = 33\1/3\; ``Usually'' = 
66\2/3\; and ``Always'' = 100 (For HCAHPS Survey items 1-9, 11, 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 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 linear-scaled scores are then adjusted for patient mix, survey 
mode, and quarterly weighting to create the LMS, see http://www.hcahpsonline.org/files/HCAHPS_Stars_Tech_Notes_Apr2015.pdf.
    The HLMR summarizes performance across the 10 HCAHPS measures by 
taking an average of each of the LMS of the 10 HCAHPS measures, using a 
weight of 1.0 for each of the 6 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 an EPM participant, the hospital's percentile of 
performance can be determined by applying the aforementioned methods to 
the linear mean scores for all IPPS hospitals with 100 or more 
completed surveys in a 4-quarter period. As previously noted, linear 
mean scores are publicly reported, but HLMRs are not. An EPM model 
participant can estimate the national distribution of HLMRs and the 
performance percentiles by using the Patient Survey Results in the 
Hospital Compare downloadable database found on Data.Medicare.gov, 
https://data.medicare.gov/data/hospital-compare?sort=relevance&tag=patient%20survey%20results, to calculate the 
HLMRs for all IPPS hospitals with 100 or more completed surveys in a 4-
quarter period.
(g) Calculating the Rate and Performance Period
    We proposed to be consistent with the HIQR Program, which uses 4 
quarters of data for HCAHPS (79 FR 50259). For the EPMs, we proposed to 
use the most recently available HCAHPS 4-quarter roll-up to calculate 
the HLMR score for the initial year of the EPMs. The proposed measure 
performance period is discussed in section III.E.5. of the proposed 
rule (81 FR 50794), and summarizes measure performance periods for 
performance years 1 through 5 of the EPM performance years. We note 
that improvement on the HCAHPS Survey (#0166) measure would be 
determined from the measure performance period available for the year 
immediately preceding the EPM model performance year. We sought comment 
on this proposal to include the HCAHPS Survey (NQF #0166) measure in 
the EPMs to assess quality performance and capture patient experience 
of care.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters did not support or were skeptical of 
the inclusion of HCAHPS because it is an overall measure of all 
patients receiving hospital services that is not specific to heart 
attacks, bypass surgery, or joint replacements. Therefore, HCAHPS does 
not reflect quality for targeted episodes of care. In addition, the 
measure is too narrow because it only encompasses patient experience 
during the inpatient hospital stay and does not capture information 
about patients' experience later in the episode of care. For these 
reasons, commenters did not believe that the measure captures the 
correct information, and it will be of limited value to clinicians for 
quality improvement.
    Response: We appreciate the concerns from the commenters about the 
broad patient population covered by this measure. Although the HCAHPS 
Survey encompasses a broader range of patients than the model episode 
definitions, we are not aware of evidence that such patients' 
experience of care differs markedly from those of the larger group of 
eligible patients after patient-mix adjustment for service line 
(surgery) and age have been applied. Having all patients responding to 
the survey helps to inform hospitals on areas for improvement. From a 
survey implementation standpoint, it is not feasible to target only 
Medicare beneficiaries who had a specific surgery, or to calculate the 
HCAHPS Linear Mean Roll-up score on the basis of particular surgical 
patients. In addition to complicating the administration of the survey, 
the number of completed surveys from such a narrow set of patients 
would be, for many hospitals, too small to support reliable measurement 
or comparison. The inclusion of the HCAHPS Survey measure (NQF #0166) 
as currently implemented and the HLMR derived from it in these models 
will present participating hospitals with a further incentive to 
improve experience of care for all patients. HCAHPS, which was launched 
in 2006 and has been continuously administered ever since, is familiar 
to over 4,000 hospitals. Modifications to the standardized 
implementation protocols would be disruptive to the other programs that 
employ HCAHPS data, such as the HIQR Program and Hospital Value-Based 
Purchasing program. We believe through the HCAHPS Survey measure (NQF 
#0166), CMS programs continue to highlight the importance of assessing 
patient experience of care.
    Comment: Several commenters recognized patient satisfaction as an 
important component of quality and supported the use of HCAHPS as a way 
to measure patient feedback. One commenter appreciated CMS not creating 
a bar that is too high for the quality measures included in the EPMs.
    Response: We thank the commenters for their support.
    Comment: Several commenters were concerned about compounding 
penalties for the CJR participants that are also selected for 
participation in the SHFFT model. Commenters further noted that the 
HCAHPS survey is already a significant part of quality measurement 
through its inclusion in the Hospital Value Based Purchasing Program.
    Response: We appreciate the commenters' concerns regarding the 
inclusion of HCAHPS in multiple CMS programs. However, this measure 
aligns with our priorities to reduce AMI and CABG mortality and 
complications while improving patient experience, as well as our 
priorities to reduce major LEJR surgery complications while improving 
patient experience for SHFFT model beneficiaries, like those in the CJR 
model. Through HCAHPS, CMS programs continue to highlight the 
importance of assessing patient experience of care. Furthermore, this 
approach allows hospitals to align with other CMS hospital quality 
programs, including programs that tie payment to performance such as 
the HVBP Program, and streamlines EPM measures for EPM participants 
testing more than one EPM.
    Comment: Several commenters recommended that CMS reduce the

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weight percentage assigned to HCAHPS. One commenter suggested that 
HCAHPS should only be 15 percent of the overall quality score, whereas 
another commenter recommended a reduced, phased-in weighting at least 
for years 1 and 2.
    Response: We believe that the proposed weight percentage assigned 
to HCAHPS is appropriate and a phased-in weighting is not necessary. 
Hospitals participating in these models have had several years of 
experience with the HCAHPS survey. Since July 2007, hospitals subject 
to the IPPS annual payment update provisions have been required to 
collect and submit HCAHPS data in order to receive their full annual 
payment update (71 FR 48037). Non-IPPS hospitals, such as CAHs, may 
voluntarily participate in HCAHPS. The incentive for IPPS hospitals to 
improve patient experience was further strengthened by the Patient 
Protection and Affordable Care Act of 2010 (Pub. L. 111-148), which 
specifically included HCAHPS performance in the calculation of the 
value-based incentive payment in the Hospital Value-Based Purchasing 
program beginning with October 2012 discharges. With respect to the 
HCAHPS Linear Mean Roll-up score measure that we proposed for the 
model, hospitals began receiving HCAHPS Summary Star Rating in their 
December 2014 Hospital Compare Preview Report. The HLMR is the basis 
for the HCAHPS Summary Star Rating; see HCAHPS Star Rating Technical 
Notes at http://www.hcahpsonline.org/StarRatings.aspx. While the HLMR 
is a relatively new calculation from the existing measures, hospitals 
have been using the HCAHPS survey for many years and have had time to 
become familiar with it, with their results, and with their standing 
relative to other hospitals through information presented on the HCAHPS 
On-Line Web site such as the HCAHPS Percentiles tables (http://www.hcahpsonline.org/SummaryAnalyses.aspx). IPPS hospitals have 
available their HCAHPS scores' relative rank compared to other 
hospitals participating in the HVBP program. As such, we believe that 
hospitals are familiar with their individual and relative performance 
on the HCAHPS Survey measure (NQF #0166).
    Comment: One commenter expressed concern that inclusion of HCAHPS 
in the EPMs could negatively affect essential hospitals if used as part 
of the quality composite score used to determine hospital eligibility 
to receive reconciliation payments. The commenter stated that patients 
admitted through the ED report lower HCAHPS scores, thus essential 
hospitals with higher ED volumes might score lower despite the fact 
that their quality could be the same or better than other hospitals.
    Response: We have examined the performance of ``safety net'' 
hospitals, sometimes referred to as ``essential'' hospitals, on the 
HCAHPS component of the HVBP program. Although we do not have an 
official definition or designation of ``safety net'' hospital, we 
understand that a safety net status typically entails one or more of 
three criteria: High Medicaid share; high proportion of uncompensated 
patients; and high county-associated poverty rate. In general, after 
all HCAHPS adjustments are applied (patient mix and survey mode), we 
believe that so-called safety net hospitals, as we understand the term, 
perform similarly to other hospitals. The current adjustment approach 
that CMS employs is both well-validated and necessary to ensure fair 
comparisons of HCAHPS scores across hospitals. When these adjustments 
are applied according to the rules currently in place, the performance 
of safety net hospitals for the HCAHPS portion of HVBP is typical of 
hospitals in general.
    With respect to HCAHPS scores of patients admitted through hospital 
emergency departments, CMS is investigating whether participating 
hospitals could submit a valid and standardized administrative record 
regarding ED admission. When HCAHPS was developed, such an indicator 
was available and was employed in HCAHPS patient-mix adjustment, where 
it had a small, negative effect on HCAHPS scores. However, collection 
of this measure ceased several years ago due to misgivings about its 
validity.
    Comment: One commenter requested that the Pain Management scores be 
included in the HCAHPS measure for CJR Performance Year 1. The 
commenter believed that removing the Pain Management scores diminish 
the importance of the role pain management plays in the recovery and 
sustained well-being of patients.
    Response: We remain dedicated to improving the quality of care 
provided to patients, including the appropriate management of pain and 
communication between patients and their providers regarding pain. We 
continue to believe that pain control is an appropriate part of routine 
patient care that hospitals should manage and is an important concern 
for patients, their families, and their caregivers. Furthermore, we are 
unaware of any empirical evidence demonstrating that failing to 
prescribe opioids lowers a hospital's HCAHPS Survey scores. However, we 
believe the potential confusion about the appropriate use of the Pain 
Management dimension questions, coupled with the public health concern 
about the opioid epidemic, warrants removing these questions from 
Hospital VBP Program scoring calculations until alternative pain 
management questions are available. In response to possible confusion 
about the Pain Management measure, we have finalized our proposal to 
remove this dimension from the Hospital Value-Based Purchasing payment 
formula beginning in FY 2018. However, CMS will continue publicly 
report the Pain Management measure on the Hospital Compare Web site 
because we continue to believe that pain control is an appropriate part 
of routine patient care that hospitals should manage and is an 
important concern for patients, their families, and their caregivers.
    Comment: One commenter was concerned about the use of HCAHPS for 
PAC/LTC based practices as there are no current requirements to use 
skilled nursing facility patient satisfaction surveys. The commenter 
believed that the measure is not appropriate for PAC-based clinicians 
because in many situations the information source is not reliable due 
to the cognitive status of the patients being surveyed.
    Response: Patients discharged to nursing homes and SNFs are 
excluded from HCAHPS survey administration because of the difficulty 
contacting such patients and consistently surveying them in a timely 
manner. We are not aware of evidence that patients discharged to a 
nursing home or SNF have different experience of care than other 
inpatients in the hospital. Only acute-care hospitals participate in 
the HCAHPS Survey, not long term care hospitals.
    Comment: One commenter recommended that CMS make the HCAHPS Linear 
Mean Roll-up (HLMR) score publicly available in order to allow 
hospitals to not only know their HLMR score, but that of other 
hospitals in order to understand their percentile levels. The commenter 
further recommended that this data be released automatically and at 
least quarterly to facilitate hospitals' ability to improve performance 
and assess financial risk.
    Response: We appreciate the concerns from the commenters about the 
broad patient population covered by this measure. Although the HCAHPS 
Survey encompasses a broader range of patients than the model episode 
definitions, we are not aware of evidence that such patients' 
experience of care differs

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markedly from those of the larger group of eligible patients after 
patient-mix adjustment for service line (surgery) and age have been 
applied. Having all patients responding to the survey helps to inform 
hospitals on areas for improvement. From a survey implementation 
standpoint, it is not feasible to target only Medicare beneficiaries 
who had a specific surgery, or to calculate the HCAHPS Linear Mean 
Roll-up score on the basis of particular surgical patients. In addition 
to complicating the administration of the survey, the number of 
completed surveys from such a narrow set of patients would be, for many 
hospitals, too small to support reliable measurement or comparison. The 
inclusion of the HCAHPS Survey measure (NQF #0166) as currently 
implemented and the HLMR derived from it in these models will present 
participating hospitals with a further incentive to improve experience 
of care for all patients. HCAHPS, which was launched in 2006 and has 
been continuously administered ever since, is familiar to over 4,000 
hospitals. Modifications to the standardized implementation protocols 
would be disruptive to the other programs that employ HCAHPS data, such 
as the HIQR Program and Hospital Value-Based Purchasing program. We 
believe through the HCAHPS Survey measure (NQF #0166), CMS programs 
continue to highlight the importance of assessing patient experience of 
care.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include the HCAHPS Survey (NQF #0166) measure in the EPMs to assess 
quality performance and capture patient experience of care.
e. Potential Future Measures
    CMS recognizes that there remain gaps in quality measures targeting 
AMI, CABG, and hip fracture care. Specifically with regard to hip 
fracture care, examples of potential measures suitable for 
consideration for inclusion in the SHFFT model in future performance 
years include: (1) Claims-based or hybrid risk-standardized hospital-
level mortality, complication, and/or readmission measures intended for 
assessing hospital or provider performance for patients with hip 
fracture; and (2) patient-reported outcome data-based measures of 
functional status, symptom burden, number of days at home and/or return 
to home and/or independent living suitable for patients with hip 
fractures and/or patients undergoing total hip or knee arthroplasty as 
referred to in 79 FR 50259. Additionally, we would consider including 
measures of all--cause harm across the models in future years and 
appropriateness of procedures. CMS also recognizes that care for 
patients with AMI, CABG, and hip fractures extends across care settings 
and providers, and includes care provided by a multitude of clinicians 
and possible post-acute care facilities (for example, inpatient 
rehabilitation facilities, intermediate care facilities, and/or home 
health services). CMS welcomed comments on measure concepts for future 
measures that potentially could be included in the AMI, CABG, and SHFFT 
models, including measures that are attributable to acute care and 
post-acute care facilities and clinicians. CMS also welcomed 
information about existing patient-centered outcomes measures that 
address quality gaps relevant to the AMI, CABG, and SHFFT models. Any 
changes to the measures included in the AMI, CABG, and SHFFT models 
would be subject to future rulemaking.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters recommended implementing quality 
measures across the care continuum, including post-acute care (PAC) and 
measures that address providers beyond the hospital that provides the 
surgery, such as Independence at Home, FQHCs, PCMHs, and ACOs.
    Response: We appreciate the commenters for the suggestion to 
implement quality measures across the care continuum. We recognize that 
there are some gaps in the current proposed measures relative to other 
settings in which patients receive care post-hospital discharge during 
EPM episodes. We will take these recommendations into consideration in 
our measure development and testing efforts, as well as in our ongoing 
efforts to identify and propose appropriate measures for the payment 
models in the future.
    Comment: Several commenters recommended the use of registries to 
report data for new measures. Commenters suggested measures from the 
Core Quality Measure Collaborative (CQMC) Cardiovascular and Orthopedic 
core quality measures set, National Cardiovascular Data Registry (NCDR) 
measures, and the STS CABG Composite Score.
    Response: We thank the commenters for their recommendations. We 
believe that registries may facilitate valuable quality improvement 
feedback to hospitals. However, we note that many registry measures are 
proprietary. With that said, we agree with commenters that the STS CABG 
Composite Score is a comprehensive NQF-endorsed measure with strong 
potential to meaningfully improve quality. The STS CABG Composite Score 
measures surgical performance based on a combination of 11 NQF-endorsed 
process and outcomes measures. We also note that 7 of the 11 NQF-
endorsed process and outcomes measures are used for the Physician 
Quality Reporting Program (PQRS) which promotes alignment of 
measurement across programs. We are incorporating the STS CABG 
composite measure (NQF #0696) data submission as a voluntary option 
weighted at 10 percent. By including this composite measure in the CABG 
EPM, we are reducing proposed HCAHPS and mortality weights by 5 percent 
each for those hospitals that voluntarily report the STS measure. We 
intend to address the weighting and the use of the actual measure score 
in the next EPM rulemaking cycle. For more information about the STS 
Composite Score, we refer readers here: http://www.sts.org/sts-public-reporting-online/cabg-composite-score.
    Comment: Several commenters recommended that CMS explore the 
opportunity to develop and implement quality of life and patient 
reported outcome measures (PROMs). Commenters identified PROMIS Global, 
VR12, SAQ-7, PHQ-2, Rose Dyspnea Score, and International Consortium 
for Health Outcomes Measurement (ICHOM) recommended measures as 
candidates for future inclusion in the EPMs. Furthermore, two 
commenters supported the inclusion of PROMs in the SHFFT model and 
encouraged CMS to mandate the PROMs for the SHFFT model as soon as 
possible.
    Response: We thank the commenters for their recommendations. We 
will take these into consideration as candidates for future inclusion 
in the EPMs and in our measure development and testing efforts.
    Comment: One commenter encouraged CMS to include other CAHPS 
measures, such as CG-CAHPS and S-CAHPS.
    Response: We thank the commenter for their recommendations.
    Comment: One commenter supported holding hospitals financially 
responsible for quality and encouraged CMS to maintain the proposed 
measures.
    Response: We thank the commenter for their support.
    Comment: Several commenters recommended including functional status 
measures, such as functional status improvement from admission to 
discharge, Functional status change for

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patients with Hip impairments (NQF #0423), and other NQF-endorsed 
functional outcome measures in the EPM models.
    Response: We thank the commenters for their recommendations. We 
will take these into consideration as candidates for future inclusion 
in the EPMs and in our measure development and testing efforts.
    Comment: Several commenters recommended that CMS consider 90-day 
measures and measures for high-impact areas including medication 
errors, hospital-acquired infections, and hospital-related injuries, 
such as surgical site infection (SSI) following hip fracture, 
complications rate following hip fracture, 90-day reoperations rate 
following hip fracture, percent of patients returning to pre-fracture 
ambulatory status at 90 days, length of stay following hip fracture, 
arrival to surgical procedure, and 30-day readmissions following hip 
fracture.
    Response: We appreciate these comments, including the suggestions 
for priority areas for further measure development. CMS acknowledges 
that outcomes measures addressing a longer timeframe, such as 90 days, 
should be pursued. In developing measures that use a longer timeframe, 
CMS will conduct empirical analyses to ensure that such measures are 
scientifically robust and to identify appropriate risk-adjustment 
approaches. CMS will begin initial exploration of the suggested 
priority areas as well as review condition specific and procedure 
specific measure concepts. The timeline for this to occur is dependent 
upon several factors including expert panel review and comment periods, 
reliability, and validity testing, thus is varied and subject to 
change. This timeline ranges between 24-36 months, pending no major 
setbacks or delays outside of CMS control. Once such measures are fully 
developed, submitted for NQF endorsement and available, CMS will 
consider the most appropriate time frame to incorporate these measures 
into the EPM quality payment methodology through future notice and 
comment rulemaking.
    Comment: One commenter supported the use of shared decision-making 
measures. The commenter believed that patients and their family 
caregivers should have the opportunity to receive all relevant 
information, review all options, weigh the benefits and potential 
drawbacks, and make a decision.
    Response: We thank the commenter for their comment and agree that 
patients, families and caregivers should have the opportunity to 
receive relevant information, review all options, weigh the benefits 
and potential drawbacks, to make the best decision. We will take this 
measure concept into consideration in our ongoing measure development 
and testing efforts.
5. 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 proposed that data 
submission for Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230)(MORT-30-AMI); Excess Days in Acute Care after Hospitalization 
for an Acute Myocardial Infarction (AMI Excess Days); Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary 
Artery Bypass Graft (CABG) Surgery (NQF# 2558)(MORT-30-CABG); and 
Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550)(Hip/Knee Complications) be accomplished 
through the existing HIQR Program processes. Since these measures are 
claims-based measures, hospitals will not need to submit data.
    We proposed that the same mechanisms used in the HIQR Program to 
collect HCAHPS Survey (NQF #0166) measure data also be used in the AMI, 
CABG, and SHFFT models (79 FR 50259). For the hospitals that 
voluntarily submit data for the Hybrid AMI mortality measure, we 
anticipate, if it is technically feasible, for data submission 
processes to be broadly similar to those summarized for the HIQR 
Program for electronic clinical quality measures. We proposed to allow 
hospitals to submit the data elements using either QRDA-I or to submit 
to data elements using a simpler spreadsheet in performance year 1. We 
proposed to require hospitals to submit data elements using only QRDA-I 
in performance years 2 through 5. We would create a template for data 
reporting, 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 hybrid AMI voluntary data. We 
describe processes for voluntary data collection in section 
III.E.4.c.(2)(ii) of the proposed rule (81 FR 50794). The use of QRDA 
for reporting of EHR data is aligned with requirements used by the HIQR 
Program for electronic clinical quality measures. We sought comment on 
the proposal to collect EHR data through either QRDA-I or through a 
simple spreadsheet in performance year 1 and to collect EHR data 
through only QRDA-I in performance years 2 through 5.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter was concerned that it will be difficult to 
link episode data from all of the various sources, such as hospitals, 
skilled nursing facilities, and clinical practices. The NPRM proposes 
to use a simple spreadsheet in year 1 and QRDA-I files in subsequent 
years, whereas participants submitting AMI voluntary data will receive 
hospital-specific reports that detail submission results from the most 
recent performance period. The commenter believes this scenario 
requires extra work and puts burden on providers for two different 
implementation solutions. The commenter requests additional information 
on how standardized the spreadsheets will be, as well as who will 
specify the format.
    Response: We thank commenters for their suggestion to align 
standards across our programs. We agree that it is important to align 
these data collection requirements to reduce burden on hospitals and 
improve interoperability. We will take this feedback into consideration 
as we shape future proposals for hybrid measures.
    One of the main tenets of the 2015 Edition Health IT Certification 
Criteria final rule (80 FR 62601) is to facilitate greater 
interoperability for several clinical health information purposes and 
enable health information exchange through new and enhanced 
certification criteria, standards, and implementation specifications. 
We note that we have worked closely with ONC to enhance testing and 
validation of certified technology's ability to capture, exchange, and 
report electronic patient data, such as through improved testing and 
certification through the Cypress CQM testing and certification tool. 
As another example, we note that ONC proposed a 2015 Edition ``CQM-- 
report'' certification criterion in the FY 2016 IPPS/LTCH PPS proposed 
rule that sought stakeholder input on the standards for representing 
and reporting CQM data in certified health IT to improve the 
reliability and consistency of such data reporting (80 FR 24613 through 
24614). Furthermore, the 2015 Edition criteria related to eCQMs offer 
increased data portability and user

[[Page 402]]

access using the established QRDA standards. Because of the support for 
testing and certification offered by ONC and their certification tools 
and programs, the widespread deployment of the QRDA standard and CMS' 
own recent experience that QRDA can provide superior clinical data for 
assessing quality and performance, we will finalize our selection of 
QRDA-I as the primary reporting standard for the EPM Model Rule for 
program years 1-3. If QRDA-I cannot be available to all participants 
for year 1, we will make a transitional submission format available to 
systems using a spreadsheet-based approach that will allow these sites 
additional time to meet the QRDA-based reporting requirements. We thank 
commenters for their continued support of improving the electronic 
reporting process and plan to continue to make improvements as 
standards evolve.
    Comment: One commenter requested that CMS conduct an analysis of 
any performance differences resulting from the transition to ICD-10 for 
the measures used in the EPMs, and for CMS to make these analyses 
publicly available.
    Response: The AMI EDAC, AMI and CABG 30-day mortality measures all 
have 3-year measurement periods. Because ICD-10 implementation began in 
October 2015, measure results calculated for program years 1 through 5 
of the EMPs will be based on a combination of ICD-9 and ICD-10 coded 
claims. Therefore, CMS cannot provide hospitals with any meaningful 
comparison of measure results with ICD-9 claims alone or ICD-10 claims 
alone. CMS continues to test ICD-10-based measure specifications to 
ensure ongoing validity of the measures. CMS provides analysis of 
claims data for each new performance year added to the 3-year period in 
the measures' Annual Updates and Specifications Reports posted on 
QualityNet each April during the IPPS notice of proposed rulemaking.
    Comment: Several commenters expressed concern regarding the 
administrative burden imposed by the proposed data submission. One 
commenter stated that the current submission process is highly manual, 
as data must be entered for each patient separately into the CMS 
spreadsheet. The commenter suggested a portal in which data can be 
uploaded and validated monthly with greater efficiency than the 
spreadsheet. Another commenter encouraged the use of measurement 
instruments which can be administered electronically to reduce burden.
    Response: We appreciate the commenters' concern, however, as stated 
in 81 FR 50910, for the Hybrid AMI mortality measure, we proposed to 
allow to submit the data elements using either QRDA-I or to submit data 
elements using a simpler spreadsheet in performance year 1. We proposed 
requiring the hospitals to submit data elements using only QRDA-I in 
performance years 2 through 5. We disagree that increased burden is 
placed on providers in that there are options to use either QRDA-I or 
simpler spreadsheet in performance year 1. The purpose of the option to 
use a simpler reporting format (spreadsheet) is to allow hospitals to 
perfect data extraction with the 2017 data and postpone mastery of 
reporting in the QRDA format to the following year. CMS would create a 
template for data reporting, 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 hybrid AMI 
voluntary data. We proposed the same mechanisms used in the HIQR 
Program to collect HCAHPS Survey measure data also be used in the AMI, 
CABG, and SHFFT models (79 FR 50259).
    Comment: One commenter expressed concern about collecting quality 
data that may not yield meaningful results. The commenter recommended a 
delay in collecting and reporting quality data for the EPMs until CJR 
data can be examined to ascertain its utility and determine whether it 
provides robust quality information.
    Response: We note that we currently have broad experience with pay-
for-performance in Medicare programs, including the HRRP, HVBP Program, 
HAC Reduction Program, and the Shared Savings Program. These pay-for-
performance programs have improved the quality of care for Medicare 
beneficiaries. For example, since the implementation of HRRP in 2012, 
readmission and complications rates for various medical conditions such 
as elective THA/TKA have been significantly reduced, thereby resulting 
in improvements in the quality of care for Medicare beneficiaries 
undergoing joint replacement procedures. Furthermore, pay-for-
performance is a feature of a number of Innovation Center models 
currently in testing. We refer readers to section III.D.5. of the CJR 
Final Rule (80 FR 73473) for further discussion of public reporting of 
pay-for-performance data during performance year 1 of the model.
    We have developed and adopted a variety of new quality measures in 
programs and models since 2011, as well as gained experience with pay-
for-reporting and pay-for-performance in a variety of models and 
programs involving a wide range of health care providers and clinical 
conditions. Given our extensive experience over the past several years 
with pay-for-performance approaches, the availability of existing 
measures that reflect the quality of care for AMI, CABG, and SHFFT 
episodes, and the breadth of the EPMs, which reaches substantially all 
IPPS hospitals in the selected MSAs, including those hospitals who 
otherwise would not participate in a voluntary payment model, we 
believe that a pay-for performance approach is necessary and 
appropriate beginning in the model's first performance year. IPPS 
hospitals have substantial experience over multiple years with CMS 
programs that include pay-for-performance and we believe, given the 
proposed quality measures for the EPMs, that AMI, CABG, and SHFFT pay-
for-performance in episode payment models is a natural extension to 
bundled payment of pay-for-performance measures used in current CMS 
programs. While we acknowledge that pay-for-performance is not the only 
way for a model to heighten a focus on maintaining or improving the 
quality of care, we believe that the EPMs, like other Innovation Center 
models, should target both improved quality and reduced costs. Based on 
our experience in other programs and models, we believe that pay-for-
performance under the EPMs shows great promise in moving participant 
hospitals toward greater efficiency and higher quality care. In view of 
successful implementation of pay-for-performance in other CMS hospital 
programs using similar quality measures that has resulted in 
significant improvements in the quality of care, we believe IPPS 
hospitals have sufficient experience to be ready for pay-for-
performance under the AMI, CABG, and SHFFT models.
    We expect that other features of the model design, including our 
plans for data sharing, will help participant hospitals committed to 
care redesign toward these goals achieve success on both quality and 
cost performance for episodes. We note that the quality measures 
finalized for the model as discussed in section III.E.2 of this final 
rule rely upon data that hospitals are already submitting and which are 
already analyzed by CMS for other programs, so we see no reason to 
adopt a period of pay-for-reporting for the first performance year of 
the model or longer. In the proposed rule, we considered a similar 
policy that would not penalize hospitals with regard to their 
eligibility for reconciliation

[[Page 403]]

payments for failure to meet the proposed quality measure thresholds in 
performance year 1. However, we continue to believe that adopting pay-
for- reporting and not pay-for-performance in performance year 1 or 
longer would be inappropriate given that two of the proposed quality 
measures are administrative claims based measures and impose no 
additional reporting burden on hospitals, the proposed measures are all 
established measures in existing CMS quality programs, and a central 
goal of the EMPs is improving care for Medicare beneficiaries. In this 
regard, the EPMs are different from some other CMS value-based 
initiatives where the data for some measures were newly submitted by 
providers or newly analyzed by CMS early in the initiative. 
Furthermore, we do not believe that participant hospitals need a year 
of pay-for-reporting to develop systems for analyzing episode claims 
under the model, as we expect hospitals to already be focused on 
improving their performance on these measures. The measures finalized 
for the EPMs are aligned with the goals of the models, are familiar to 
hospitals based on their use in other CMS hospital programs, and are 
aligned with CMS priorities to reduce mortality and complications while 
improving the patient experience. Because the measures reflect these 
goals and accurately measure hospitals' level of achievement and 
improvement on quality outcomes that are important to beneficiaries, we 
are finalizing our proposal to implement a pay-for-performance approach 
in the AMI, CABG, and SHFFT models in the first performance year by 
using quality performance in the episode payment methodology.
    Comment: One commenter recommended clarification on the PROM, 
specifically the Veterans RAND 12 Item Health Survey (VR-12) data 
submission requirement to accommodate for the handling of missing data 
elements consistent with proven methods in the scientific literature as 
it determines if a hospital has successfully met its reporting 
threshold.
    Response: We thank the commenter for their suggestion. One of the 
generic health-related quality of life assessment survey that hospitals 
can use is the Veterans RAND 12 Item Health Survey (VR-12). Hospitals 
who elect to use this survey instrument must report patient responses 
to all of the questions; that is, all 14 questions from this survey. 
Twelve questions or items (i.e., question groups 1-7) in the survey are 
used to calculate two scores, a ``Physical Health Summary Measure (PCS-
physical component score)'' and a ``Mental Health Summary Measure (MCS-
mental component score).'' Two additional questions are included as 
anchor questions that CMS will use to gauge the clinical significance 
of a (physical and/or mental health) change following an intervention. 
Likewise, hospitals who elect to use the other generic health-related 
quality of life assessment, the PROMIS-Global, must also report patient 
responses to all of the questions to be considered for the successful 
voluntary reporting of the PRO and risk variable data component of the 
SHFFT model.
    Comment: Several commenters believed that measures should be 
collected at intervals more immediately post-surgery and more routinely 
afterward throughout the 6 month post-discharge duration. One commenter 
further noted that a participant hospital's quality performance must be 
considered in parallel with its financial performance and these 
components be compared, in tandem, to a pre-EPM baseline.
    Response: The measures proposed for the AMI, CABG, and SHFFT models 
use a 3-year reporting period and are updated annually. The 3-year 
reporting period ensures that hospitals have a sufficient number of 
cases for a reliable and valid estimate of their risk-adjusted outcome 
rate. The measures are not designed for more frequent reporting of 
results. CMS does assess trends in hospitals' performance on the 
proposed measures to identify potential unintended consequences in the 
HIQR program.
    Comment: Several commenters were supportive of the proposed 
approach to reporting and data collection. Commenters stated that it 
demonstrates CMS' effort to minimize administrative burden on providers 
when implementing new care models. One commenter appreciated that many 
of the proposed quality measures are currently being reported for the 
Inpatient Quality Reporting Program (IQR), thereby reducing additional 
reporting burden for hospital staff. Another commenter commended CMS 
for treating and separately bundling services for patients who fall 
under the SHFFT model rather than including them in CJR.
    Response: We thank the commenters for their support.
    Comment: Several commenters raised concerns about the proposed 
timeline for voluntary data submission in the SHFFT model. Specifically 
commenters were concerned that the data submission timeline did not 
align with the model performance years. The commenters suggested that 
the data submission deadline closely align with the start date of the 
model so CMS can receive relevant data and have time to analyze initial 
CJR changes to make necessary changes before implementation of SHFFT 
data collection.
    Response: The intent of the proposed timeline for voluntary data 
submission for the SHFFT model is to reduce confusion by proposing to 
use the same 3-year rolling time periods for calculating readmissions 
and complications performance that are used in the hospital IQR program 
and to align the data collection timeline with the CJR model timeline 
starting in program year 1. CMS will assess data submitted for the CJR 
model and will consider any necessary changes in future rulemaking 
cycles for the CJR and SHFFT models.
    Comment: One commenter recommended that CMS allow hospitals to 
submit using either the QRDA-I or QRDA-III approach for the first 
performance period to allow maximum flexibility and to assess which 
approach is most feasible.
    Response: For the Hybrid AMI Mortality measure, CMS is seeking to 
risk adjust individual patients, thus we have specified QRDA-I, which 
describes patient level data, as the appropriate standard. The QRDA-III 
standard, which describes aggregate data, would not be appropriate for 
this purpose. One of the main tenets of the 2015 Edition Health IT 
Certification Criteria final rule (80 FR 62601) is to facilitate 
greater interoperability for several clinical health information 
purposes and enable health information exchange through new and 
enhanced certification criteria, standards, and implementation 
specifications. We note that we have worked closely with ONC to enhance 
testing and validation of certified technology's ability to capture, 
exchange, and report electronic patient data, such as through improved 
testing and certification through the Cypress CQM testing and 
certification tool. As another example, we note that ONC proposed a 
2015 Edition ''CQM-- report'' certification criterion in the FY 2016 
IPPS/LTCH PPS proposed rule that sought stakeholder input on the 
standards for representing and reporting CQM data in certified health 
IT to improve the reliability and consistency of such data reporting 
(80 FR 24613 through 24614). Furthermore, the 2015 Edition criteria 
related to eCQMs offer increased data portability and user access using 
the established QRDA standards. Because of the support for testing and 
certification offered by ONC

[[Page 404]]

and their certification tools and programs, the widespread deployment 
of the QRDA standard and CMS' own recent experience that QRDA can 
provide superior clinical data for assessing quality and performance, 
we will finalize our selection of QRDA-I as the primary reporting 
standard for the EPM Model Rule for program years 1-3. If QRDA-I cannot 
be available to all participants for year 1, we will make a 
transitional submission format available to systems using a 
spreadsheet-based approach that will allow these sites additional time 
to meet the QRDA-based reporting requirements.
    Comment: Several commenters raised concerns about the proposed 
timeline for voluntary data submission in the SHFFT model. Specifically 
commenters were concerned that the data submission timeline did not 
align with the model performance years. The commenters suggested that 
the data submission deadline closely align with the start date of the 
model so CMS can receive relevant data and have time to analyze initial 
CJR changes to make necessary changes before implementation of SHFFT 
data collection.
    Response: The intent of the proposed timeline for voluntary data 
submission for the SHFFT model is to reduce confusion by proposing to 
use the same 3-year rolling time periods for calculating readmissions 
and complications performance that are used in the hospital IQR program 
and to align the data collection timeline with the CJR model timeline 
starting in program year 1. CMS will assess data submitted for the CJR 
model and will consider any necessary changes in future rulemaking 
cycles for the CJR and SHFFT models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
collect EHR data through either QRDA-I or through a simple spreadsheet 
in performance year 1 and to collect EHR data through only QRDA-I in 
performance years 2 through 5.
    The proposed quality measure performance periods for required and 
voluntary reporting measures by the performance year of the AMI, CABG, 
and SHFFT models are displayed in Tables 41, 42, 43, 44, and 45.

                                    Table 41--Summary of Quality Measure Performance Periods by Year of the AMI Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
MORT-30-AMI *......................  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021
AMI Excess Days....................  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0230) (MORT-30-AMI).
** Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (AMI Excess Days).


                                   Table 42--Summary of Quality Measure Performance Periods by Year of the CABG Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Model year
             Measure l              --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
MORT-30-CABG *.....................  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558) (MORT-30-CABG).


                            Table 43--Summary of Quality Measure Performance Periods by Year of the Voluntary Data Submission
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
                                    --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
Submission of EHR data elements for  July 1, 2017-August     September 1 2017-June   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020-June 30,
 the Hybrid AMI Mortality Measure.    31, 2017.               30, 2018.               2019.                  2020.                  2021.
Submission of STS CABG Composite     July 1, 2017-August     September 1, 2017-June  July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020 -June
 Measure data.                        31, 2017.               30, 2018.               2019.                  2020.                  30, 2021.
Submission of functional status      September 1, 2016-June  July 1, 2017-June 30,   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020-June 30,
 data for elective primary THA/TKA    30, 2017.               2018.                   2019.                  2020.                  2021.
 procedures.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 405]]


                                   Table 44--Summary of Quality Measure Performance Periods by Year of the SHFFT Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hip/Knee Complications *...........  April 1, 2014-March     April 1, 2015-March     April 1, 2016-March    April 1, 2017- March   April 1, 2018-March
                                      31, 2017.               31, 2018.               31, 2019.              31, 2020.              31, 2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1550) (Hip/Knee Complications).


                           Table 45--Summary of Quality Measure Performance Periods by Year for Required Meaures for All EPMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCAHPS *...........................  July 1, 2016-June 30,   July 1, 2017-June 30,   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey (NQF #0166).

6. Display of Quality Measures and Availability of Information for the 
Public From the AMI, CABG, and SHFFT Models
    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. We proposed 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, we believe that the public and hospitals' 
familiarity with the Hospital Compare Web site will make it simpler to 
access data. We sought comment on this proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters supported the proposal to publicly 
report hospitals' EPM quality performance data on Hospital Compare.
    Response: We thank the commenters for their support.
    Comment: Several commenters expressed concern that the description 
of data publicly displayed on Hospital Compare should accurately 
reflect performance. Rather than placing hospitals with insufficient 
volume on a quality measure at the 50th percentile in the ``Good'' 
category, it should be placed in a separate category noting that there 
was insufficient volume to determine a performance score. One commenter 
further suggested that hospitals be provided an opportunity to preview 
and offer corrections to data provided by CMS before reporting on 
Hospital Compare.
    Response: While we understand the concerns of the commenter that we 
have no actual outcome measure results for certain hospitals, we 
continue to believe it would be unfair to disadvantage a participant 
hospital in the pay-for-performance methodology of this model based on 
insufficient number or no applicable cases alone and, therefore, we 
will assign these hospitals to the 50th performance percentile, which 
is the middle of the national measure performance distribution, and 
assign quality performance points to the participant hospital 
accordingly based on the performance percentile scale identified in 
Table 41.
    We note that the Hospital Compare Web site is the vehicle that 
provides public reporting and within this Web site we indicate that 
this Web site fulfills section 1886(b)(3)(B)(viii)(VII) of the Act, as 
amended by section 3001(a)(2) of the Affordable Care Act, which 
requires the Secretary to establish procedures for making information 
regarding measures submitted available to the public after ensuring 
that a hospital has the opportunity to review its data before they are 
made public. Prior to the release of data on Hospital Compare, 
hospitals are given the opportunity to review data during a 30-day 
preview period via the QualityNet Secure Portal (http://www.qualityreportingcenter.com/wpcontent/uploads/2015/07/IQR_FY-2017_Hospital-IQR-Program-ReferenceChecklist_Tool_7.21.2015_FINAL508.pdf). With respect to the 
HCAHPS Survey measure (NQF #0166), CMS similarly provides hospitals 
with their confidential preview reports on a quarterly basis, before 
the results are publicly reported on Hospital Compare Web site (http://www.hospitalcompare.hhs.gov/) (78 FR 50778).
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
display quality measure results on the Hospital Compare Web site 
(http://www.hospitalcompare.hhs.gov). Regarding the voluntary PRO data 
collection, because we are collecting the data required to develop a 
future PRO-based performance measure that will assess hospital quality 
of care for patients undergoing elective primary THA/TKA procedures, we 
do not plan to publicly report on Hospital Compare. For the STS CABG 
Composite measure, which is voluntary for year one, we intend to 
publicly report if operationally feasible. We plan to utilize notice 
and comment rulemaking if CMS decides to require this measure in the 
future and will thus discuss plans for public reporting.

F. Compliance Enforcement and Termination of an Episode Payment Model

1. Overview and Background
    The following discussion details the enforcement mechanisms we 
proposed to make available to CMS for the EPM when an EPM participant 
or certain other individuals or entities fails to comply with the 
requirements of the model.
    Section 510.410 established that CMS will enforce the CJR model 
requirements against CJR participant hospitals, and will hold each 
participant hospital responsible for its own and its CJR collaborators' 
compliance with CJR model requirements. Given that CJR participant 
hospitals may receive reconciliation payments, and may choose to 
distribute or share those

[[Page 406]]

payments with their CJR collaborators, CMS believes that enhanced 
scrutiny and monitoring of CJR participant hospitals was necessary and 
appropriate. We also noted in the CJR Final Rule (80 FR 73464) that by 
making the CJR participant hospitals responsible for compliance with 
the model, CMS indirectly will be accounting for CJR collaborators' 
compliance, in addition to any direct monitoring of such CJR 
collaborators that HHS (including CMS and OIG) conducts. Furthermore, 
Sec.  510.410 established that upon discovering an instance of CJR 
collaborator noncompliance with the CJR model, CMS, HHS, or a 
respective designee may take remedial action against the CJR 
participant hospital, including requiring the participant hospital to 
terminate a sharing arrangement with a CJR collaborator and to prohibit 
further engagement in the CJR model by that collaborator, and CMS may 
also increase a participant hospital's repayment. Section 510.410 as 
well as section 1115A of the Social Security Act authorizes CMS to 
reduce or eliminate a participant hospital's reconciliation payment as 
well as increase a participant hospital's repayment amount. We proposed 
an enforcement structure for the EPM that will be consistent with the 
CJR model, as we believe the CJR model and the EPM share many of the 
same policy characteristics.
2. Compliance Enforcement for the EPMs
    We proposed that CMS will have the remedial actions detailed in 
Sec.  512.460(b)(2) available for use against any EPM participant where 
the EPM participant or its EPM collaborator, collaboration agent, or 
downstream collaboration agent is not compliant with the applicable 
requirements as set forth in Sec.  512.460(b)(1). These compliance 
tools will support CMS' objectives for the EPM to maintain or improve 
quality of care, reduce program expenditures, safeguard program 
integrity, protect against fraud and abuse, and deter noncompliance 
with EPM requirements. Furthermore, preventing EPM participants from 
engaging in avoiding high-cost and high-severity patients or from 
targeting low-cost and low-severity patients will further CMS' goals 
under the CR incentive payment model to reduce cardiovascular 
mortality, improve health-related quality of life, and reduce the risk 
of hospital admission. Additionally, these compliance tools will 
support CMS' aim under the EPM that beneficiaries receive complete and 
accurate information, including notices which promote increasing 
consumer engagement and freedom of choice. Given that EPM participants 
may choose to enter into sharing arrangements with EPM collaborators, 
those EPM collaborators may have distribution arrangements with 
collaboration agents, and those collaboration agents may have 
downstream distribution arrangements with downstream collaboration 
agents, we believe that enhanced scrutiny and monitoring of EPM 
participants and their EPM collaborators, collaboration agents, and 
downstream collaboration agents is necessary and appropriate in order 
to mitigate program integrity risks.
    Similar to the CJR model, we proposed to hold the EPM participant 
responsible for its own and its EPM collaborators' compliance with the 
EPM requirements. Additionally, in the EPM proposed rule we proposed to 
add EPM participant responsibility for the other individuals and 
entities with financial arrangements under the EPM. This was based in 
part on the proposed addition of ACOs and hospitals, including CAHs, as 
EPM collaborators. Specifically, because we proposed to allow 
additional entities and individuals to be EPM collaborators, 
collaboration agents, or downstream collaboration agents, we must have 
tools to address noncompliance with the requirements of the EPM by 
these entities and individuals as well. Overall, we concluded in the 
proposed rule that EPM participants should ensure that any entity or 
individual with a financial arrangement under the EPM complies with 
model requirements in order to safeguard program integrity.
    We proposed that CMS have authority to take remedial action against 
an EPM participant if its related EPM collaborator, collaboration 
agent, or downstream collaboration agent fails to comply with the 
requirements of the EPM; has signed a sharing arrangement, distribution 
arrangement, or downstream distribution arrangement that is 
noncompliant with the requirements of the EPM; takes any action that 
threatens the health or safety of patients; avoids at-risk 
beneficiaries; 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 that could lead to the inability to 
comply with the requirements of the EPM; takes any action that CMS 
determines for program integrity reasons is not in the best interests 
of the applicable EPM, or fails to take any action that CMS determines 
for program integrity reasons should have been taken to further the 
best interests of the EPM; is subject to action to redress an 
allegation of fraud or significant misconduct; or is subject to action 
involving violations of certain laws, rules, or regulations that are 
relevant to the EPM. Moreover, we proposed that for purposes of this 
provision, ``failure to comply with the requirements of the EPM'' would 
specifically include, but not be limited to, avoiding potentially high-
cost or high-severity patients; targeting potentially low-cost or low-
severity patients; failing to provide medically appropriate services or 
systematically engaging in the over- or under-delivery of appropriate 
care; failing to provide beneficiaries with complete and accurate 
information, including required notices; failing to allow beneficiary 
choice of medically necessary options, including non-surgical options; 
or failing to follow the requirements related to sharing arrangements.
    Proposed remedial actions included issuing a warning letter to the 
EPM participant; requiring the EPM participant to develop a corrective 
action plan; reducing or eliminating the EPM participant's 
reconciliation payment; reducing or eliminating the EPM participant's 
CR incentive payment; requiring the EPM participant to terminate a 
sharing arrangement with an EPM collaborator and prohibit further 
engagement by the EPM participant in sharing arrangements with the EPM 
collaborator; and terminating the EPM participant's participation in 
the EPM. Where a participant is terminated from the EPM, we proposed 
that the EPM participant would remain liable to CMS for all negative 
NPRA generated from episodes of care that occurred prior to 
termination. In addition, we noted that any information collected by 
CMS in relation to termination of a participant from the EPM would be 
shared with our program integrity colleagues at HHS, the Department of 
Justice, and their respective designees. We noted further that should 
an EPM participant, or one of its related EPM collaborators, 
collaboration agents, or downstream collaboration agents, be 
noncompliant with the requirements of the EPM or engage in unlawful 
behavior related to participation in the EPM, such information could be 
used in proceedings unrelated to the administrative enforcement 
mechanisms in this section. We believe these remedial actions are 
necessary tools to safeguard program integrity, including protecting 
against fraud and abuse and deterring noncompliance with EPM 
requirements.

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    In summary, we set forth in proposed Sec.  512.460 that EPM 
participants must comply with all requirements outlined in part 512. We 
specified that, except as specifically noted in this part, the 
regulations under this part must not be construed to affect the 
applicable payment, coverage, program integrity, or other requirements 
under this chapter (such as those in parts 412 and 482).
    Further, we proposed in Sec.  512.460 that CMS may take remedial 
actions if an EPM participant or its related EPM collaborators, 
collaboration agents, or downstream collaboration agents--
     Fails to comply with any applicable requirements of this 
part or is identified as noncompliant through monitoring by HHS 
(including CMS and OIG) of the EPM, including but not limited to--
    ++ Avoiding potentially high-cost or high-severity patients;
    ++ Targeting potentially low-cost or low-severity patients;
    ++ Failing to provide medically appropriate services or 
systematically engaging in the over- or under-delivery of appropriate 
care;
    ++ Failing to provide beneficiaries with complete and accurate 
information, including required notices;
    ++ Failing to allow beneficiary choice of medically-necessary 
options, including non-surgical options; or
    ++ Failing to follow the requirements related to sharing 
arrangements.
     Has signed a sharing arrangement, distribution 
arrangement, or downstream distribution arrangement that is 
noncompliant with the requirements of this part;
     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 of this part;
     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 of this part;
     Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the EPM, or fails to take any 
action that CMS determines for program integrity reasons should have 
been taken to further the best interests of the EPM;
     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; or
     Is subject to action involving violations of the physician 
self-referral law, civil monetary penalties law, Federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the EPM.
    We proposed the remedial actions to include the following:
     Issuing a warning letter to the EPM participant.
     Requiring the EPM participant to develop a corrective 
action plan, commonly referred to as a CAP.
     Reducing or eliminating the EPM participant's 
reconciliation payment.
     Reducing or eliminating the EPM participant's CR incentive 
payment.
     Requiring the EPM participant to terminate a sharing 
arrangement with an EPM collaborator and prohibit further engagement by 
the EPM participant in sharing arrangements with the EPM collaborator.
     Terminating the EPM participant's participation in the 
EPM. Where a participant is terminated from an EPM, the EPM participant 
will remain liable for all negative NPRA generated from EPM episodes 
that occurred prior to termination.
    Furthermore, we proposed that CMS may add 25 percent to a repayment 
amount on the EPM participant's reconciliation report if all of the 
following conditions are met:
     CMS has required a corrective action plan from the EPM 
participant.
     The EPM participant owes a repayment amount to CMS.
     The EPM participant fails to timely comply with the 
corrective action plan or is noncompliant with the EPM's requirements.
    The proposals for compliance enforcement were included in proposed 
Sec.  512.460. We sought comment on our proposals.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters acknowledged the need for remedial 
actions proposed by CMS under the EPM to address EPM participant 
noncompliance with EPM requirements. However, some commenters expressed 
concern about CMS' proposal that EPM participants would be held 
responsible for the compliance of their related EPM collaborators, 
collaboration agents, and downstream collaboration agents. The 
commenters claimed that such an expansive accountability for the 
conduct of others would create a large regulatory and legal burden for 
the EPM participant, especially regarding collaboration agents and 
downstream collaboration agents with which EPM participants do not have 
direct contractual relationships. One commenter stated their belief 
that while EPM participants can and should validate that each EPM 
collaborator, collaboration agent, and downstream collaboration agent 
has a compliance program, EPM participants should not be responsible 
for the compliance of these individuals and entities with the 
requirements of the EPM. The commenter asserted that the compliance of 
these parties is essentially out of the EPM participant's control when 
the individual or entity with a financial arrangement under the EPM is 
not owned or operated by the EPM participant. The commenter urged CMS 
to instead hold each EPM collaborator, collaboration agent, and 
downstream collaboration agent accountable for its own compliance with 
the requirements of the EPM or, at a minimum, to identify specific 
elements for which the EPM participant would be responsible for the 
compliance of its related EPM collaborators, collaboration agents, and 
downstream collaboration agents.
    Response: We appreciate the concerns of some of the commenters 
regarding the potential burdens on EPM participants associated with 
accountability for the conduct of other individuals and entities, 
especially for those individuals and entities that do not have direct 
contractual relationships with the EPM participant. With regard to the 
commenter's belief that EPM participants can and should validate that 
each EPM collaborator, collaboration agent, and downstream 
collaboration agent has a compliance program, we want to clarify that 
our proposal for financial arrangements would only require that an EPM 
collaborator have a compliance program that includes oversight of the 
sharing arrangement as proposed in Sec.  512.500(b)(4). We did not 
propose to require that collaboration agents or downstream 
collaboration agents have a compliance program.
    We note that under the EPM, the EPM participant is the sole entity 
that is financially accountable to CMS. It is only through an EPM 
participant that the opportunity exists for EPM collaborators, 
collaboration agents, and downstream collaboration agents to have 
financial arrangements under the EPM. In addition, because only EPM 
participants can generate internal cost savings and receive 
reconciliation payments and then choose to distribute those funds 
through gainsharing payments to EPM collaborators, we believe a focus 
on EPM participants is necessary and appropriate. Therefore,

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the enforcement authority over the EPM participant is key to 
successfully implementing these models and ensuring program integrity.
    We note that the Shared Savings Program regulations in Sec.  
425.210(b) and Sec.  425.218 similarly permit CMS to hold ACOs 
accountable for not only the noncompliance of their ACO participants 
and ACO providers/suppliers but also for the noncompliance of any other 
individuals or entities performing functions or services related to ACO 
activities. Furthermore, CMS may terminate the participation agreement 
with an ACO when an ACO, ACO participants, ACO providers/suppliers, or 
other individuals or entities performing functions or services related 
to ACO activities fail to comply with any of the requirements of the 
Shared Savings Program under the regulations. The scope of the 
compliance enforcement authority in the Shared Savings Program is 
similar to our proposal to hold the EPM participant accountable for the 
noncompliance of its related EPM collaborators, collaboration agents, 
and downstream distribution agents.
    In the EPM proposed rule and in this final rule, we provide our 
rationale for the EPM requirements that we proposed and are finalizing, 
which we believe are necessary to advance the goals of the EPM, protect 
beneficiaries from potential adverse consequences of the EPM, and 
provide program integrity safeguards for the Medicare program. We 
believe it is important that EPM participants, EPM collaborators, 
collaboration agents, and downstream collaboration agents consider 
these requirements holistically and determine how to best to achieve 
compliance. Thus, we will not identify only a subset of EPM 
requirements or the other proposed provisions to identify noncompliance 
specified in Sec.  512.460(b)(1)(i) through (ix) for which we will hold 
the EPM participant responsible with respect to its related EPM 
collaborators, collaboration agents, or downstream collaboration 
agents.
    Finally, we emphasize that entering into sharing arrangements is a 
choice that EPM participants may make, and EPM participants also have 
the choice as to whom to select as an EPM collaborator based on 
selection criteria developed by the EPM participant as specified in 
Sec.  512.500(a)(3) and finalized in this final rule. In addition, EPM 
participants have the authority through their contracts with their EPM 
collaborators to address the conduct of collaboration agents and 
downstream collaboration agents.
    Comment: One commenter asserted that the compliance enforcement 
provisions that CMS proposed will not protect EPM beneficiaries in a 
timely manner. The commenter observed that CMS specifically proposed to 
allow for termination of an EPM participant's participation in the EPM 
or termination of a sharing arrangement when an EPM participant or its 
related EPM collaborator, collaboration agents, or downstream 
collaboration agent discriminates against at-risk Medicare 
beneficiaries by avoiding caring for them or takes an action that 
threatens patients' health or safety. However, the commenter expressed 
concern that CMS did not appear to allow the termination of an EPM 
participant or termination of a sharing arrangement for an EPM 
participant or EPM collaborator, respectively, found to have 
purposefully steered a patient to a particular provider which it knew, 
or should have known, would fail to provide needed care. The commenter 
claimed that CMS' proposal also did not address the termination of 
providers found to have deliberately administered substandard care. The 
commenter stated that termination or exclusion of poorly performing 
providers from the EPM is important because participants cannot 
ultimately control patient choice and where beneficiaries choose to go 
post-discharge. The commenter urged CMS to expressly allow for remedial 
action in the case of an EPM participant or an EPM collaborator who 
repeatedly withholds care as referenced in other parts of the proposed 
rule, or steers patients to particular providers which it knew, or 
should have known, would fail to provide needed care.
    Response: We appreciate the commenter's concern about protecting 
beneficiaries under the EPM from the potentially harmful consequences 
of withholding care, providing substandard care, or steering 
beneficiaries to particular providers who fail to provide needed care. 
These are serious concerns, and we believe that our proposal for 
compliance enforcement under the EPM allows CMS to take remedial action 
if any of these circumstances are discovered. We proposed in Sec.  
512.460(b)(1)(iii) that CMS may take remedial action against any EPM 
participant when the EPM participant or its related EPM collaborator, 
collaboration agent, or downstream collaboration agent takes any action 
that threatens the health or safety of patients. If an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent is found to have taken any action that threatens the health or 
safety of patients, including but not limited to, withholding care, 
providing substandard care, or steering beneficiaries to certain 
providers or suppliers who will fail to provide needed care, the 
regulations adopted in this final rule allow CMS to take remedial 
action. Moreover, CMS may take remedial action in response to actions 
that threaten health and safety that include the types of actions the 
commenter requested, including issuing a warning letter to the EPM 
participant; requiring the EPM participant to develop a corrective 
action plan; reducing or eliminating the EPM participant's 
reconciliation payment; increasing the EPM participant's repayment 
amount; reducing or eliminating the EPM participant's CR incentive 
payment; requiring the EPM participant to terminate a sharing 
arrangement with an EPM collaborator and prohibit further engagement by 
the EPM participating in sharing arrangements with the EPM 
collaborator; or terminating the EPM participant's participation in the 
EPM.
    Comment: One commenter requested that CMS address how a patient's 
clinical outcome may be considered when determining noncompliance with 
the requirements of the EPM. The commenter stated there could be 
scenarios where health care that may not be in the best interest of an 
EPM participant's cost performance under the EPM may be clinically in 
the best interest of the patient.
    Response: We appreciate the commenter's concern that compliance 
enforcement take into account what is clinically in the best interest 
of the patient. We note that the types of noncompliance we identified 
in our proposal in Sec.  512.460(b)(1)(i) included failing to provide 
medically appropriate services or systematically engaging in the over- 
or under-delivery of appropriate care or failing to allow beneficiary 
choice of medically necessary options, including non-surgical options. 
Each case of noncompliance determined based on the provisions in Sec.  
512.460(b)(1) will be considered on a case-by-case basis, and CMS will 
weigh both the financial interests of the Medicare program and the 
clinical needs of beneficiaries when determining the appropriate 
remedial action.
    Comment: One commenter encouraged CMS to clarify the proposal in 
Sec.  512.460(b)(1)(vii) that CMS may take remedial action if an EPM 
participant or its related EPM collaborator, collaboration agent, or 
downstream collaboration agent ``takes

[[Page 409]]

any action that CMS determines for program integrity reasons is not in 
the best interests of the applicable episode payment model, or fails to 
take any action that CMS determines for reasons of program integrity 
should have been taken to further the best interests of the EPM.'' The 
commenter requested that in the final rule, CMS provide examples of 
actions that are not clear violations of existing fraud and abuse 
statutes that would fall into this category of noncompliance.
    Response: The proposed provision in Sec.  512.460(b)(1)(vii) where 
the commenter requested that CMS provide examples would allow CMS the 
flexibility to take remedial action where the EPM participant or its 
related EPM collaborator, collaboration agent, or downstream 
collaboration agent takes any action that CMS determines is not in the 
best interests of the EPM, or fails to take any action that CMS 
determines for program integrity reasons should have been taken to 
further the best interests of the EPM. This provision is purposefully 
structured to include noncompliance that is not a clear violation of 
existing fraud and abuse statutes. For example, an EPM participant 
could fail to respond to a request from CMS for records to enable the 
investigation into concerns about the potential selection of EPM 
collaborators based on the volume and value of referrals. In this 
scenario, CMS could determine that the EPM participant was noncompliant 
based on this proposed provision because the EPM participant failed to 
provide access to records so that the potential program integrity 
concerns could be assessed. Thus, CMS could take remedial action in 
this example by issuing a warning letter to the EPM participant 
regarding the need to supply the requested records. In another example, 
if an audit of claims for physicians' services furnished to EPM 
beneficiaries by a collaboration agent found a high error rate in 
payment due to incorrect coding, CMS could determine for program 
integrity reasons that the coding errors of the collaboration agent are 
not in the best interests of the EPM. CMS could then take remedial 
action by requiring the EPM participant to develop a corrective action 
plan to address the coding errors.
    Comment: One commenter expressed concern about the proposal in 
Sec.  512.460(b)(1)(ix) that CMS may take remedial action when the EPM 
participant or its related EPM collaborator, collaboration agent, or 
downstream collaboration is subject to action involving violations of 
the physician self-referral law, civil monetary penalties law, Federal 
anti-kickback statute, antitrust laws, or any other applicable Medicare 
laws, rules, or regulations that are relevant to the EPM. The commenter 
stated specifically that violations ``of any other applicable Medicare 
laws, rules, or regulations that are relevant to EPM'' is overly broad 
so that CMS should apply a reasonable knowledge standard to the EPM 
participant's awareness of a collaborator's involvement in such 
matters.
    Response: We appreciate the commenter's interest in the standard 
that CMS will apply for purposes of the proposed provision in Sec.  
512.460(b)(1)(ix) in identifying circumstances when an EPM participant 
or its related EPM collaborator, collaboration agent, or downstream 
collaboration agent is subject to action for violations of the 
specified laws, or any other applicable Medicare laws, rules, or 
regulations that are relevant to the EPM. However, we disagree with the 
commenter's suggestion that CMS apply a reasonable knowledge standard 
to the EPM participant's awareness of a collaborator's involvement in 
such matters. We believe the information regarding whether an 
individual or entity is ``subject to action'' should be readily 
available to the EPM participant. EPM participants can also include 
provisions in their contracts to require that they be notified when 
such circumstances exist. Accordingly, we believe it is reasonable to 
expect that the EPM participant will be aware of all such circumstances 
when its related EPM collaborator, collaboration agent, or downstream 
collaboration agent is specifically subject to action involving 
violations of the physician self-referral law, civil monetary penalties 
law, Federal anti-kickback statute, antitrust laws, or any other 
applicable Medicare laws, rules, or regulations that are relevant to 
the EPM. Therefore, we believe that use of a bright-line standard is 
more appropriate to determine compliance with this provision, 
regardless of what specific individual or entity is subject to action 
for a violation.
    Comment: One commenter recommended that CMS strengthen the 
accountability for EPM participants that are found to withhold or delay 
care by imposing a separate financial penalty that is independent of 
repayment responsibility. The commenter reasoned that an EPM 
participant that has already had to repay CMS the maximum percentage 
permitted under the EPM, that is, met the stop-loss limit, will have 
little incentive to refrain from other potentially harmful cost-cutting 
strategies unless the EPM participant could be subject to a separate 
financial penalty that is not subject to the EPM stop-loss limit.
    Response: Given the proposed compliance tools for the EPM, as well 
as the existing laws and regulations that prohibit care stinting, 
provision of substandard care, or denial of medically necessary care, 
we believe that it is unnecessary to implement a process for a separate 
financial penalty outside of the compliance tools that we proposed. 
When an EPM participant or its related EPM collaborator, collaboration 
agent, or downstream collaboration agent engages in these noncompliant 
behaviors, CMS may take remedial action, including reducing or 
eliminating the EPM participant's reconciliation payment or reducing or 
eliminating the EPM participant's CR incentive payment amount. In 
addition, under circumstances where CMS has required a corrective 
action plan, the EPM participant owes a repayment amount to CMS, and 
the EPM participant fails to timely comply with the corrective action 
plan or is noncompliant with the EPM's requirements, we proposed that 
CMS may add 25 percent to a repayment amount on an EPM participant's 
reconciliation report. We are clarifying in regulation in this final 
rule that the 25 percent is a penalty.
    Moreover, we note that in accordance with the provisions finalized 
in Sec.  512.305(d) for determination of the reconciliation payment or 
repayment amount, we first calculate the NPRA for a performance year 
that is adjusted, if applicable, for the stop-loss or stop-gain 
percentage that applies. Next, we add in the results from the post-
episode spending and ACO overlap calculations, if applicable, for the 
prior performance year. Finally, we adjust the reconciliation or 
repayment amount as described in Sec. Sec.  512.460(b) and (c). Thus, 
the potential financial penalty of up to 25 percent of the repayment 
amount on an EPM participant's reconciliation report if certain 
conditions are met is not subject to the EPM stop-loss limitation. 
Therefore, the EPM participant has a continuing financial incentive to 
refrain from other potentially harmful cost-cutting strategies that 
could lead CMS to apply this financial penalty even if that EPM 
participant already has to repay CMS the maximum percentage permitted 
under the stop-loss limitation under the EPM. We believe this structure 
for the financial penalty is consistent with the request of the 
commenter.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.460 for

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compliance enforcement, with modification to clarify that the 25 
percent that CMS may add to the repayment amount under certain 
conditions is a penalty. The compliance enforcement provisions for the 
EPM are:
     EPM participants must comply with all of the requirements 
outlined in this part. Except as specifically noted in this part, the 
regulations under this part must not be construed to affect the 
applicable payment, coverage, program integrity, or other requirements 
under this chapter (such as those in parts 412 and 482 of this 
chapter).
     CMS may take one or more of the remedial actions set forth 
in this section if an EPM participant or its related EPM collaborator, 
collaboration agent, or downstream collaboration agent does any of the 
following:

++ Fails to comply with any requirements of this part or is identified 
as noncompliant through monitoring by HHS (including CMS and OIG) of 
the EPM, including but not limited to any of the following:
--Avoiding potentially high-cost or high-severity patients.
--Targeting potentially low-cost or low-severity patients.
--Failing to provide medically appropriate services or systematically 
engaging in the over- or under-delivery of appropriate care.
--Failing to provide beneficiaries with complete and accurate 
information, including required notices.
--Failing to allow beneficiary choice of medically necessary options, 
including non-surgical options.
--Failing to follow the requirements related to sharing arrangements.
++ Has signed a sharing arrangement, distribution arrangement, or 
downstream distribution arrangement that is noncompliant with the 
requirements of this part.
++ 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 of this chapter.
++ 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 
this part.
++ Takes any action that CMS determines for program integrity reasons 
is not in the best interests of the EPM, or fails to take any action 
that CMS determines for program integrity reasons should have been 
taken to further the best interests of the EPM.
++ 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 law, civil monetary penalties law, Federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the EPM.
     Remedial actions include the following:

++ Issuing a warning letter to the EPM participant.
++ Requiring the EPM participant to develop a corrective action plan, 
commonly referred to as a CAP.
++ Reducing or eliminating the EPM participant's reconciliation 
payment.
++ Reducing or eliminating the EPM participant's CR incentive payment.
++ Requiring the EPM participant to terminate a sharing arrangement 
with an EPM collaborator and prohibit further engagement by the EPM 
participant in sharing arrangements with the EPM collaborator.
++ Terminating the EPM participant's participation in the EPM. Where a 
participant is terminated from an EPM, the EPM participant will remain 
liable for all negative NPRA generated from EPM episodes that ended 
prior to termination.
     CMS may add a 25 percent penalty to a repayment amount on 
the EPM participant's reconciliation report if all of the following 
conditions are met:

++ CMS has required a corrective action plan from the EPM participant.
++ The EPM participant owes a repayment amount to CMS.
++ The EPM participant fails to timely comply with the corrective 
action plan or is noncompliant with the EPM's requirements.
3. Termination of an Episode Payment Model
    We set forth in proposed Sec.  512.900 that CMS may terminate any 
EPM for reasons including, but not limited to, the following:
     CMS no longer has the funds to support the applicable 
model.
     CMS terminates the applicable model in accordance with 
section 1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) 
of the Act, termination of the model is not subject to administrative 
or judicial review.
    We did not receive any comments on these proposals.
    Final Decision: We are finalizing the proposals in Sec.  512.900 
for termination of an EPM, with editorial modifications. CMS may 
terminate any EPM for reasons including, but not limited to, one of the 
following:
     CMS no longer has the funds to support the EPM; or
     CMS terminates the EPM in accordance with section 
1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) of the 
Act, termination of the model is not subject to administrative or 
judicial review.
G. Monitoring and Beneficiary Protection
1. Introduction and Summary
    With the AMI, CABG, and SHFFT models, we proposed to complement the 
CJR model implemented in 2016, as we believe the proposed EPMs 
represented additional opportunities to improve beneficiary access, 
patient outcomes, and overall quality of care across a broader spectrum 
of clinical conditions. The proposed EPM policies were intended to 
support making care more easily accessible to beneficiaries when and 
where they need it, increasing beneficiary engagement and thereby 
informing beneficiary choices.
    In the proposed rule, we stated our belief that the proposed EPMs 
would improve beneficiary access and outcomes, but we further noted 
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 refer to section III.E.3 of 
the proposed rule (81 FR 50881 through 50893) for discussion of the 
methodology for incorporating quality into the payment structure and 
the measures utilized for these models, which we believe could help 
identify and mitigate these possibilities.
2. Beneficiary Choice
    As with the CJR model, we proposed that all hospitals (with some 
limited exceptions) in the selected geographic areas for each EPM would 
participate in the proposed EPMs. An individual beneficiary will retain 
full choice of providers as they do currently, but upon agreeing to be 
admitted to an EPM participant that results in discharge from an MS-DRG 
that initiates an EPM episode, the beneficiary will not be able to opt 
out of his or her care being included in an EPM episode under the 
responsibility of that EPM participant. We do not believe that it is 
appropriate or consistent with other Medicare programs to allow a 
patient to opt out of a payment system that is unique to

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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 the proposed EPMs 
will not increase beneficiary cost-sharing. However, we also believe 
that full notification and disclosure of the EPMs and their possible 
implications is critical for beneficiary understanding and protection. 
Further, it is important to create safeguards for beneficiaries to 
ensure that care recommendations are based on clinical needs and not 
inappropriate cost savings. This is particularly important when one 
entity is held accountable for payments across multiple provider 
settings as in the design of the proposed EPMs. It also is important 
for beneficiaries to know that they can raise any concerns with their 
physicians, with the 1-800-MEDICARE helpline, or with their local 
Quality Improvement Organizations (QIOs).
    As with the CJR model and other episode-based payment models, the 
proposed EPMs will not limit a beneficiary's ability to choose among 
Medicare providers or the range of services that will be available to 
them. Beneficiaries will continue to choose any Medicare participating 
provider, or any provider that has opted out of Medicare, with the same 
costs, copayments and responsibilities as they have for other Medicare 
services that are not included in an EPM episode. Although the proposed 
EPMs will allow EPM participants to enter into sharing arrangements 
with certain providers, suppliers, and ACOs and allow EPM participants 
to recommend to beneficiaries preferred providers and suppliers, within 
the constraints of applicable laws and regulations, EPM participants 
may not restrict beneficiaries to a list of preferred or recommended 
providers or suppliers that surpass any restrictions that already exist 
under current statutes and regulations. Moreover, an EPM participant 
may not charge any EPM collaborator a fee to be included on a list of 
preferred providers or suppliers, nor may the EPM participant accept 
such payments, which would be considered to be outside the realm of 
sharing arrangements. Although the emergent nature of some of the 
clinical conditions that are the focus of the proposed EPMs may limit 
beneficiaries' abilities to plan the hospital where they will be 
treated for these conditions, such constraint should be no different 
than it will be in the absence of the EPMs. Thus, the proposed EPMs 
will not create any new restriction of beneficiary freedom to choose 
providers, including surgeons, hospitals, post-acute care providers, or 
any other providers or suppliers.
    To specifically safeguard beneficiary freedom of choice in 
decision-making about care following hospital discharge, we proposed to 
require that, similar to CJR participant hospitals, EPM participants 
must, as part of discharge planning, account for potential financial 
bias by providing each patient with a complete list of all available 
post-acute care options in the applicable service area consistent with 
medical need, including beneficiary cost-sharing and quality 
information (where available and as applicable). We stated our 
expectation that the treating physician, as well as all other treating 
practitioners, would continue to identify and discuss all medically 
appropriate options with the beneficiary, and that the EPM participant 
will discuss the various facilities and providers available to meet the 
clinically identified needs. These proposed requirements for EPM 
participants would supplement the discharge planning requirements under 
existing CoPs. We also specifically note that neither the CoPs nor this 
proposed transparency requirement preclude EPM participants from 
recommending preferred providers and suppliers within the constraints 
created by current laws and regulations, as coordination of care and 
optimization of care are important factors for successful participation 
in the EPMs.
    We invited comment on these proposals, including additional 
opportunities to ensure high quality care.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters requested that beneficiaries be 
permitted to opt out of the EPMs. One commenter was concerned that a 
beneficiary may try to ``opt out'' by driving to another hospital that 
is not an EPM participant, thus restricting the beneficiary's freedom 
of choice.
    Response: In proposing that beneficiaries are not able to opt out 
of the EPMs, we meant that beneficiaries are not able to opt out of 
having their care, when furnished in an EPM episode, paid for under the 
EPM methodology. Once a beneficiary initiates an episode through 
admission to an EPM participant for a clinical condition that results 
in discharge from an MS-DRG that begins an EPM episode, their care is 
automatically included in the EPM and they are unable to opt out of 
having their care included in an EPM episode. In the geographic region 
of that EPM participant, the EPM is how Medicare pays for care for the 
clinical condition that is the focus of that EPM episode. Beneficiaries 
do have the choice to avoid their care being paid for under the EPM by 
choosing to be admitted to a hospital that is not an EPM participant, 
which would require that the hospital be in a different MSA that has 
not been selected for EPM participation. In some cases, such as 
elective CABG, a beneficiary may choose to travel to a hospital that is 
not a CABG model participant for surgery that is planned in advance if 
the beneficiary does not want his or her care to be paid for under the 
CABG model. However, in most cases under the proposed EPMs this choice 
is infeasible because beneficiaries with AMI or hip fracture are often 
transported to hospitals by emergency medical services that use 
transport protocols to determine the hospital that will receive the 
beneficiary. In other cases of AMI, even though beneficiaries may 
travel themselves to an emergency department, it is likely that the 
severity of AMI symptoms will lead them to go to the nearest hospital 
emergency department. Once the treatment plan for the hip fracture or 
AMI is established in the emergency department, to the extent that plan 
may include immediate admission for surgery or medical management, it 
is infeasible and unsafe for the beneficiary to choose to travel to 
another hospital at that point to avoid their care being included in an 
EPM.
    By not allowing beneficiaries to opt out of having their care paid 
for under the EPM, this does not mean that their right to choose or 
decline otherwise covered Medicare items and services is limited. EPM 
beneficiaries retain their right to choose or decline items and 
services that are covered by Medicare. The EPMs are testing changes to 
how Medicare pays for care but, like Medicare payment systems, they 
neither define nor limit coverage, nor limit beneficiary choices to any 
specific covered services. In both the EPMs and other Medicare payment 
methodologies, providers are expected to not treat Medicare 
beneficiaries differently from other patients based on differences in 
Medicare payment. Moreover, the beneficiary safeguards adopted in this 
final rule ensure that the EPM payment structure does not disadvantage

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Medicare beneficiaries. We note that within traditional FFS Medicare we 
do not allow beneficiaries to opt out of any Medicare payment systems 
as payment systems exist to ensure appropriate payment for similar 
services across beneficiaries and across providers. Furthermore, 
because beneficiary cost-sharing is unchanged under the EPMs, it does 
not have a direct financial effect on beneficiaries and, therefore, 
minimizes any impacts on beneficiary freedom of choice.
    We discuss in the next section our requirement for beneficiary 
notification under the EPMs that must contain an explanation of the 
model and how it may or may not impact their care; notification that 
the beneficiary retains freedom of choice to choose providers and 
services for the EPM episode (where those choices are especially 
relevant during the 90 days following hospital discharge); 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; a 
statement that all existing Medicare beneficiary protections continue 
to be available to the beneficiary, including the ability to report 
concerns of substandard care to the QIOs and the 1-800-MEDICARE 
helpline; and a list of the providers and suppliers with whom the EPM 
participant has a sharing arrangement. We also require that individuals 
and entities with financial arrangements under the EPMs furnishing care 
to EPM beneficiaries provide notice to the beneficiary of the EPM's 
structure and the existence of the financial arrangement. Even if the 
clinical condition of a beneficiary makes it unrealistic for the 
beneficiary to make an active choice about whether or not his or her 
care is included in an EPM episode, we believe the notification 
policies provide important safeguards to protect beneficiary freedom of 
choice and access to care throughout EPM episodes which continue for 90 
days following discharge from the anchor hospitalization. Notification 
allows beneficiaries to understand the potential impact of the EPMs on 
their care and gives them the opportunity to understand the interests 
of all parties when they are presented with care recommendations that 
may lead to less costly care under the EPMs.
    Comment: Many commenters commended CMS for providing beneficiaries 
with the ability to choose among Medicare providers and the range of 
services that would be available to them under the EPM. Some commenters 
were pleased that EPM participants may not limit beneficiaries upon 
hospital discharge to receiving services only from preferred or 
recommended providers. Other commenters believe that changes to 
beneficiary care patterns under the EPMs may result in beneficiaries 
not being given true choice to continue to receive care within their 
home community and advocated for stronger protections to ensure that 
this choice is available.
    Several commenters provided suggestions about strategies CMS could 
employ to ensure that beneficiary freedom of choice is not being 
compromised under the EPMs. They encouraged CMS to monitor EPM episode 
claims data and publish these findings as part of the EPM evaluation to 
promote transparency and an understanding of the EPM's effects. The 
commenters supported CMS' proposal to review and audit hospitals if CMS 
has reason to believe an EPM participant is compromising beneficiary 
access to care. The commenters also recommended that CMS explore both 
the retrospective monitoring reviews discussed in the proposal rule, as 
well as the potential for real-time monitoring to provide more 
immediate information about EPM beneficiary care.
    Response: We appreciate the support of the commenters for our 
proposal that beneficiaries retain their freedom to choose providers 
and suppliers, as well services, under the EPMs, in the context of the 
EPMs that encourage increased care coordination and clinical pathways 
that may improve the quality and efficiency of EPM episodes. We 
understand and share the interest of the commenters in ensuring that 
this freedom of choice is realized in practice in the experience of EPM 
beneficiaries, when the financial incentives under the EPMs may lead 
EPM participants and treating providers and suppliers to make specific 
treatment recommendations to advance the EPM goal of improving the 
quality and efficiency of care. We believe that our final policies for 
beneficiary notification, including our requirements for the provision 
of a list of post-acute care providers as part of discharge planning 
and for monitoring throughout the EPMs as discussed in sections 
III.G.3. through 6. of this final rule, provide important safeguards 
for EPM beneficiary freedom of choice. Monitoring will help us to 
confirm that EPM beneficiary freedom of choice is not being restricted 
and to address timely issues of noncompliance by EPM participants or 
their related EPM collaborators, collaboration agents, or downstream 
collaboration agents that arise.
    Comment: Many commenters provided a variety of perspectives on CMS' 
proposal to require, as part of discharge planning and referral, EPM 
participants to inform beneficiaries of all Medicare participating 
post-acute care providers in an area and identify those post-acute care 
providers with whom the EPM participant has sharing arrangements, as 
well as the proposal that EPM participants may recommend preferred 
provider and suppliers, consistent with applicable statutes and 
regulations.
    The commenters in favor of CMS' proposal reasoned that it was most 
consistent with maintaining beneficiary choice under the EPMs, in the 
context of the financial incentives of the EPMs to reduce episode 
spending. However, even under CMS' proposal, multiple commenters were 
apprehensive about the potential for patient ``soft steering'' between 
EPM participants and post-acute care providers to occur due to the 
incentives for EPM participants to reduce expenditures, which could 
result in stinting on care or directing beneficiaries to low-cost 
providers that may provide substandard care. Several commenters were 
concerned that if an EPM participant reduced the number of preferred 
providers the EPM participant recommends in response to the financial 
incentives under the EPMs, patients may be required to travel further 
for care or be cared for by a provider that is not the best fit for 
their medical needs. A number of commenters recommended that CMS could 
mitigate the potential for soft steering by adding additional 
requirements for the information provided to EPM beneficiaries about 
post-acute care providers. One commenter urged CMS to institute such 
additional requirements for those preferred providers that are 
recommended by an EPM participant, including requiring that any 
preferred provider furnished enhanced services and/or higher quality 
services. Another commenter urged CMS to minimize steering by requiring 
hospitals to inform patients and their families of the post-acute care 
options available in their geographic area, as well as the pros and 
cons of selecting a particular post-acute care provider, including the 
provider's capabilities and limitations.
    Other commenters disagreed with elements of CMS' proposed 
requirements for the information that EPM participants must provide to 
beneficiaries as part of the discharge planning process. Some 
commenters objected to CMS' proposal that the EPM participant provide 
each patient with a ``complete list of all available post-acute care 
options in the applicable service

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area,'' arguing that a complete list may be difficult to keep current 
because post-acute care providers change often. Other commenters 
claimed that providing a complete list of post-acute care providers is 
not useful and will confuse and overwhelm beneficiaries when they 
receive this list, as well as a list of preferred providers and 
suppliers. The commenters pointed out that the complete list does not 
identify the quality of the post-acute care providers. As such, 
commenters suggested that EPM participants be permitted to provide a 
preferred list of post-acute care providers only, as long as that list 
is compiled based upon objective quality metrics which are explained to 
the beneficiary. Several commenters requested that CMS allow EPM 
participants to provide a list of post-acute care options based on the 
patient need.
    The commenters who urged CMS to allow EPM participants to provide a 
preferred list also requested that all Medicare discharge planning 
requirements be waived since EPM participants are being held 
financially accountable for costs throughout the episode. The 
commenters contended that by receiving a targeted list of post-acute 
care providers to choose from, EPM beneficiaries would be more likely 
to engage in their follow up care. Alternatively, the commenters 
recommended that if CMS does not allow EPM participants to provide only 
a preferred list that EPM participants should be allowed to exclude 
certain post-acute care providers with poor quality performance from 
the complete list. They rationalized these suggestions by stating that 
continuity of care efforts may be hampered between EPM participants and 
preferred providers if beneficiaries choose to receive post-acute care 
services from providers on the complete list as opposed to the 
preferred list, particularly if those post-acute care providers have 
poor quality performance, yet the EPM participant is still responsible 
for the cost and quality performance of the EPM episode. The commenters 
further asserted that in order to align with the goals of the EPM to 
reduce cost and improve quality of care and care coordination through 
care redesign efforts, EPM participants should be permitted collaborate 
with post-acute care providers by selectively targeting those post-
acute care providers best able to meet the need for consistency of care 
and ongoing collaboration and communication with EPM participants 
regarding the care of EPM beneficiaries.
    Other commenters in favor of providing only a preferred list 
believe this approach would make it easier for physicians to know which 
beneficiaries are in the EPMs and for which they are accountable. 
Several commenters urged CMS to allow hospitals, physicians, and post-
acute care facilities to organize into provider teams that can better 
coordinate care for patients and improve adherence to treatment plans 
throughout the episode. The commenters were concerned about EPM 
participants that would be held accountable for EPM episode quality and 
spending if the patient chooses a sub-optimal post-discharge facility 
and believe that EPM participants should be able to recommend post-
acute care providers that they have evaluated and work with to provide 
higher quality, lower cost care.
    Response: Given the wide range of the commenters' views, we believe 
that our proposed policy on the information about post-acute care 
providers that must be shared with beneficiaries as part of discharge 
planning and referral represents a middle position that appropriately 
balances transparency and beneficiaries' need to be informed of their 
full range of post-acute care provider options to maintain freedom of 
choice, with EPM participants' desire to inform beneficiaries of those 
post-acute care providers that are most efficient and provide the 
highest quality care.
    We believe that requiring the provision of a complete list is most 
consistent with the CoP on discharge planning in Sec.  482.43 and 
ensures that beneficiaries have full information about post-acute care 
providers in the area. To allow EPM participants to provide only a 
preferred list, even if that list were compiled based on objective 
criteria, could restrict beneficiary freedom of choice of providers and 
suppliers under the EPM and would be inconsistent with the discharge 
planning CoP on that basis. It could also increase the risk of patient 
``soft steering'' between EPM participants and post-acute care 
providers due to the incentives for EPM participants to reduce 
expenditures, which could result in stinting on care or directing 
beneficiaries to low-cost providers that may provide substandard care. 
We did not propose to waive any aspect of the discharge planning CoP 
and continue to believe the CoP provides important protections for 
Medicare beneficiaries, including those in an EPM episode, regarding 
discharge planning, while the proposed EPM requirements are designed to 
supplement existing discharge planning requirements in the context of 
the EPMs. We also disagree with the commenters that providing a 
complete list of post-acute care providers in the area would reduce the 
likelihood of meaningful beneficiary engagement in follow up care as 
compared to their engagement if we were to permit EPM participants to 
provide only a list of preferred providers and suppliers.
    Therefore, as we proposed we are requiring EPM participants to 
provide a complete list of post-acute care providers to EPM 
beneficiaries as part of discharge planning and referral, and we will 
not waive Medicare's discharge planning CoP. EPM participants need to 
make sure the complete list provided to EPM beneficiaries is based on 
the most current, available information. There are publicly available 
sources that can be used to maintain and update complete lists of post-
acute care providers in the area. Because such complete lists are 
required to be presented to patients for whom home health care or post-
hospital extended care services are indicated and appropriate as 
determined by the discharge planning evaluation under the discharge 
planning CoP in the discharge plan for patients who are likely to 
suffer adverse health consequences upon discharge if there is no 
adequate discharge planning under Sec.  482.43, we believe that EPM 
participants already prepare such lists for many beneficiaries. 
Therefore, applying this requirement to all EPM beneficiaries with a 
medical need for a specific level of post-acute care services does not 
result in any significant additional administrative burden on EPM 
participants.
    While we proposed to require that EPM participants provide each 
patient with a complete list of all available post-acute care options 
in the applicable service area consistent with medical need, we did not 
propose the parameters related to medical need in regulation. We agree 
with the commenters that the complete list of post-acute care providers 
presented to EPM beneficiaries should be based on medical need. For 
example, we do not believe it would be appropriate for an EPM 
participant to provide a complete list of SNFs to an EPM beneficiary as 
part of discharge planning and referral if SNF care would not be 
medically necessary for the beneficiary following hospital discharge. 
Therefore, we are clarifying in Sec.  512.450(a)(1) that as part the 
discharge planning and referral, EPM participants must provide a 
complete list of HHAs, SNFs, IRFs, or LTCHs that are participating in 
the Medicare program in an area, and that this list must be presented 
to EPM beneficiaries for whom home health care, SNF, IRF, or LTCH 
services are medically necessary.

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    We further note that, while this list must include all post-acute 
care providers that meet the regulatory requirements and, therefore, 
may not exclude those post-acute care providers with poor quality 
performance based on the provisions of the EPM, we also proposed to 
require that the complete list include beneficiary cost-sharing and 
quality information (where available and as applicable), although we 
did not incorporate this in our proposed regulations. We do not believe 
it would be appropriate for the complete list to require that 
beneficiary cost-sharing and quality information be included due to the 
potential burden on EPM participants to prepare this additional 
information. However, we are confirming that EPM participants may 
provide beneficiary cost-sharing and quality information about post-
acute care providers on the complete list, as long the EPM participant 
includes cost-sharing and quality information that is comparable for 
all the post-acute care providers on the complete list. Providing this 
information on only a subset of post-acute care providers on the 
complete list could be used to steer beneficiaries to certain post-
acute care providers and that would be contrary to the purposes of 
transparency and beneficiary freedom of choice that are the underlying 
reasons for providing the complete list.
    In response to the commenters who expressed concern that 
beneficiaries would be confused by the complete list of post-acute care 
providers, especially if also provided with a preferred list of 
providers, we believe that discharge planning involves discussions with 
beneficiaries and caregivers and that those professionals engaged in 
discharge planning, including the treating physician as well as all 
other treating practitioners, will continue to identify and discuss all 
medically appropriate options with the beneficiary to meet the 
beneficiary's clinically identified needs. In addition, we expect that 
the EPM participant will discuss the various facilities and providers 
available to meet the clinically identified needs, taking into account 
patient and family preferences when they are expressed. We are 
confident that through these important discussions related to post-
discharge planning EPM participants will be available to satisfactorily 
address any confusion on the part of beneficiaries and caregivers about 
the list(s) of post-acute care providers that the EPM beneficiary 
receives.
    We proposed that EPM participants could also identify preferred 
providers and suppliers as part of the discharge planning and referral 
process, consistent with applicable statutes and regulations. This 
would allow EPM participants to provide information to EPM 
beneficiaries about high-quality, efficient providers that an EPM 
participant would prefer patients choose, on the basis of internal 
assessments of quality and cost. Because we recognize that there may be 
many high quality and efficient post-acute care providers and suppliers 
who do not enter into sharing arrangements with EPM participants, we do 
not believe that the EPM participant's list of preferred providers and 
suppliers must include only EPM collaborators, nor do we believe that 
all EPM collaborators must be considered to be preferred providers and 
suppliers.
    While we understand that some commenters would like us to 
additionally require that the preferred providers and suppliers 
recommended by the EPM participant be determined based on specific 
criteria such as the provision of enhanced services or higher quality 
care in order to further safeguard against patient steering in 
discharge planning, we believe that establishing such requirements 
would be overly prescriptive and is unnecessary. Because EPM 
participants are responsible for EPM episode cost and quality 
performance, and the EPM episode includes the period of time during 
which an EPM beneficiary would be receiving post-acute care services 
following discharge from the anchor hospitalization, EPM participants 
have a vested interest in recommending only those post-acute care 
providers on a preferred list that the EPM participant has reason to 
believe will provide care that will advance the EPM goals. Therefore, 
we do not believe it is necessary for to us to set additional 
requirements for the list of preferred providers and suppliers beyond 
those already applicable under existing statutes and regulations 
because to do so would limit the flexibility of EPM participants to 
identify such preferred providers and suppliers. We recommend that EPM 
participants be transparent in how preferred providers and suppliers 
are generally selected, and note that policies that define the 
relationships between the EPM participant and the physicians and post-
acute care providers and suppliers in its region must be consistent 
with applicable laws and regulations, but we do not believe that the 
details of hospitals' internal business processes must be disclosed.
    Allowing EPM participants to recommend post-acute care providers on 
the preferred list to EPM beneficiaries, in addition to providing the 
complete list, meets the need of EPM participants for care redesign 
that improves the quality and reduces the cost of EPM episodes through 
collaboration with post-acute care providers that are best able to 
provide consistency of care and ongoing collaboration and communication 
with EPM participants regarding the care of EPM beneficiaries, while 
not restricting beneficiary freedom of choice. We disagree that 
considerations of ease of physician identification and tracking of EPM 
beneficiaries should be a consideration in determining the lists of 
post-acute care providers that are provided to EPM beneficiaries as 
part of the discharge planning and referral process. EPM participants 
are accountable for EPM episodes and, therefore, have the primary 
identification and tracking responsibility for EPM beneficiaries.
    We agree with those commenters who believe that hospitals, 
physicians, and post-acute care facilities that organize into provider 
teams may better coordinate care for patients and improve adherence to 
treatment plans throughout the EPM episodes. Our provisions for 
financial arrangements under the EPMs that are discussed in section 
III.I. of this final rule facilitate the financial alignment of 
providers, suppliers, and ACOs in care redesign that advances the goals 
of the EPMs. By allowing EPM participants to recommend to EPM 
beneficiaries post-acute care providers on a preferred list, while 
requiring transparency about the existence of sharing arrangements with 
post-acute care providers on the list and prohibiting EPM participants 
from charging fees or accepting payments from any EPM collaborator to 
be on the list, we expect that EPM participants will be able to 
capitalize on the care redesign work of such teams, without restricting 
beneficiary freedom of choice. EPM participants are able to recommend 
post-acute care providers on a preferred list that is developed in a 
way that is consistent with applicable statues and regulations and who 
they have evaluated and work with to provide higher quality, lower cost 
care, as long as the financial relationships among the parties are 
disclosed.
    Finally, since there is no requirement that the beneficiary receive 
post-acute care services from a provider on a preferred list, we do not 
believe the size of the preferred list will influence the distance an 
EPM beneficiary needs to travel for post-acute care services. The 
beneficiary may select any provider of post-acute care services for 
care, and the EPM participant must also provide a complete list of 
post-acute care

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providers in the area so that the beneficiary has complete information 
to make his or her choice.
    Comment: Several commenters requested clarification of ``in the 
area'' in the context of the requirement that EPM participants must 
inform beneficiaries of all Medicare participating post-acute care 
providers in the area as part of discharge planning and referral 
because the proposed regulation did not define this phrase. The 
commenters observed that ``in the area'' could have different meanings 
for different EPM participants and beneficiaries. One commenter noted 
that for EPM participants that provide tertiary care, it would be 
unreasonable to require them to provide a complete list of post-acute 
care providers in the patient's home service area when it is not the 
same service area as the EPM participant.
    Response: As discussed in the proposed rule (81 FR 50915), the 
proposed requirement for EPM participants to inform beneficiaries of 
all participating post-acute care providers in an area as part of 
discharge planning and referral would supplement the discharge planning 
requirements under the existing CoP. The intention of this EPM 
requirement is to ensure that beneficiaries are given information about 
potential post-acute care options in a geographic area that is 
convenient to the beneficiary after discharge from the hospital. 
Therefore, for consistency with the complete lists of HHAs or SNFs 
already required for some patients in the discharge plan under the 
discharge planning CoP, we are requiring that EPM participants provide 
a list of HHAs, SNFs, IRFs, or LTCHs that are available to the EPM 
beneficiary, that are participating in the Medicare program, and that 
serve the geographic area (as defined by the HHA) in which the patient 
resides, or in the case of a SNF, IRF, or LTCH, in the geographic area 
requested by the patient. As discussed previously, this list must be 
presented to EPM beneficiaries for whom home health care, SNF, IRF, or 
LTCH services are medically necessary. We have added to Sec.  512.2 the 
definition of area that is the same definition used in the CoP for 
discharge planning. Area means ``as defined in Sec.  400.200 of this 
chapter, the geographical area within the boundaries of a State, or a 
State or other jurisdiction, designated as constituting an area with 
respect to which a Professional Standards Review Organization or a 
Utilization and Quality Control Peer Review Organization has been or 
may be designated.'' We note that we expect the SNF list provided to an 
EPM beneficiary would also include all rural hospital providers of SNF-
level care in swing beds in the geographic area requested by the 
patient.
    In response to the commenter who was concerned that it would be 
unreasonable to require EPM participants to provide a complete list of 
post-acute care providers in the patient's home service area when it is 
not the same service area as the EPM participant, we note that this 
requirement already exists under the CoP for discharge planning for 
those Medicare beneficiaries who need a discharge plan and for whom 
home health care is indicated and appropriate as determined by the 
discharge planning evaluation. The EPMs simply extend this requirement 
to all EPM beneficiaries so we believe the provision of such lists is 
feasible for EPM participants. We emphasize that the EPMs do not 
restrict Medicare beneficiaries' ability to choose to receive post-
acute care services from any Medicare-enrolled provider, regardless of 
the geographic location of that provider.
    Comment: Several commenters encouraged CMS to allow EPM 
participants to educate beneficiaries on where electronic listings of 
post-acute care providers can be found, rather than providing EPM 
participants with hard copy lists. The commenters suggested that 
beneficiaries could be provided with a notification advising where the 
complete, electronic list could be located, and that beneficiaries may 
receive a hard copy upon request.
    Other commenters requested that CMS, rather than the EPM 
participant, provide a list of all Medicare-participating post-acute 
care providers through the CMS and/or MAC Web sites, as CMS already has 
this information. The commenters asserted that compiling, updating and 
providing this information is an administrative burden on EPM 
participants that could be better handled by CMS.
    Response: We appreciate commenters' feedback regarding the form and 
preparation of the complete list of post-acute care providers that EPM 
participants must provide to EPM beneficiaries based on medical 
necessity as part of discharge planning and referral. We believe it is 
imperative to provide the complete list, as well as a preferred list if 
applicable, in a written manner as part of discharge planning and 
referral. Beneficiaries may not have online access at the time of 
discharge planning, and we believe that the presentation of hard copy 
lists is key to facilitating productive discharge planning discussions 
with beneficiaries and caregivers. EPM participants are welcome to post 
these lists on their Web site to supplement any hard copy list provided 
as a part of discharge planning and referral.
    Finally, we believe that the EPM participant, rather than CMS, is 
in the best position to provide the complete list of post-acute care 
providers that is medically necessary for an EPM beneficiary. Because 
such complete lists are required to be presented to patients for whom 
home health care or post-hospital extended care services are indicated 
and appropriate as determined by the discharge planning evaluation 
under the discharge planning CoP in the discharge plan for patients who 
are likely to suffer adverse health consequences upon discharge if 
there is no adequate discharge planning under Sec.  482.43, we believe 
that EPM participants already prepare such lists for many 
beneficiaries. In addition, we expect that the EPM participant will 
discuss with the EPM beneficiary the various facilities and providers 
available to meet the clinically identified needs, taking into account 
patient and family preferences when they are expressed and, therefore, 
the EPM participant is best-positioned to prepare the complete list and 
provide it to the EPM beneficiary.
    Comment: Several commenters stated their belief that the best 
approach to avoiding patient steering and promoting patient choice is 
by educating the beneficiary about the EPMs and the effects on the care 
they may receive. Some commenters further requested that CMS mandate 
shared decision-making tools be used during the discharge planning 
process, such as a patient-decision aid to provide balanced, evidence-
based sources of information about treatment options. Several 
commenters encouraged CMS to adopt more detailed requirements for an 
all-inclusive discharge planning process that engages a broad team of 
health professionals in the discharge decision-making process, 
considers the beneficiary's personal health care goals and preferences 
in order to provide for better access to care, and does not lose sight 
of what best meets the needs of the individual patient, while still 
being cost-effective. One commenter urged CMS to specifically require 
that discharge planning involve an interdisciplinary team that 
incorporates expertise in all post-acute care capabilities.
    One commenter who believes that discharge planning has historically 
been focused on getting the patient out of the hospital rather than any 
extended planning relative to post-hospital care

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urged CMS to consider the wider and time-extended responsibility for 
post-hospital care planning that occurs under an EPM. The commenter 
requested that CMS require the EPM participant to offer advance care 
planning discussions as part of care planning that represents the 
evolution of hospital discharge planning to fit the needs of EPMs.
    Other commenters requested that CMS provide a discharge planning 
notice template to ensure that discharge planning under the EPMs leads 
to successful transitions. One commenter further recommended that CMS 
soften the language in the CoP for discharge planning to enable more 
fruitful conversations between patients and their care teams, and 
ultimately more effective and efficient transitions of care.
    Response: We appreciate the interest of the commenters in 
successful discharge planning for EPM beneficiaries that results in 
improved quality and reduced costs for EPM episodes. As discussed 
previously, we did not propose to waive any aspect of the discharge 
planning CoP and continue to believe the CoP provides important 
protections for Medicare beneficiaries, including those included in an 
EPM episode of care, regarding discharge planning, while the proposed 
EPM requirements are designed to supplement existing discharge planning 
requirements in the context of the EPMs. We believe that adopting 
additional requirements under the EPMs for discharge planning or care 
planning beyond those that currently exist under all applicable statues 
and regulations would be overly restrictive for EPM participants 
without providing additional, necessary beneficiary safeguards and is, 
therefore, unnecessary. Therefore, we will not require EPM participants 
to engage in specific additional activities such as advance care 
planning, use specific strategies such as shared decision-making tools, 
or involve specified teams of health professionals, beyond any existing 
requirements under applicable statutes and regulations. For these same 
reasons, we also decline to adopt the commenters' suggestion that CMS 
provide a discharge planning template to EPM participants, as we 
believe such a template would be overly restrictive.
    We expect that the accountability of EPM participants for the cost 
and quality of EPM episodes will lead them to work toward successful 
discharge planning that results in post-discharge services and 
beneficiary experiences that advance the EPM goals. As part of care 
redesign, we expect that EPM participants may make changes to their 
current discharge planning processes to improve care coordination and 
informed beneficiary decision-making to the extent these factors are 
expected to improve the quality and efficiency of EPM episode care and 
the revised approaches are consistent with all applicable statutes and 
regulations.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.450(a) for 
beneficiary choice under the EPMs, with modification to clarify the 
complete list of post-acute care providers to be provided to the EPM 
beneficiary as part of discharge planning and referral. Additionally, 
we are finalizing the proposal that beneficiaries cannot opt out of 
having their care included in an EPM episode, without modification. The 
EPM beneficiary choice policies are the following:
     The EPMs do not restrict Medicare beneficiaries' ability 
to choose any Medicare enrolled provider or supplier, or any physician 
or practitioner who has opted out of Medicare.
    ++ As part of discharge planning and referral, EPM participants 
must provide a complete list of HHAs, SNFs, IRFs, or LTCHs that are 
participating in the Medicare program, and that serve the geographic 
area (as defined by the HHA) in which the patient resides, or in the 
case of a SNF, IRF, or LTCH, in the geographic area requested by the 
patient.

--This list must be presented to EPM beneficiaries for whom home health 
care, SNF, IRF, or LTCH services are medically necessary.
--EPM participants must specify on the list those post-acute care 
providers on the list with whom they have a sharing arrangement.
--EPM participants may recommend preferred providers and suppliers, 
consistent with applicable statutes and regulations.
--EPM participants may not limit beneficiary choice to any list of 
providers or suppliers in any manner other than that permitted under 
applicable statutes and regulations.
--EPM participants must take into account patient and family 
preferences when they are expressed.
--EPM participants may not charge any EPM collaborator a fee to be 
included on any list of preferred providers or suppliers, nor may the 
EPM participant accept such payments.
3. Beneficiary Notification
    As we stated in the EPM proposed rule, we believe that beneficiary 
notification and engagement is essential because under the proposed 
EPMs, there will be a change in the way EPM participants are paid, 
which could affect the type of care or treatments beneficiaries 
receive. While we believe that existing Medicare provisions are 
effective in protecting beneficiary freedom of choice and access to 
appropriate care, we also believe that the additional safeguards 
implemented with the CJR model will also be appropriate under the 
proposed EPMs. We believe that appropriate beneficiary notification 
should--(1) explain the model; (2) advise beneficiaries and their 
families or caregivers of the beneficiaries' clinical needs and care-
delivery choices; and (3) clearly specify that any non-hospital 
provider holding a risk-sharing arrangement with the EPM participant 
should be identified to the beneficiary as a financial partner of such 
EPM participant for the purposes of services covered under the proposed 
EPMs' episodes. Through these policies, we sought to enhance 
beneficiaries' understanding of their care, improve their abilities to 
share in the decision-making, and give them 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 may or may 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, including the ability to report concerns 
of substandard care to Quality Improvement Organizations (QIO) and the 
1-800-MEDICARE helpline.
    However, we acknowledged that because of the emergent nature of 
admissions related to the clinical conditions that are the focus of the 
proposed EPMs, in particular the AMI and SHFFT models, many patients 
initially admitted for such episodes may not, at the time of admission, 
be capable of receiving appropriate notification. In addition, there 
may be situations in which it is not determined until after an 
admission that the patient's care will be included in an EPM episode. 
In such situations, because the decision to admit may not be made in 
advance, it would be appropriate that the notifying entity be the EPM 
participant. Nonetheless,

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consistent with CJR policy, we proposed that EPM participants must: (1) 
Require all providers and suppliers that execute EPM sharing 
arrangements with such EPM participants to share with beneficiaries or 
beneficiary representatives certain notification materials, to be 
developed or approved by CMS, that detail the applicable EPM; and (2) 
where feasible, provide such information in advance of admission for 
services included in EPM episodes. When, due to the emergent nature of 
the admission, it is not feasible to provide such notification in 
advance of admissions, we proposed that the EPM participant would be 
responsible for providing such notifications as soon as reasonably 
practicable but no later than discharge from the hospital accountable 
for the episode. Under our proposal, EPM participants would be required 
to provide such notifications as a condition of any EPM sharing 
arrangements. Where an EPM participant does not have such sharing 
arrangements with providers or suppliers that furnish services to 
beneficiaries during EPM episodes, or where admissions for covered 
episodes of care are ordered by physicians who do not have such EPM 
sharing arrangements, we proposed that the EPM participant must provide 
such beneficiary notification materials at the earliest time that is 
reasonably practicable but no later than discharge from the hospital 
accountable for the episode.
    Further, we proposed that each participant of an ACO that has 
entered into a sharing arrangement with the EPM participant provide to 
each EPM beneficiary a written notice of the EPM's structure and the 
existence of the ACO's sharing arrangement with the EPM participant. 
Under this proposal, the ACO must require any ACO participant with 
which such ACO has relevant distribution arrangements, to provide the 
written notification. We proposed the ACO must provide such beneficiary 
notification no later than the time at which the beneficiary first 
receives services from such ACO participant and/or an ACO PGP member 
collaboration agent during the EPM episode. We understand that various 
providers and suppliers, including hospitals, may be ACO participants; 
therefore, if, due to the emergent nature of a particular admission, it 
is not feasible to provide such notification in advance of such 
admission, the ACO participant would be responsible for providing such 
notification as soon as reasonably practicable but no later than 
discharge from the hospital accountable for the episode. The purpose of 
this proposed policy was to ensure that all beneficiaries who initiate 
EPM episodes and/or their designated representatives receive the 
beneficiary notification materials as early as possible. We believe 
that this proposal targeted beneficiaries for whom information is 
relevant, and increased the likelihood that patients would become 
engaged and seek to understand the EPMs and their potential impact on 
their care.
    We also proposed that an EPM participant must provide the 
beneficiary with a written notice of any potential financial liability 
associated with non-covered services recommended or presented as an 
option as part of discharge planning, no later than the time that the 
beneficiary discusses a particular post-acute care option or at the 
time the beneficiary is discharged, whichever occurs earlier. We 
proposed that if the hospital knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the hospital must notify the beneficiary that the service would 
not be covered by Medicare. Moreover, if the hospital is discharging a 
beneficiary to a SNF prior to the occurrence of a 3-day hospital stay, 
and the beneficiary is being transferred to or is considering a SNF 
that would not qualify under the SNF 3-day waiver discussed in section 
III.J.6.a. of the proposed rule (81 FR 50939 through 50041), the 
hospital must notify the beneficiary that he or she will be responsible 
for costs associated with that stay, except those which would be 
covered by Medicare part B during a non-covered inpatient SNF stay.
    We proposed that all providers and suppliers that are required to 
provide notice to beneficiaries of the EPM model (participant and 
collaborator hospitals, PGPs, physicians, nonphysician practitioners, 
post-acute care providers and suppliers, and ACOs) must be able to, 
upon request by CMS, indicate compliance with the beneficiary 
notification requirements outlined in this section. The participant or 
collaborator should be able to generate a list of beneficiaries that 
received such notification and when the notification was received and 
provide it to CMS upon request. We noted that the method employed to 
document beneficiary notification may vary; for example, some hospitals 
and collaborators may retain a list of all beneficiaries that received 
the notification; document in the medical record that the beneficiary 
received the beneficiary notification; add a barcode to the 
notification form to be scanned into the medical record; or employ 
another method of recordkeeping. Regardless of the method used for 
recordkeeping, the entity must be able to provide CMS with a list of 
all beneficiaries that received the notification materials in a 
specified time period. This requirement will aid CMS in monitoring EPM 
participant and collaborator compliance with the EPM notification 
requirements.
    We noted that Medicare beneficiaries are accustomed to receiving 
similar notices of rights and obligations from health care providers 
prior to the start of inpatient care, or, as appropriate, under 
emergency conditions. In following the same guidelines established for 
the CJR model, we aimed to limit confusion and to provide consistent 
direction to hospitals which may be participating in both the CJR model 
and the EPMs. We invited comment on ways in which the timing and source 
of beneficiary notification might be modified to best serve the needs 
of beneficiaries without creating unnecessary administrative work for 
providers.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters stressed that education and 
counseling for patients and caregivers is crucial to patient outcomes. 
From the perspective of the commenters, when patients and caregivers 
receive real-time information from providers in language they can 
understand, patients and caregivers can then take on more active roles 
and participate more fully in the care patients receive and make more 
informed decisions. The commenters commended CMS for recognizing the 
importance of communication between providers, patients, and caregivers 
in favorably influencing health outcomes. In addition, the commenters 
agreed that beneficiaries should be adequately educated about 
applicable Medicare provisions for their care so that they can make 
informed choices about what care is appropriate for them. Most 
commenters were pleased that CMS proposed detailed beneficiary 
notification requirements that would require EPM participants and CJR 
hospital participants to advise patients and caregivers of care choices 
and explain how the EPMs or CJR model might impact the care they 
receive. One commenter suggested that detailed beneficiary notification 
should only be provided upon beneficiary request.
    Other commenters stated that the proposed notification requirements 
imposed on EPM participants and CJR hospital participants add a 
significant unnecessary burden with no notable impact on beneficiary 
care. One

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commenter stated that EPM beneficiary notification is unnecessary 
because providers and suppliers do not provide such notices under the 
IPPS when a beneficiary is admitted to the hospital. Another commenter 
stressed that the complexities of patient identification, attribution, 
and precedence rules make providing the correct notification at the 
correct time an operational barrier to successful beneficiary 
notification under the EPM. While several commenters agreed with the 
idea of promoting transparency for beneficiaries, from their 
perspective this ideal was outweighed by the administrative burden of 
beneficiary notification. The commenters stated that the beneficiary 
notification requirement will require investment in significant heath 
IT resources to build the necessary tools and reminders in the 
Electronic Health Record in order to comply with the detailed 
notification requirement. Several commenters also objected to the 
proposed requirement that EPM participants furnish to CMS upon request 
the list of patients who received beneficiary notification and the date 
the notification was provided on the grounds that it is unduly 
burdensome. One commenter on the proposal for the CJR model requested 
that CMS delay the proposed requirement that CJR hospital participants 
be able to report beneficiaries who received notification until July 1, 
2017, noting that it will take time for participants to develop and 
build information technology programs to retrieve the names of 
beneficiaries who have received a beneficiary notification, including 
the date received, for any period of time that CMS may request.
    Other commenters urged CMS to be responsible for providing the 
detailed beneficiary notification to alleviate the administrative 
burden on EPM participants. Furthermore, because participation in the 
EPMs is required in the selected geographic regions, some commenters 
suggested that CMS be responsible for providing the beneficiary 
notification for this reason as well. The commenters speculated CMS 
could provide the beneficiary notifications via the annual ``Medicare & 
You'' handbook that is mailed to all Medicare beneficiaries by adding 
an insert with the mailing clearly notifying the beneficiary of the 
Innovation Center models being tested in their MSA and describing how 
those models may impact beneficiaries who are admitted to a hospital 
with certain conditions or have certain procedures.
    Response: We believe that providing full notification and 
disclosure of the EPMs or CJR model and the possible implications for 
beneficiaries' access to care is essential to ensuring that 
beneficiaries understand the EPMs or CJR model, are protected from 
potential harm under the EPMs or CJR model, and maintain freedom of 
choice of providers and suppliers, as well as services, throughout EPM 
or CJR episodes. We previously finalized detailed beneficiary 
notification requirements for the CJR model in the CJR Final Rule (80 
FR 73516 through 73521). We believe it is essential that this 
notification be specific to beneficiaries whose care is actually 
included in the EPMs or CJR model and provided in close proximity (or 
during) the EPM or CJR episode so it is meaningful to the beneficiary 
while he or she is receiving recommendations for care during the EPM or 
CJR episode. In addition, we believe that all beneficiaries whose care 
is included in an EPM or CJR episode should be provided with detailed 
information about the model, not just those beneficiaries who request 
such information. It is not possible for CMS to target notification to 
the specific Medicare beneficiaries who initiate an EPM or CJR episode; 
instead, the entity with the best, most timely information on a 
beneficiary's status is the EPM participant or CJR hospital participant 
because the beneficiary's EPM or CJR episode initiates at the EPM 
participant or CJR hospital participant.
    Like the CJR model, the EPMs incorporate financial incentives for 
reducing the cost of care for all related items and services furnished 
to EPM beneficiaries during the anchor hospitalization and the 90 days 
post-hospital discharge. This payment methodology creates the potential 
for the unintended consequences of reduced access to care or care 
stinting that are not present under the IPPS, which provides a single 
payment to the hospital for a hospitalization, without regard to 
payments for Part B services during the inpatient hospitalization or 
payment for any Part A or Part B items or services furnished after 
hospital discharge. Thus, while such notification is not required under 
the IPPS, we believe the EPM detailed beneficiary notification 
requirement encourages care recommendations that are based on the 
clinical needs of beneficiaries and not on inappropriate cost savings. 
Moreover, we note that all existing Medicare beneficiary protections 
continue to be available to the EPM beneficiary. These include the 
ability to report concerns of substandard care to the 1-800-MEDICARE 
helpline and the QIOs, where staff will be trained to assist EPM 
beneficiaries with any concerns they may have about their care under 
the EPMs.
    While we understand that this detailed notification requirement 
places some additional burden on EPM participants and CJR hospital 
participants, we believe the value of the notification in protecting 
beneficiaries from harm and maintaining beneficiary freedom of choice 
outweighs this burden, given the potential for beneficiary steering and 
care stinting that may result from the financial incentives under the 
EPM or CJR model. Based on their early implementation experience with 
the CJR model, CJR hospital participants already have significant 
experience with similar detailed notification requirements to those we 
proposed for the EPMs and CJR model. We further note that EPM 
participants have experience with required notification of beneficiary 
rights and obligations upon hospital admission, and we expect EPM 
participants will draw upon this experience in operationalizing the 
beneficiary notification requirement for the EPMs. We encourage EPM 
participants to notify all beneficiaries under circumstances where it 
is likely that the beneficiary's care will be included in the EPM, even 
if the EPM participant may be unable to be certain, in view of the 
rules around model attribution and precedence or the rapid pace of 
clinical care, in a timeframe that would otherwise allow timely 
beneficiary notification that meets the EPM requirements.
    In response to those commenters who specifically objected to the 
proposed requirement that EPM participants provide to CMS upon request 
the list of beneficiaries who received notification and the date of 
that notification, this record access and retention requirement is the 
same as the requirement for other records under the EPMs where those 
records must be maintained and the Government provided access to enable 
audit, evaluation, inspection, or investigation as discussed in section 
III.H. of this final rule. Given the importance of beneficiary 
notification as a beneficiary safeguard under the EPMs, we must be able 
to monitor the sufficiency of such notifications. Additionally, 
regarding the request of one commenter that we delay implementing the 
proposed requirement that CJR hospital participants be able to provide 
information on beneficiaries notified upon request by CMS, as discussed 
in section V.H. of this final rule, the effective date of the full 
amended beneficiary notification regulations in Sec.  510.405 for the 
CJR

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model is July 1, 2017, which is consistent with the commenter's request 
for the delayed timing of the effective date of this requirement.
    Comment: Several commenters provided their perspectives on CMS' 
proposal for the contents and timing of the detailed beneficiary 
notification. The commenters urged CMS to adopt the proposed detailed 
notification elements, including a detailed explanation of the EPM and 
how it might be expected to affect the beneficiary's care; notification 
that the beneficiary retains freedom of choice to choose providers and 
services; explanation of how patients can access care records and 
claims data; a statement about all existing Medicare beneficiary 
protections that continue to be available to the beneficiary; and a 
list of the providers and suppliers with whom the beneficiary has a 
sharing arrangement. One commenter suggested that the notification 
should highlight that participation in an EPM is intended to improve 
quality and reduce waste, rather than focus on notifying beneficiaries 
of sharing arrangements. Several commenters stated that while patients 
should be informed that they are receiving care from a hospital that is 
required to participate in the EPM, beneficiaries should not be given 
reason to be unnecessarily worried about the quality of care they will 
receive.
    Some commenters suggested that the beneficiary notification be 
provided prior to admission for an anchor hospitalization. One 
commenter stated that notification at the point of admission for LEJR 
under the CJR model was too late because it would not occur at a time 
when beneficiaries could process and act on the information. Several 
commenters on the CJR model proposal for the detailed beneficiary 
notification recommended that the delivery of the notification to a 
beneficiary occur before admission to an anchor hospitalization, 
stating that notification could be provided by the admitting physician 
regardless of his or her participation in the CJR model as a 
collaborator or, alternatively, the CJR participant hospital could 
convey the notification prior to admission once the surgery is 
scheduled. Another commenter requested that CMS allow the beneficiary 
notification to be given at any time during a CJR episode, arguing that 
requiring providers to furnish beneficiary notifications prior to 
admission for surgery under the CJR model leads to additional 
administrative burden on providers.
    Other commenters were concerned that given the emergent nature of 
some EPM episodes, notice may not always be able to be provided upon 
admission since MS-DRGs are not assigned to beneficiaries until the 
claim is coded and submitted for payment following the beneficiary's 
discharge from the hospital. One commenter urged CMS to work with the 
provider community to identify exceptions where delivering a 
notification is not possible prior to discharge and create an exception 
to the detailed beneficiary notification requirement in these cases. 
The commenter provided the example of instances where patients are 
admitted and then subsequently transferred to another facility for a 
higher level of care, claiming that in this scenario there may not be 
time to provide the notification. As a result, the commenter believes 
that EPM participants may be penalized due to a clinical situation that 
is beyond their control.
    Response: We appreciate the commenters' support for the proposed 
elements of the detailed beneficiary notification. We do not believe 
that providing detailed notification to a beneficiary that his or her 
care is included in an EPM in a format that presents the proposed 
elements should lead to undue beneficiary concerns about the quality of 
their care, especially given the beneficiary safeguards that are being 
adopted for the EPMs. Given the importance of transparency of financial 
arrangements under the EPMs that have the potential to influence care 
recommendations for EPM beneficiaries, we disagree with the commenter 
that providing information on sharing arrangements in the EPM 
participant's detailed notification to the beneficiary is unnecessary.
    We have further considered the timing of the required detailed 
beneficiary notification in view of the public comments. For the EPMs, 
we proposed that the EPM participant must provide notification upon 
admission to the hospital or immediately following the decision to 
schedule a procedure or provide a service which would result in a 
patient being discharged under a covered episode. The proposed EPM 
regulation text specified that where, due to the patient's condition, 
it may not be feasible to provide notification at such times, the 
notification must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable but no later than 
discharge from the hospital accountable for the episode. We believe 
this timing is generally appropriate and provides EPM participants and, 
similarly, CJR hospital participants with necessary flexibility 
regarding the timing of the detailed notification for beneficiaries 
with the clinical conditions that are the focus of EPM or CJR episodes. 
We disagree with the commenter who suggested that beneficiary 
notification could be provided any time during a CJR episode because it 
is important that beneficiaries be advised as early as possible in an 
episode (if not before the episode begins) that their care is included 
in an EPM or CJR episode, in order to safeguard beneficiary freedom of 
choice of providers and services and ensure the beneficiary's 
understanding of how the model might be expected to affect the 
beneficiary's care.
    We believe that the earliest point in time that the detailed 
beneficiary notification could be provided by the EPM participant or 
CJR hospital participant is when the admission is scheduled in advance 
with the EPM participant or CJR hospital participant, consistent with 
the request of some commenters that the notification be provided prior 
to hospital admission for the anchor hospitalization. However, under 
the EPMs many admissions will be unscheduled due to the clinical 
conditions that are the focus of the models and in those circumstances, 
beneficiary notification must be provided upon admission or as soon as 
is reasonably practicable but no later than discharge from the EPM 
participant accountable for the EPM episode. Similarly, while we 
believe that the detailed beneficiary notification under the CJR model 
should be provided by the CJR hospital participant that CMS holds 
financially responsible for the CJR episode rather than the admitting 
physician, the earliest point in time that this notification could be 
provided is when the admission is scheduled in advance with the CJR 
hospital participant, consistent with the alternative suggested by one 
commenter as an alternative to admitting physician notification of the 
model. This timing will allow beneficiaries with scheduled admissions 
to process and act on the beneficiary notification prior to the 
beneficiary's admission to the hospital, although this notification 
timing is not possible for those admissions that are not scheduled in 
advance with the CJR hospital participant.
    We note that in view of our final AMI transfer policy as discussed 
in section III.C.4.a.(5) of this final rule which cancels the AMI 
episode initiated at the initial treating hospital when the beneficiary 
is transferred to another hospital for care, the timing of notification 
issues raised by the commenter who urged CMS to allow for exceptions 
should no longer pose a concern. All beneficiaries in the AMI model 
will be discharged from the acute care hospital responsible for the AMI

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episode so we do not believe exceptions to the detailed notification 
requirement are necessary. We expect that EPM participants will 
generally be able to identify EPM beneficiaries upon admission given 
the clinical conditions that are the focus of the EPMs. Moreover, in 
the case of any uncertainly about the MS-DRG that will ultimately be 
assigned to the beneficiary's claim, we encourage EPM participants to 
provide notification to those beneficiaries whose care may be included 
in the EPM so that the notification requirement is met in the event the 
beneficiary's care is ultimately included in the EPM.
    Given that the EPM participant is required to provide the detailed 
notification, in our final regulations we are clarifying the 
requirements for the timing of the notification to be more specific 
based on whether or not the admission is scheduled in advance with the 
EPM participant. We note that scheduled admissions are especially 
relevant to CABG episodes and unscheduled admissions are relevant to 
AMI, CABG, and SHFFT episodes. If the admission is scheduled in 
advance, then the EPM participant must provide notice as soon as the 
admission is scheduled. The notification must be provided upon 
admission to the EPM participant if the admission that initiates the 
EPM episode is not scheduled with the EPM participant in advance. We 
believe this timing is appropriate because hospitals provide other 
information concerning patient rights and responsibilities upon 
admission to the hospital. In either case, in circumstances where, due 
to the patient's condition, it is not feasible to provide notification 
at such times, the notification must be provided to the beneficiary or 
his or her representative as soon as is reasonably practicable but no 
later than discharge from the EPM participant accountable for the EPM 
episode.
    We are also clarifying in Sec.  512.450(b)(1)(v) that the 
disclosure of the EPM participant's sharing arrangements as part of the 
detailed beneficiary notification may be satisfied if the EPM 
participant provides a web address where beneficiaries may access the 
list of providers, suppliers, and ACOs with whom the EPM participant 
has a sharing arrangement. Section 512.500(d)(1)(ii)(A), as we are 
finalizing it in this final rule, requires the EPM participant to 
publicly post (and update on at least a quarterly basis) on a Web page 
on the EPM participant's Web site accurate current and historical lists 
of all EPM collaborators. We expect that allowing the detailed 
beneficiary notification to reference the Web site for the list of 
providers, suppliers, and ACOs with sharing arrangements will reduce 
the burden on EPM participants to prepare and keep current this element 
of the notification.
    We are finalizing the elements of the detailed beneficiary 
notification in Sec.  512.450(b)(1), specifically a detailed 
explanation of the EPM and how it might be expected to affect the 
beneficiary's care; notification that the beneficiary retains freedom 
of choice to choose providers and services; 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; a statement that all 
existing Medicare beneficiary protections continue to be available to 
the beneficiary, including the ability to report concerns of 
substandard care to Quality Improvement Organizations or the 1-800-
MEDICARE helpline; and a list of the providers, suppliers, and ACOs 
with whom the EPM participant has a sharing arrangement, which may be 
fulfilled by the EPM participant including in the detailed notification 
a web address where beneficiaries may access the list.
    Comment: A few commenters expressed support for the proposed 
requirement that EPM participants and EPM collaborators disclose their 
financial relationships and interests to patients in the context of the 
structure of the EPM. Other commenters stated that the multiple 
beneficiary notices required under CMS' proposal would create an 
overload for EPM and CJR beneficiaries, result in administrative burden 
on providers, and be infeasible in some cases unless the EPM 
participant or CJR participant hospital administers the notice on 
behalf of physicians. They also questioned the rationale for the 
differences in the proposed timing for such notices by different 
collaborators that resulted in a lack of uniformity, ranging from the 
time the decision to undergo a procedure or service covered under an 
EPM is made and no later than discharge from the hospital accountable 
for the episode to when the beneficiary first receives services from a 
provider or supplier associated with the party with the sharing 
arrangement. One commenter pointed out that CMS' proposal that a 
physician who is an EPM collaborator notify the beneficiary of his or 
her sharing arrangement at the time that the decision to undergo a 
procedure or service covered under the EPM is made and no later than 
discharge from the hospital accountable for the episode makes providing 
timely notice impossible for an EPM collaborator who is a physician who 
does not furnish a service to the beneficiary until after hospital 
discharge. The commenter requested clarification about whether such a 
physician would need to provide notice to the beneficiary of the 
sharing arrangement and, if so, the timing of such notice. Another 
commenter asserted that it would be unlikely that certain providers 
with a sharing arrangement under the CJR model would practically be 
able to collect administrative documentation from the beneficiary about 
the notice in the course of clinical care, such as in the case of an 
independent hospitalist who only sees patients while they are admitted 
to the CJR participant hospital or an anesthesiologist who is working 
on improving operating room efficiency.
    Several commenters recommended that beneficiary notices should only 
be provided once by the EPM participant or CJR hospital participant and 
should provide information on all individuals and entities with sharing 
arrangements under the EPM or CJR model. The commenters asserted that 
this approach to notices would make the beneficiary aware of all the 
individuals and entities with a sharing arrangement with the EPM 
participant or CJR hospital participant, without overwhelming the 
patient every time he or she sees a clinician or goes to a facility for 
care.
    One commenter who opposed the collaborator notice requirement 
requested that CMS provide specific examples of when various EPM 
collaborators would need to provide notice if the policy is adopted. 
The commenter described the example of an ACO that has a sharing 
arrangement with a CABG model participant, and both an independent 
group of cardiothoracic surgeons and an independent group of primary 
care physicians are ACO participants who also have sharing arrangements 
with the same CABG model participant. If the notice requirement is 
finalized, the commenter requested that CMS clarify the notice 
requirements for the ACO and both physician groups with respect to a 
CABG beneficiary who receives included services from physicians in both 
groups during the CABG episode.
    Response: We appreciate the support of the commenters for 
disclosure to EPM beneficiaries of EPM financial relationships between 
the EPM participant and other providers, suppliers, and ACOs. We agree 
that a single notice by the EPM participant to the EPM beneficiary of 
all individuals and entities with sharing arrangements

[[Page 421]]

under the EPM is important to provide disclosure of these financial 
arrangements that could potentially influence the recommendations of 
the EPM beneficiary's treating providers and suppliers and, therefore, 
we are finalizing this requirement as part of the detailed beneficiary 
notification discussed previously. However, we believe it is necessary 
also to provide the EPM beneficiary with such information again at the 
time and in the context where the beneficiary can best use that 
information to evaluate the advice he or she is receiving from health 
care providers and suppliers based on the beneficiary's specific 
knowledge of any financial interests of those providers and suppliers 
that could influence their recommendations. By providing additional 
notice of sharing arrangements specific to the care the beneficiary is 
receiving from the EPM collaborator and providing this notice in close 
proximity to when that care is being furnished during the EPM episode, 
the beneficiary will be better able to assess the recommendations from 
that individual or entity.
    We have further considered the issues raised by the commenters 
about the potential for multiple notices to beneficiaries and the 
inconsistency of the proposed notice provisions for different types of 
EPM or CJR collaborators that would have had different timing during 
the EPM or CJR episode and might, therefore, have been difficult for 
EPM or CJR collaborators to comply with or been confusing to providers 
and suppliers treating EPM or CJR beneficiaries. We proposed different 
timelines for some of the required EPM notices, ranging from the time 
the decision to undergo a procedure or service covered under an EPM is 
made to the time when the beneficiary first receives a service from the 
entity or its related providers and suppliers that treat beneficiaries. 
We acknowledge that our timing proposal for collaborating physician, 
nonphysician practitioner, PGP, and hospital notice of sharing 
arrangements was a practical impossibility for these types of EPM 
collaborators if the individual or entity did not furnish a service to 
the EPM beneficiary prior to discharge from the hospital accountable 
for the EPM episode. Moreover, while our EPM proposal for ACO notices 
was intended to refer broadly to ACOs, the specific proposed regulation 
text regarding the timing appeared to narrow the notice scope to only 
those ACO providers/suppliers that are PGPs with distribution 
arrangements, resulting in lack of uniformity for ACO notices. 
Additionally, while we proposed that physicians, nonphysician 
practitioners, PGPs, post-acute care providers and suppliers, 
hospitals, and ACOs with sharing arrangements would be required to 
provide written notice to EPM beneficiaries of the structure of the EPM 
and the existence of the individual's or entity's sharing arrangement 
with the EPM participant, we did not address collaborator notice by 
providers or suppliers of outpatient therapy services or CAHs that we 
also proposed be eligible to be EPM collaborators.
    We continue to believe that it is an important beneficiary 
safeguard to provide EPM and CJR beneficiaries with separate, specific 
notice of each sharing arrangement that has the potential to influence 
a provider's or supplier's care recommendations, even if that results 
in the beneficiary receiving multiple notices during an EPM or CJR 
episode. This rationale is applicable to all EPM and CJR collaborators. 
We also continue to believe that it is not feasible or necessary to 
require those individuals and entities with distribution arrangements 
and downstream distribution arrangements under the EPM or CJR model to 
provide notice to EPM or CJR beneficiaries. These other arrangements 
are not entered into directly with the EPM participant or CJR hospital 
participant and, therefore, they may not have the same potential for 
affecting clinical decisions. Furthermore, to require an additional 
notice from each of these parties could greatly increase the number of 
separate notices to EPM or CJR beneficiaries, potentially resulting in 
information overload and confusion that do not contribute to improved 
EPM or CJR beneficiary understanding and greater safeguards.
    However, in response to concerns raised by the commenters about the 
uniformity and feasibility of the EPM collaborator notice requirements 
we proposed, we also are streamlining the EPM collaborator notice 
requirements. Specifically, we are adopting requirements for the 
provision of notice that are more equitable and consistent across all 
the individuals and entities with sharing arrangements under the EPM, 
as those individuals and entities are finalized in section III.I. of 
this final rule, with a notice timeframe that is appropriate and 
practical for EPM collaborators. We believe our revisions clarify which 
parties are responsible for providing beneficiary notice of sharing 
arrangements and when such notice must be provided, and will minimize 
any confusion among providers and suppliers treating EPM beneficiaries. 
In our final beneficiary notice requirements discussed later in this 
section, we distinguish among EPM collaborators that are individual 
providers or suppliers that furnish items and services directly to EPM 
beneficiaries, and those EPM collaborators that do not directly furnish 
items and services to EPM beneficiaries, namely PGPs, nonphysician 
practitioner group practices (NPPGPs), therapy group practices (TGPs), 
and ACOs.
    First, an EPM participant must require every EPM collaborator that 
furnishes an item or service to an EPM beneficiary during an EPM 
episode to provide written notice to the beneficiary of the structure 
of the EPM and the existence of the individual's or entity's sharing 
arrangement. The notice must be provided no later than the time at 
which the beneficiary first receives an item or service from the EPM 
collaborator during an EPM episode. In circumstances where, due to the 
patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The EPM 
collaborator must be able to generate a list of all beneficiaries who 
received such a notice, including the date on which the notice was 
provided to the beneficiary, to CMS upon request. We believe this 
notice requirement is feasible for all EPM collaborators that furnish 
items and services to EPM beneficiaries (that is, EPM collaborators 
other than ACOs, PGPs, NPPGPs, or TGPs) at any point in the EPM 
episode, including the circumstances raised by the commenter of an 
independent hospitalist with a sharing arrangement that only sees 
patients while they are admitted to the model participant or an 
anesthesiologist who has a sharing arrangement related to improving 
operating room efficiency. In the case of both of these physicians, the 
EPM participant must require the physician to provide written notice to 
the beneficiary of the structure of the EPM and the existence of the 
physician's sharing arrangement when the beneficiary first receives an 
item or service from the physician during an EPM episode. If the 
physician with a sharing arrangement does not provide an item or 
service to the beneficiary during an EPM episode, no notice is 
required. However, we point out that ultimately to be eligible to 
receive a gainsharing payment for an EPM performance year, the 
physician who is an EPM collaborator must have directly furnished a 
billable item or service to an EPM beneficiary during an EPM episode 
that occurred during the performance

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year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment according to the requirement in Sec.  512.500(c)(2)(ii).
    Second, an EPM participant must require every EPM collaborator that 
is a PGP, NPPGP, or TGP where a member of the PGP, member of the NPPGP, 
or member of the TGP furnishes an item or service to an EPM beneficiary 
during an EPM episode to provide written notice to the beneficiary of 
the structure of the EPM and the existence of the entity's sharing 
arrangement. The notice must be provided no later than the time at 
which the beneficiary first receives an item or service from any member 
of the PGP, member of the NPPGP, or member of the TGP and the required 
notice may be provided by that member. The PGP, NPPGP, or TGP must be 
able to generate a list of all beneficiaries who received such a 
notice, including the date on which the notice was provided to the 
beneficiary, to CMS upon request. The required notice for a PGP, NPPGP, 
or TGP with a sharing arrangement need only be provided once to a 
beneficiary during an EPM episode. Different members of the same group 
who furnish items or services to the same beneficiary later in the EPM 
episode do not need to also provide notice.
    Third, an EPM participant must require an EPM collaborator that is 
an ACO where an ACO participant bills for or ACO provider/supplier 
furnishes an item or service to an EPM beneficiary during an EPM 
episode to provide written notice to the beneficiary of the structure 
of the EPM and the existence of the entity's sharing arrangement. The 
notice must be provided no later than the time at which the beneficiary 
first receives an item or service from any ACO participant or ACO 
provider/supplier and the required notice may be provided by that ACO 
participant or ACO provider/supplier. The ACO must be able to generate 
a list of all beneficiaries who received such a notice, including the 
date on which the notice was provided to the beneficiary, to CMS upon 
request. The required notice for an ACO with a sharing arrangement need 
only be provided once to a beneficiary during an EPM episode. Different 
ACO participants or ACO providers/suppliers that furnish items or 
services to the same beneficiary later in the EPM episode do not need 
to also provide notice. We note that in the case of an ACO participant 
that is a group practice that bills for but does not itself directly 
furnish the first item or service to an EPM beneficiary from any ACO 
participant or ACO provider/supplier during an EPM episode, ``the time 
at which the beneficiary first receives an item or service from any ACO 
participant'' means the time when the beneficiary first receives an 
item or service that is billed by the ACO participant and furnished by 
a group practice member. In these circumstances, the required ACO 
notice may be provided by that group practice member.
    These final notice provisions set forth a consistent framework for 
beneficiary notice of sharing arrangements that can be applied to all 
EPM collaborators, with additional details about the notice for those 
entities that can be EPM collaborators but that do not themselves 
directly furnish items and services to EPM beneficiaries. While a 
beneficiary may receive multiple notices of sharing arrangements during 
one EPM episode, we only require that each individual or entity that is 
an EPM collaborator provide notice once during the episode, including 
those circumstances where an EPM beneficiary receives items or services 
during an EPM episode from more than one member of the PGP, member of 
the NPPGP, or member of the TGP with a sharing arrangement or more than 
one ACO participant or ACO provider/supplier in an ACO with a sharing 
arrangement.
    We believe this comprehensive framework clarifies the notice 
requirements for all EPM collaborators, and that it is feasible for EPM 
participants to require their EPM collaborators to provide notices that 
meet the requirements. However, we also appreciate that developing and 
coordinating the notice processes to fit within the course of clinical 
care, especially for those collaborators that never themselves directly 
furnish items and service to EPM beneficiaries, will require effort 
that is related to the number and complexity of the EPM participant's 
sharing arrangements, the technological capacity of its collaborators 
to document and retain notices, the care patterns for EPM beneficiaries 
for which a particular EPM participant is responsible, and other 
issues. Nevertheless, as discussed previously, we believe that 
individual notice of sharing arrangements by each EPM collaborator to 
EPM beneficiaries is necessary, and we expect that the streamlined 
structure we are finalizing for these notices minimizes, to the extent 
possible, any additional burden on EPM participants and their related 
collaborators.
    For purposes of illustration, we will step through the application 
of these provisions to the commenter's example of an ACO that has a 
sharing arrangement with a CABG model participant and both an 
independent group of cardiothoracic surgeons and an independent group 
of primary care physicians who are ACO participants who also have 
sharing arrangements with the same participating hospital. We note that 
this example results in a complex notice pattern that is highly 
unlikely to occur in practice, because we expect that in general the 
ACO would contract with the CABG model participant and then enter into 
distribution arrangements with its ACO participants, in this case the 
group of cardiothoracic surgeons and the group of primary care 
physicians, rather than all three entities contracting individually 
with the CABG model participant. In the example, both physician groups 
furnish included services to a CABG beneficiary during a CABG episode. 
We further assume that a member of the cardiothoracic surgery group 
furnishes a service to a CABG beneficiary during a CABG episode before 
a member of the primary care physician group. In this scenario, when 
the cardiothoracic surgeon furnishes the first service to the CABG 
beneficiary that is billed by the cardiothoracic surgery group, that 
surgeon is required to provide notice to the CABG beneficiary about the 
sharing arrangement of the group of cardiothoracic surgeons and the 
sharing arrangement of the ACO with the CABG model participant. When 
the primary care physician later in the CABG episode furnishes the 
first service to the CABG beneficiary that is billed by the primary 
care physician group, the primary care physician is required to provide 
notice to the CABG beneficiary about the sharing arrangement of the 
group of primary care physicians with the CABG model participant. The 
beneficiary has already been notified about the ACO's sharing 
arrangement.
    Comment: Several commenters urged CMS to allow the required 
beneficiary notifications and notices by any individual or entity to be 
permitted on an electronic basis, with proof of receipt by the EPM 
beneficiary, rather than through a paper process that requires a 
beneficiary's signature.
    Response: We did not propose a written signature requirement in 
regulation. We agree that electronic health records may be used to 
maintain documentary evidence of written communications, and we have 
not specified a specific mechanism by which proof of beneficiary 
notification must be maintained.
    Comment: Several commenters expressed support for CMS' proposal 
that notification materials be developed

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or approved by CMS, because the commenters believe that allowing 
hospitals and other providers that stand to profit from the EPM to 
describe the EPM and how it might affect the beneficiary's care is 
unlikely to result in objective information for consumers. The 
commenters requested that CMS provide samples of beneficiary 
notifications to be provided by EPM participants and samples of notices 
to be provided by post-acute care providers that are EPM collaborators. 
One commenter pointed out that there are cases where the determination 
of a procedure, either LEJR or a hip pinning for fracture, is not made 
until after the surgery is in process, so the commenter urged CMS to 
consider a combined CJR/SHFFT notice that will incorporate all needed 
elements and reduce confusion for patients.
    Other commenters requested that CMS make available generic sample 
notifications that could apply to all models in order to reduce 
confusion for beneficiaries, hospitals, physicians, and the general 
public. The commenters claimed that a single streamlined beneficiary 
notification for all models would relieve EPM participants of a large 
operational burden and ensure that beneficiaries receive appropriate 
notice related to the care they are receiving, without causing 
unnecessary confusion. Several commenters stressed that a sample notice 
will achieve a level of accuracy and consistency that would not occur 
with individual notice formats and contents devised by each EPM 
participant.
    Response: We appreciate the interest of the commenters in 
streamlining the beneficiary notification materials that are used for 
the EPMs, as well as other models, in order to provide greater clarity 
for beneficiaries, providers and suppliers, and the general public. 
However, we do not agree that a single general notification could apply 
to all models, given the elements we are finalizing for the EPM 
detailed beneficiary notification as discussed previously in this 
section, which include an explanation of the EPM and how it might be 
expected to affect the beneficiary's care. While we agree that certain 
beneficiary notification elements, such as notification that the 
beneficiary retains freedom of choice to choose providers and services, 
may be common across many models, other elements differ. Therefore, we 
cannot provide a single generic beneficiary notification document that 
applies across all models. Beneficiaries, providers and suppliers, and 
the general public with an interest in model notifications need to know 
about the specific model features and how the model might be expected 
to affect a beneficiary's care.
    We also appreciate the commenters' interest in having CMS develop 
or approve the detailed beneficiary notification about the EPMs in the 
interest of transparency and accuracy of the information for 
beneficiaries, for whose benefit the notification is provided. We 
prepared a detailed beneficiary notification template for the CJR model 
which is currently used by CJR participant hospitals, and we similarly 
plan to prepare and make available prior to EPM implementation a 
detailed beneficiary notification template that EPM participants can 
use. While we appreciate that a combined notification template for the 
CJR and SHFFT models could be desirable in some circumstances, for 
expedience we recommend that if there is uncertainty about the hip 
fracture surgery that will be performed, the CJR/SHFFT model 
participant should provide both detailed model notifications to the 
beneficiary upon unscheduled admission to the hospital that initiates 
the episode.
    We will also consider the possibility of preparing notice templates 
that may be used for individuals and entities with sharing arrangements 
under the EPMs that are required to provide notice to EPM 
beneficiaries. While we are not certain that a single notice is 
appropriate for all individuals and entities with these arrangements, 
or even for a single type of provider or supplier (such as a physician 
or SNF) with a sharing arrangement, we will continue to explore the 
option of making notice templates available to EPM participants for 
their related EPM collaborators to use.
    Comment: A number of commenters provided recommendations about how 
CMS should monitor compliance with the beneficiary detailed 
notification and notice requirements. Some commenters suggested that 
monitoring could be carried out by a CMS contractor, such as a state 
survey agency or a QIO. Alternatively, the commenters asserted that a 
hospital private accrediting body could conduct the monitoring. The 
commenters recommended that monitoring should include submission of any 
model notice format and content to the monitoring entity in advance of 
its use, certification of assurances of compliance by EPM participants 
and individuals with EPM sharing arrangements, auditing of compliance 
within the first 30 to 60 days of EPM implementation or implementation 
of the revised notification requirements in the CJR model, and annual 
auditing of compliance thereafter. Additionally, several commenters 
expressed concerned regarding the implications for the EPM participant 
should an EPM collaborator fail to provide their required notice to a 
beneficiary.
    Response: We agree with the commenters on the importance of 
monitoring for the sufficiency of beneficiary detailed notifications 
and notices under the EPMs and CJR model. We appreciate the specific 
suggestions and will take them into consideration in developing the 
specific monitoring strategies for these notifications and notices as 
we refine the plans with the monitoring contractor that is currently 
engaged with us in monitoring the CJR model and the monitoring 
contractor that we expect to assist us with monitoring the EPMs.
    Beneficiary notifications and notices as finalized in Sec.  
512.450(b) are requirements of the EPM and, as such, CMS may take 
remedial action if an EPM participant or one of its related EPM 
collaborators, collaboration agents, or downstream collaboration agents 
is noncompliant with the requirements of the EPM, including on the 
basis of failure to provide required beneficiary notices. As discussed 
in section III.F. of this final rule, we require the EPM participant to 
assume responsibility for compliance of all of these parties to ensure 
that its activities and those of its related EPM collaborators, 
collaboration agents, and downstream collaboration agents comply with 
EPM requirements, and our compliance tools for instances of 
noncompliance apply to EPM participants. We emphasize that entering 
into sharing arrangements is a choice that EPM participants may make, 
and EPM participants also have the choice as to whom to select as an 
EPM collaborator based on selection criteria developed by the EPM 
participant
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.450(b) for 
required beneficiary notifications under the EPMs, with modification to 
streamline both the detailed beneficiary notification and EPM 
collaborator notice requirements, as well as to apply the EPM 
collaborator notice requirements to all individuals and entities with 
sharing arrangements under the EPMs. We emphasize that all information 
provided to beneficiaries must be in a form and manner which is 
accessible to the beneficiary, including those beneficiaries with 
disabilities and beneficiaries with limited English proficiency, 
consistent with applicable law and CMS policy. Required beneficiary 
notifications are--
     Each EPM participant must provide written notification to 
any Medicare

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beneficiary that meets the criteria in Sec.  512.240 of his or her 
inclusion in the EPM. The notification must be provided upon admission 
to the EPM participant if the admission that initiates the EPM episode 
is unscheduled. If the admission is scheduled, then the EPM participant 
must provide notice when the decision to schedule admission is made. In 
circumstances where, due to the patient's condition, it is not feasible 
to provide notification at such times, the notification must be 
provided to the beneficiary or his or her representative as soon as is 
reasonably practicable but no later than discharge from the EPM 
participant accountable for the EPM episode. The EPM participant must 
be able to generate a list of all beneficiaries receiving such 
notification including the date on which the notification was provided 
to the beneficiary to CMS upon request. The beneficiary notification 
must contain all of the following:
    ++ A detailed explanation of the EPM and how it might be expected 
to affect the beneficiary's care.
    ++ Notification that the beneficiary retains freedom of choice to 
choose providers and services.
    ++ 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.
    ++ 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 or the 1-800-MEDICARE helpline.
    ++ A list of the providers, suppliers, and ACOs with whom the EPM 
participant has a sharing arrangement. This requirement may be 
fulfilled by the EPM participant including in the detailed notification 
a web address where beneficiaries may access the list.
     An EPM participant must require every EPM collaborator to 
provide written notice to applicable EPM beneficiaries of the structure 
of the EPM and the existence of its sharing arrangement with the EPM 
participant.
    ++ Require every EPM collaborator that furnishes an item or service 
to an EPM beneficiary during an EPM episode to provide written notice 
to the beneficiary of the structure of the EPM and the existence of the 
individual's or entity's sharing arrangement. The notice must be 
provided no later than the time at which the beneficiary first receives 
an item or service from the EPM collaborator during an EPM episode. In 
circumstances where, due to the patient's condition, it is not feasible 
to provide notice at such times, the notice must be provided to the 
beneficiary or his or her representative as soon as is reasonably 
practicable. The EPM collaborator must be able to generate a list of 
all beneficiaries who received such a notice, including the date on 
which the notice was provided to the beneficiary, to CMS upon request.
    ++ Require every EPM collaborator that is a PGP, NPPGP, or TGP 
where a member of the PGP, member of the NPPGP, or member of the TGP 
furnishes an item or service to an EPM beneficiary during an EPM 
episode to provide written notice to the beneficiary of the structure 
of the EPM and the existence of the entity's sharing arrangement under 
the EPM. The notice must be provided no later than the time at which 
the beneficiary first receives an item or service from any member of 
the PGP, member of the NPPGP, or member of the TGP, and the required 
notice may be provided by that member. In circumstances where, due to 
the patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The PGP, NPPGP, or 
TGP must be able to generate a list of all beneficiaries who received 
such a notice, including the date on which the notice was provided to 
the beneficiary, to CMS upon request.
    ++ Require every EPM collaborator that is an ACO where an ACO 
participant bills for or ACO provider/supplier furnishes an item or 
service to an EPM beneficiary during an EPM episode to provide written 
notice to the beneficiary of the structure of the EPM and the existence 
of the entity's sharing arrangement under the EPM. The notice must be 
provided no later than the time at which the beneficiary first receives 
an item or service from any ACO participant or ACO provider/supplier 
and the required notice may be provided by that ACO participant or ACO 
provider/supplier. In circumstances where, due to the patient's 
condition, it is not feasible to provide notice at such times, the 
notice must be provided to the beneficiary or his or her representative 
as soon as is reasonably practicable. The ACO must be able to generate 
a list of all beneficiaries who received such a notice, including the 
date on which the notice was provided to the beneficiary, to CMS upon 
request.
     An EPM participant must provide the beneficiary with a 
written notice--
    ++ Of any potential financial liability associated with non-covered 
services recommended or presented as an option as part of discharge 
planning, no later than the time that the beneficiary discusses a 
particular post-acute care option or at the time the beneficiary is 
discharged, whichever occurs earlier.
    ++ Of any potential financial liability, associated with non-
covered services recommended or presented as an option as part of 
discharge planning, no later than the time that the beneficiary 
discusses a particular post-acute care option or at the time the 
beneficiary is discharged, whichever occurs earlier.
     If the EPM participant knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the EPM participant must notify the beneficiary that the 
service would not be covered by Medicare.
     If the EPM participant is discharging a beneficiary to a 
SNF prior to the occurrence of a 3-day hospital stay, and the 
beneficiary is being transferred to or is considering a SNF that would 
not qualify under the SNF 3-day waiver in Sec.  512.610, the EPM 
participant must notify the beneficiary in accordance with paragraph 
(b)(3)(i) of this section that the beneficiary will be responsible for 
payment for the services furnished by the SNF during that stay, except 
those services that would be covered by Medicare Part B during a non-
covered inpatient SNF stay.
     Lists of beneficiaries that receive notifications or 
notices must be retained and access provided to CMS in accordance with 
Sec.  512.110.
4. Monitoring for Access to Care
    Given that an EPM participant could receive a reconciliation 
payment when the EPM participant reduces average actual EPM-episode 
spending below the quality-adjusted target price and achieves an 
acceptable or better level of quality of care, the EPM participant 
could have an incentive to avoid complex, high-cost cases by not 
admitting patients at all or by transferring patients to nearby 
facilities or specialty referral centers that are not EPM participants. 
We intend to monitor the EPM participants' episode claims data--for 
example, to compare each EPM participant's case mix relative to a pre-
model historical baseline--to determine whether complex patients are 
being systematically excluded from the EPM participant's EPM episodes. 
We proposed to publish these data as part of each EPM's evaluation to 
promote transparency and an understanding of the EPM's effects. We also 
proposed to continue to review and audit EPM participants if we have 
reason to believe

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that they are compromising beneficiary access to care. For example, we 
would review claims data to determine whether there is an unusual 
pattern of referral to regional hospitals located outside of the EPM 
participant's catchment area or a clinically unexplained increase or 
decrease in CABG or rates of other related surgical procedures that do 
not initiate EPM episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters emphasized that a beneficiary's access to 
the full range of treatment options appropriate for a given medical 
condition is critical for positive health care outcomes to be achieved 
under the proposed EPMs. The commenters expressed support for CMS' 
goals for the EPMs to encourage EPM participants and providers and 
suppliers caring for EPM beneficiaries to improve access to care, 
manage patients to better outcomes, and achieve improvements in the 
efficiency of care.
    Several commenters expressed concern that the financial incentives 
under the EPMs will affect both patient selection and access to the 
most appropriate care for the individual beneficiary, especially 
because the EPM pricing methodology does not risk adjust EPM episode 
quality-adjusted target prices for patient demographic and disease 
characteristics. The commenters claimed that frail, elderly, disabled, 
sicker, and complex beneficiaries with multiple comorbidities who would 
be more likely to initiate EPM episodes due to the generally emergent 
nature of the clinical conditions that are the focus of the EPMs may 
experience unintended consequences such as problems with access to 
care, substandard quality of care, and care stinting because these 
patients commonly require more therapeutic interventions, thereby 
incurring higher costs, to achieve the best health outcomes. 
Specifically, the commenters speculated that EPM participants may avoid 
caring for beneficiaries likely to be complex, high-cost cases by 
delaying treatment, not admitting patients at all, or transferring 
patients to nearby facilities or referral centers that are outside of 
the EPM participant's MSA that was selected for participation in the 
EPM. A few commenters expressed particular concern that small and rural 
hospitals that are EPM participants would avoid admitting frail 
patients in their home communities. Another commenter noted that care 
coordination for EPM beneficiaries requires prompt attention and early, 
accurate identification of beneficiaries. The commenter believes that 
in view of the multiple clinical scenarios and critical nature of the 
physical condition of most beneficiaries in the proposed EPMs, in many 
instances the process of identifying patients as being an EPM 
beneficiary will be a secondary concern to the importance of getting 
the beneficiary to the proper level of care regardless of inclusion or 
exclusion in an EPM, which may make patient selection less likely than 
in episodes in other models.
    Many commenters believe the EPMs do not include sufficient 
safeguards to substantially improve the care experience for the many 
and growing numbers of Medicare beneficiaries. Some commenters urged 
CMS to delay testing the models, particularly the CABG model, until the 
benefits of such models can be proven.
    Several commenters encouraged CMS to closely monitor EPM 
participants' claims data for changes in referral and care patterns to 
ensure that complex patients are not being excluded from the EPMs and 
for other changes that may indicate EPM participants are stinting on 
necessary and appropriate care. Some commenters stressed the particular 
importance of monitoring for beneficiary access to care because 
beneficiaries cannot opt out of the EPMs. One commenter recommended 
that CMS conduct audits, both internally and by an outside party, of a 
sample of patient medical records to determine whether the services 
actually received by beneficiaries in the proposed EPMs correspond to 
existing standards of care--and whether they also include innovative 
treatments and procedures appropriate for a beneficiary's medical 
condition.
    One commenter provided a detailed crosswalk of potential monitoring 
measures in the measure domains of beneficiary freedom of choice; 
access, quality, and cost of care; SHFFT participants' coding for hip 
and femur fractures and ``upcoding;'' patient shifting; and EPM 
participants' use of waivers and compliance with other rules. The 
commenter matched potential monitoring measures in these domains, such 
as beneficiary complaints in the freedom of choice domain, to the 
source of information for the measure, which in this example would be 
complaints registered to the 1-800-MEDICARE helpline and state QIOs. 
The commenter's list of recommended sources of information for the 
monitoring measures was extensive and specific, including beneficiary 
surveys; claims data; patient-reported outcome data; hospital consumer 
assessment of healthcare providers and systems (hospital CAHPS), home 
health CAHPS, and clinician and group CAHPS; claims data from EPM 
participants and EPM collaborators linked to provider of service and 
Medicare data on provider practice and specialty (MD-PPAS) files; 
agreements for financial arrangements; site visits, beneficiary 
engagement incentives documentation; financial records of reconciled 
payments and repayments; and claims data linked to post-acute care 
provider data sets.
    Another commenter requested clarification about how CMS intends to 
monitor EPM participants and EPM collaborators for compliance other 
than through claims review for changes in utilization patterns. The 
commenter asserted that meaningful claims data required for oversight 
of the EPMs will not be available for years after the models have been 
implemented. In addition, the commenter stated that utilization 
patterns measure only one aspect of compliance.
    The commenters urged CMS to strengthen the protections against EPM 
participants engaging in cherry[hyphen]picking healthier patients and 
avoiding sick patients in order to give the appearance of improved EPM 
cost and quality performance. Several commenters also recommended that 
beneficiaries in the models should be informed of the hotlines 
available to convey grievances on care at each level of service during 
the episode. Some commenters supported CMS' proposal to monitor 
compliance and to integrate the QIOs into the process as an entity 
available to handle beneficiary complaints.
    Other commenters believe that any discoveries of problems with 
access to care should be publicly reported, and that EPM participants 
found to be participating in these practices should not be able to 
receive reconciliation payments. Another commenter urged CMS to 
strengthen the accountability of EPM participants by implementing a 
separate financial penalty for hospitals found to have deliberately 
withheld medically necessary care or steered a patient toward a health 
care provider known to be delivering substandard care. The commenter 
suggested that such a penalty should be sizable enough to act as a 
disincentive for hospitals and other providers that might consider 
stinting as potentially profitable.
    Response: We appreciate the commenters' support for the goals of 
the EPM and agree that a beneficiary's access to the full range of 
treatment options appropriate for a given medical condition should be 
maintained. We believe that the final design of the EPMs provides 
sufficient beneficiary protections that there is no need to

[[Page 426]]

delay the EPMs and proceeding with testing beginning on July 1, 2017 as 
we proposed, coupled with close monitoring and the patient safeguards 
adopted in this final rule, is the most appropriate way to move quickly 
to gather new insights into the most effective strategies to improve 
the quality and reduce the cost of care through episode payment.
    We also acknowledge that patient selection and underutilization are 
both potential issues related to access to care due to the financial 
incentives of the EPMs. With respect to underutilization, we agree that 
it is important to monitor changes in utilization patterns and case 
mix, and to generally monitor whether barriers to patient access 
develop in MSAs where hospitals are required to participate in the 
EPMs. We appreciate the extensive potential monitoring measures 
recommended by one commenter, many of which appear promising and where 
information will be available to operationalize these measures. We note 
that the sources of information for monitoring measures extend well 
beyond claims data to include information on beneficiary experience and 
outcomes that cannot be obtained through claims data. While there is 
necessarily some lag in the availability of claims data due to the 
timing of claims submission and processing, we disagree with the 
commenter who suggested it would be years after EPM implementation 
before meaningful claims data for oversight were available. For 
example, we will be analyzing claims data on an ongoing basis and will 
be performing the first reconciliation process 9 months after model 
implementation, for which we expect to have reliable claims data for 
EPM episodes during the first performance year. We will take the 
suggestions of monitoring measures provided by the commenters into 
consideration in developing the specific metrics for monitoring for 
access to care as we refine the plans with our monitoring and 
evaluation contractors. We note that further details about these plans 
are currently unavailable.
    We believe that it is appropriate to use our existing oversight 
authority to monitor the risks of the EPM regarding access to care, 
just as we monitor the various risks inherent in all payment models and 
systems, but we do not believe that new controls are necessary in 
regulation, other than those which we proposed and are finalizing for 
the EPMs after consideration of the public comments. We do not believe 
that specific requirements for medical necessity or review against 
specific standards of care are necessary, beyond those broad 
requirements which are set by the CoPs. We believe that the existing 
influences of reputation, care guidelines, QIO review, Joint Commission 
review, quality metrics, and our EPM monitoring and evaluation 
activities are sufficient to ensure that beneficiary access to care is 
not impeded under the EPMs. We further note that the existing antitrust 
laws help to prevent anti-competitive practices in the maintenance of 
hospital networks, thereby allowing competition between network 
providers to promote high quality outcomes.
    In response to concerns raised by the commenters about our EPM 
pricing methodology that the commenters believe heightens the risk of 
patient selection or hospital financial harm for those hospitals 
disproportionately caring for complex patients, we are exploring 
incorporating risk adjustment into the EPM payment methodologies by 
performance year 3 of the EPMs, as discussed in section III.D.4.b.(2) 
of this final rule. Risk adjustment could potentially reduce variation 
in payment stemming from differences in case mix rather than the value 
of care provided, as well as help minimize the incentive EPM 
participants may have to avoid complex cases under the EPM. We agree 
with the commenter that the risk of patient selection under the EPM may 
be reduced due to the generally emergent nature of the clinical 
conditions that are the focus of the EPMs, rather than elective surgery 
such as in the CJR model. However, the potential for patient selection 
based on our final payment policy for transfers of beneficiaries with 
AMI from the outpatient or inpatient setting of an initial treating 
hospital to a transfer hospital as discussed in section III.C.4.a.(5) 
of this final rule may be increased in comparison with our proposal so 
we will be monitoring the treatment patterns of beneficiaries with AMI 
closely throughout the model performance years.
    In section III.F. of this final rule, we describe the reasons that 
an EPM participant or its related EPM collaborator, collaboration 
agent, or downstream collaboration may be noncompliant under the EPM, 
which include avoiding potentially high-cost patients or high-severity 
patients; targeting potentially low-cost or low-severity patients; 
failing to provide medically necessary services or systematically 
engaging in the over- or under-delivery of appropriate care; failing to 
allow beneficiary choice of medically necessary options, including non-
surgical options; taking any action that threatens the health or safety 
of patients; or avoiding at-risk Medicare beneficiaries. We will make a 
determination of EPM participant noncompliance based on all information 
available to us, including the information from our monitoring 
activities regarding access to care, quality of care, and delayed care 
as discussed in this final rule.
    We have several compliance tools available to us for circumstances 
of noncompliance, including issuing a warning letter to the EPM 
participant; requiring the EPM participant to develop a corrective 
action plan; reducing or eliminating the EPM participant's 
reconciliation payment; reducing or eliminating the EPM participant's 
CR incentive payment; requiring the EPM participant to terminate a 
sharing arrangement with an EPM collaborator and prohibit further 
engagement by the EPM participant in sharing arrangements with the EPM 
collaborator; terminating the EPM participant's participation in the 
EPM; and, when certain circumstances are met, adding a 25 percent 
penalty to a repayment amount on the EPM participant's reconciliation 
report. We also note that we have the authority to revoke provider 
enrollment in the Medicare program for cause, such as providing 
substandard care that places beneficiaries at risk by under-delivering 
care. This broad range of tools provides us with the flexibility to 
address noncompliant EPM participant behaviors of varying levels of 
severity, and provides strong safeguards for beneficiaries and the 
Medicare program. We note that the compliance tools do not include 
public reporting of problems with access to care found for specific EPM 
participants because we do not believe this would be appropriate for 
EPM enforcement actions. Instead, we may notify our federal program 
integrity colleagues and, where appropriate, law enforcement, of such 
behavior, particularly in instances in which HHS (including CMS and 
OIG) discovered knowing violations or patterns of violations of 
requirements that directly impacted the safety and health of patients.
    Given the enforcement tools delineated in this final rule, as well 
as the prevalence of existing laws, rules, and regulations prohibiting 
care stinting, provision of substandard care, or denial of medically 
necessary care, we believe that it is unnecessary to implement 
processes for a separate financial penalty specifically for the EPM as 
requested by one commenter, outside of the compliance tools finalized 
in section III.F. of this final rule. Where an EPM participant engages

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in these behaviors, CMS could consider reducing or eliminating that EPM 
participant's reconciliation payment or applying a penalty to the 
repayment amount, as well as notifying our federal program integrity 
colleagues and, where appropriate, law enforcement, of such behavior.
    Finally, as discussed in section III.G.3. of this final rule, we 
require that detailed beneficiary notification under the EPMs includes 
advising EPM beneficiaries that all standard Medicare beneficiary 
protections remain in place. The EPM beneficiary may voice concerns or 
grievances regarding care, such as to the QIOs or through the 1-800-
MEDICARE helpline.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals for monitoring beneficiary 
access to care, without modification.
5. 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 higher cost services at the expense of better 
outcomes and higher quality. However, we believe that professionalism, 
the quality measures proposed for the EPMs, and clinical standards can 
be effective in preventing stinting on medically necessary care in both 
the inpatient and post-acute care settings during the 90 days in the 
EPM episode following discharge from the anchor hospitalization. 
Accordingly, we believe that the potential for the denial of medically 
necessary care within the EPMs is not be greater than that which 
currently exists under the IPPS. However, we also believe that we have 
the authority and responsibility to audit EPM participants' and their 
EPM collaborators' medical records and claims to verify that 
beneficiaries receive medically necessary services, and we proposed to 
perform such auditing activities as we deem appropriate. We also 
proposed to monitor financial arrangements between EPM participants and 
their EPM collaborators to ensure that such arrangements do not result 
in the denial of medically necessary care or other programmatic or 
patient abuses. Our proposals were consistent with the policies that 
have been established for the CJR model.
    In the proposed rule, we stated our belief that the 90-day post-
hospital discharge episode duration is sufficiently long so as to 
create financial accountability for the EPM participant and to 
encourage the provision of high quality care that minimizes the risk of 
complications and readmissions that typically could occur within such a 
time period. Clinical standards of care also constrain physician 
patterns of practice, and we believe that the risk associated with 
deviations from those standards provides further deterrence to 
compromising care.
    We invited comment on the proposal, including additional 
opportunities to ensure high quality care.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concern that the EPMs could 
negatively affect a beneficiary's access to and quality of care based 
on the financial incentives under the EPMs. Some commenters claimed 
that these incentives may discourage guideline-based care and best 
practices identified through clinical research. Other commenters 
speculated that AMI model participants may treat an AMI episode with 
outpatient observation rather than admit the beneficiary for medical 
management so as to avoid the episode from being initiated. Similarly, 
some commenters claimed that beneficiaries with AMI who need a PCI 
would receive the procedure as an outpatient, also to avoid the 
initiation of an AMI episode. The commenters were concerned with the 
potential for such site-of-service shifting to result in lower quality 
of care for AMI beneficiaries treated medically or with a PCI, 
especially for those complex beneficiaries that could result in high-
cost AMI episodes if admitted for inpatient treatment.
    Several commenters identified a potential risk to quality of care 
that could result from changes in the timing of planned secondary PCIs 
after AMI due to the financial incentives in the AMI model, where AMI 
episodes include planned, related care such as readmissions for PCI and 
outpatient PCI without a payment adjustment, except in the case of a 
CABG readmission. The commenters speculated that AMI model participants 
will either perform this secondary PCI during the initial hospital 
stay, potentially causing harm to patients, or intentionally delaying 
the procedure until after the episode ends. The commenters recommended 
that CMS monitor and evaluate whether these shifts in the timing of PCI 
occur and whether they affect patient outcomes.
    One commenter claimed that the performance of SHFFT procedures may 
not be sustainable in rural hospitals that are SHFFT model 
participants. The commenter reasoned that rural hospitals in regions 
selected for SHFFT model participation that have, in the past, provided 
to their community the service of local joint replacement and hip 
fracture treatment may no longer be able to sustain this practice given 
the financial implications of the proposed SHFFT model. Other 
commenters discussed the unintended consequences of limited access to 
care throughout the 5-year duration of the EPMs. One commenter 
presented findings from interviews of SNF staff members at SNFs that 
experienced shorter lengths-of-stay in markets with heavy Medicare 
Managed Care penetration who reported having to discharge patients 
early when the staff members believed those patients were unsafe for 
release.
    One commenter outlined in detail their quality concerns about the 
transitions at the beginning and end of the EPM episode. The commenter 
asserted that the required bundling in the EPMs in the selected 
geographic areas would create a new transition in care, at the end of 
the 90 days following hospital discharge, for persons for whom care 
transitions are already problematic. The commenter claimed that the 
transition into the hospitalization for serious conditions like hip 
fracture, AMI, and CABG that are the focus of the EPMs is a disruptive 
event. They recommended that the requirements for the EPMs should 
attend to this initial transition at least with respect to the quality 
of care planning and the documentation of the decision to operate. The 
commenter specifically urged CMS to specify that the merits of the 
decision to hospitalize and to monitor or operate must be documented, 
both for fracture patients and for AMI, and that documentation should 
show that the risks and expected benefits had been discussed 
thoroughly. In addition, the commenter believes that at the end of the 
episode, the patient would likely lose whatever care coordination and 
supplemental benefits that the hospital and its partners were providing 
under the EPM. They pointed out that this creates another transition, 
with the associated risks of inadequate information transfer, fear and 
anxiety in creating and learning another set of care arrangements, and 
cessation of important services. The commenter reasoned that persons 
with underlying, serious chronic conditions will be unlikely to be 
stable and doing well at 90 days following hospital discharge; they 
will be more likely to be in fragile health and may be continuing to 
decline. Therefore, the commenter suggested that the EPMs should 
require attention to these issues by generating quality metrics that 
track real performance in this transition. The commenter identified 
this last transition

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as an opportunity for CMS to tally utilization and mortality shortly 
after the EPM episode ends and also to generate and use metrics that 
directly monitor transition quality.
    Response: We agree that the commenters have accurately described 
possible risks of unintended consequences on care quality as a result 
of the financial incentives under the EPMs; however, we note that 
similar risks are inherent in all bundled payment models and systems. 
We agree that monitoring is necessary in order to further reduce these 
potential risks. We believe that professionalism, the quality measures 
proposed for the EPMs, and clinical standards can be effective in 
preventing denials of medically necessary care in both the inpatient 
and post-acute care settings during the 90 days post-hospital 
discharge. Additionally, we have consistently found that the 
traditional authorities available to the Secretary, including antitrust 
laws, anti-kickback provisions and other existing laws and regulations 
under the Medicare program, are adequate to provide a counterbalance to 
the economic incentives that could drive under-delivery of care. 
Therefore, we believe that we can use our existing oversight authority 
to monitor the risks of the EPMs, just as we monitor the various risks 
inherent in all payment models and systems, but we do not believe that 
new controls are necessary in regulation, other than those which we 
proposed and are finalizing for the EPMs after consideration of the 
public comments.
    We have a number of established mechanisms by which we will monitor 
for evidence of the under-delivery of care, and by which we can react 
to and mitigate any identified problems. We will be monitoring data in 
the process of calculating quality metrics, and we have several 
reporting mechanisms, such as the 1-800-MEDICARE helpline. We monitor 
the quality of hospitals stays and surgical procedures through the 
QIOs, we routinely review medical records in our claims audits, and we 
specifically investigate outcomes as part of our evaluations of new 
payment and service delivery models. All of these processes create 
opportunities to identify potentially noncompliant providers or 
suppliers. Providers or suppliers who are investigated and found to be 
inappropriately denying care, diverting patients, providing unsafe 
care, or furnishing care in a setting that does not comply with 
Medicare rules may be sanctioned using our authorities under the 
Medicare program as well as those adopted for the EPMs, with penalties 
that may include EPM participant ineligibility for reconciliation 
payments, revocation from the Medicare program if patients are placed 
at risk by substandard care, or other applicable administrative 
actions.
    We agree that there are opportunities to employ additional quality 
metrics in the EPMs, including those around care transitions at the 
beginning of the EPM episode and the end of the episode. However, we 
note that obstacles exist not only in defining new measures, but in 
implementing mechanisms to report and assess those metrics without 
creating undue administrative burden or technological challenges for 
providers. Therefore, we are not adopting any additional requirements 
for these care transitions under the EPMs.
    We believe that there are opportunities for rural SHFFT model 
participants to improve the quality and efficient of care under the 
SHFFT model that are similar to those for hospitals that are not 
located in rural areas. Rural SHFFT model participants have the same 
opportunity as other SHFFT model participants to benefit financially 
from improvements in the cost and quality performance of SHFFT 
episodes. In addition, as discussed in section III.D.7.c.(1) of this 
final rule, we are finalizing more protective limitations on loss for 
rural hospitals, SCHs, MDHs, and RRCs in recognition of the importance 
of preserving Medicare beneficiaries' access to care from these 
hospitals. Therefore, we disagree with the commenter that the financial 
implications of the SHFFT model are likely to make the provision of 
surgical hip fracture treatment in rural hospitals unsustainable.
    We agree with the commenters that monitoring is essential to 
protect against practices that may reduce the quality of post-acute 
care services. We believe that monitoring for this quality is best 
accomplished at the population level through monitoring for access to 
the appropriate level and quantity of post-acute care services. We also 
believe that beneficiary knowledge and engagement; the reliance on the 
medical direction of the physician; the monitoring of quality metrics; 
the complaint and oversight opportunities through the 1-800-MEDICARE 
helpline and the QIOs; and the use of care coordination all cooperate 
to ensure the quality of individual services delivered to individual 
beneficiaries, including post-acute care services, is maintained or 
improved under the EPMs.
    We note that we will analyze the care patterns for beneficiaries 
with AMI who present to AMI model participants for treatment, 
regardless of whether or not they are admitted to the hospital for 
treatment, treated as an outpatient, transferred to another hospital 
for the initial hospitalization, or transferred from an inpatient stay 
at the AMI model participant to another hospital for an inpatient 
hospitalization. Because best AMI care practices for hospitals with 
different cardiac care capacity are not well-defined, we expect that 
our analyses performed as part of monitoring will help to identify the 
effects on care quality and costs of different patterns in relation to 
patient complexity. Not all the beneficiaries we examine through our 
monitoring analyses will actually be included the AMI model (for 
example, if the beneficiary is treated for AMI only as an outpatient), 
but we plan to examine the experiences of all beneficiaries with AMI 
who present to an AMI model participant for treatment so we can develop 
the full picture of all care patterns for this emergent, common 
clinical condition. We will also analyze patterns of planned cardiac 
care for AMI beneficiaries for consistency with clinical guidelines and 
to examine the effects of such patterns on beneficiary outcomes.
    Comment: Several commenters expressed support for CMS' proposal to 
continuously monitor financial arrangements between EPM participants 
and EPM collaborators, as well as auditing of patients' medical records 
and claims to allow early detection and intervention in the case of 
quality concerns. However, the commenters requested that the monitoring 
be conducted through the analysis of already submitted documentation, 
and not through an additional reporting requirement.
    Response: We appreciate the commenters' support for monitoring 
financial arrangements and patient medical records to allow for early 
detection of quality concerns, as well as their concerns over the 
increased administrative burden on EPM participants that could result 
from these monitoring activities. We note that we do not require 
routine submission of most information under the EPMs, including 
documentation on sharing arrangements or EPM beneficiary medical 
records. However, we proposed in Sec.  512.110 that EPM participants 
must allow the Government access to all books, contracts, records, 
documents, and other evidence sufficient to enable the audit, 
evaluation, inspection, or investigation of several areas, including 
the entity's compliance with EPM requirements and the quality of 
services furnished to an EPM beneficiary during EPM episodes. We expect 
that the

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proposed monitoring activities will require records being made 
available to CMS consistent with the access to records and retention 
requirements as discussed in section III.H. of this final rule. We 
further note that CMS may also designate contractors to which these 
records will be required to be made available. We understand the need 
to balance our monitoring of financial arrangements and auditing of EPM 
beneficiaries' medical records and claims as a safeguard for 
beneficiary quality of care with the administrative burden on EPM 
participants to make those records available to us, although EPM 
participants are required retain those records and provide access to 
them upon request. Therefore, we will be judicious in our request that 
records be submitted to us to allow for monitoring, keeping in mind the 
burden on EPM participants of record submission in relation to the 
value of those records to provide program integrity checks and allow 
early detection of any quality concerns.
    Comment: A few commenters recommended that CMS develop a plan to 
identify where and when inappropriate reductions in care might occur. 
While the commenters commended CMS for articulating the potential for 
such problems to occur under the EPMs, they urged CMS to create a clear 
and specific monitoring and enforcement plan to ensure beneficiary 
choice is protected and to ensure that consumers receive the most 
appropriate care, in the most appropriate setting, at the right time. 
The commenters suggested that CMS develop training for 1-800-MEDICARE 
call center employees to identify and flag potential care reductions or 
inappropriate steering under the EPMs. They also encouraged CMS to 
ensure that the State Health Insurance Assistance Programs (SHIPs) are 
appropriately trained and engaged by the time the final EPMs are 
implemented. Other commenters suggested the CMS adopt an appeals 
mechanism for beneficiaries who receive poor quality care under the 
EPMs.
    The commenters further recommended that CMS consider establishing 
an independent Ombudsman program for the purposes of monitoring and 
assisting beneficiaries in all model tests underway at the Innovation 
Center, including the proposed EPMs. The commenters reported that 
Ombudsman programs are being successfully used in the Financial 
Alignment Initiative for Medicare-Medicaid Enrollees, as well as to 
monitor the Durable Medical Equipment Prosthetics, Orthotics and 
Supplies (DMEPOS) Competitive Bidding program authorized by the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003. 
The commenters stated these independent entities are responsible for 
monitoring beneficiary access to care, in addition to limiting 
beneficiary confusion and promoting enhanced understanding. With an 
increasing number of delivery and payment system models ongoing at the 
Innovation Center, the commenters believe a dedicated Ombudsman is 
warranted.
    The commenters recommended that beneficiaries be provided 
information and data about improved outcomes and satisfaction seen to 
date under payment models. The commenters further believe that general 
beneficiary education programs regarding medical necessity and 
beneficiary choice would be advantageous to supporting providers and 
suppliers furnishing services to EPM beneficiaries. Specifically, one 
commenter stated that some post-acute care providers are not educated 
or are continuing to operate with protocols that encourage overuse of 
certain types of care and result in lower quality health care for 
Medicare beneficiaries. An example provided by the commenter included 
service patterns where all patients are treated by the provider for the 
maximum number of benefit days, regardless of clinical or social need. 
The commenter explained that in other circumstances than under the 
EPMs, events that create quality concerns may be a financial benefit to 
the post-acute care provider, such as when a patient who resides in a 
SNF falls and fractures his or her hip. The commenter claimed that upon 
readmission to the SNF, it is likely that the SNF will keep the patient 
at an acute level of care for 90 days or even longer, regardless of the 
original functional status of the patient.
    Finally, one commenter stated that patients report that some post-
acute care providers are engaging in marketing efforts that may not 
accurately portray beneficiary choice. The commenter asserted that in 
their direct experience, some post-acute care providers establish 
mandatory minimum stay requirements that do not align with physician 
discharge orders and show reluctance to coordinate with the 
beneficiary's care team during the post-acute stay. In this scenario, 
the commenter concluded that there would be little an EPM participant 
could do to influence the pattern of care furnished by such post-acute 
care providers if an EPM beneficiary is treated by a provider that uses 
such practices. The commenter requested that CMS support EPM 
participants in improving the quality and efficiency of EPM episodes by 
adopting revised payment policies for institutional post-acute care 
services that are better aligned with medical necessity, including 
payment for short stays that include more appropriate types of therapy 
that support improved outcomes and increased quality. The commenter 
further recommended that CMS engage in marketing monitoring activities 
in order to support EPM goals.
    Response: We thank commenters for their feedback regarding 
additional mechanisms to monitor the quality of care received by 
beneficiaries. We will be developing the specific metrics for 
monitoring for the quality of care as we refine the plans with our 
monitoring and evaluation contractors so further details are currently 
unavailable. We appreciate the recommendations of the commenters on 
metrics for monitoring quality of care as a counter to the financial 
incentives under the EPMs and will take them into consideration as we 
finalize our plans for monitoring the effects of the EPMs.
    We do not believe that special beneficiary appeal rights are 
necessary under the EPMs. First, there are numerous processes in place 
under the EPMs and the Medicare program to protect beneficiary choice. 
The beneficiary retains all rights to choose the provider or supplier 
for medically necessary covered services. The beneficiary retains the 
benefits of the doctor-patient relationship, with additional 
notification of any sharing arrangement that could create a potential 
conflict of interest. In addition, the beneficiary must be provided 
with a notice of non-coverage for continuing services, such as a 
continued stay in an EPM participant or a SNF, and the beneficiary has 
access to the existing expedited review process in these cases. The 
beneficiary may also voice concerns or grievances, such as to the QIO 
or through the 1-800-MEDICARE helpline. We agree that it would be 
beneficial to distribute educational materials to ensure that 
beneficiaries can take advantage of the support available at the 1-800-
MEDICARE helpline, SHIP, and the QIOs, and we will consider developing 
such materials for publication contemporaneously with the start of the 
EPMs. Additionally, 1-800-MEDICARE helpline staff will be appropriately 
trained and have access to relevant EPM-specific informational 
materials that allow them to respond to many potential beneficiary 
concerns related to the EPMs by the time the EPMs are implemented.

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    We further note that we intend to establish an Alternative Payment 
Models Beneficiary Ombudsman within CMS who will complement the 
Medicare Beneficiary Ombudsman in responding to beneficiary inquiries 
and concerns arising from care under the models addressed in this final 
rule, as well as other Innovation Center models, under the existing 
Medicare processes. These existing Medicare beneficiary inquiry 
processes include the Quality Improvement Organizations (QIO) and the 
1-800-MEDICARE helpline that works with the Medicare Beneficiary 
Ombudsman and CMS caseworker staff to resolve beneficiary issues. We 
will ensure that the QIOs, 1-800-MEDICARE helpline, CMS casework staff 
and the Alternative Payment Models Beneficiary Ombudsman have the 
information necessary, as well as access to program experts, to the 
extent consistent with applicable privacy and security laws, to respond 
to beneficiary issues prior to the implementation of the EPMs on July 
1, 2017. The 1-800-MEDICARE helpline staff, QIOs and the Medicare 
Beneficiary Ombudsman already have information and program expert 
access for the CJR model, but we will ensure that those same materials 
are also made available to the Alternative Payment Models Beneficiary 
Ombudsman and CMS casework staff, to the extent consistent with 
applicable privacy and security laws.
    While we will not revise our payment policies under the Medicare 
program for EPM participants or other providers or suppliers beyond 
those discussed in this final rule, we agree with commenters regarding 
the need to continually improve stakeholder education for models to 
succeed and we intend to do as much as we can to work to design and 
deploy a helpful learning and diffusion program. We currently 
facilitate learning within models by disseminating the lessons learned 
across models so that participants can benefit from the experiences of 
other models, and are always looking for better ways to educate and 
assist participants and their partners in care redesign in knowledge 
sharing. We continue to believe that these efforts contribute to 
reducing the administrative burden on the health care delivery system 
and are responsive to commenters' requests that we address the 
educational needs of providers and suppliers caring for EPM 
beneficiaries.
    We also note that the usual tools employed by CMS to monitor and 
prevent overutilization all apply to the services, including post-acute 
care services, furnished during EPM episodes. These tools include data 
analysis, the process of tracking patterns of utilization and trends in 
the delivery of care, and medical review, a clinical audit process by 
which we verify that services paid by Medicare were reasonable and 
necessary in accordance with section 1862(a)(1)(A) of the Act. We 
believe that these tools as employed by the MACs and by the QIOs are 
sufficient to check for the medical necessity of EPM services, 
including post-acute care services.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals for monitoring quality of 
care, without modification.
6. Monitoring for Delayed Care
    We proposed the EPMs in part to incentivize EPM participants to 
create efficiencies in the delivery of care during a 90-day post-
hospital discharge episode duration following an acute clinical event. 
Theoretically, the EPMs also could create incentives for EPM 
participants or their EPM collaborators to delay services until after 
the 90-day post-discharge period has ended. Consistent with the CJR 
model, we believe that existing Medicare safeguards and other proposals 
under the EPMs are sufficient to protect EPM beneficiaries from harm 
due to delayed care.
    First, our experience with other episode-based payment models such 
as the BPCI initiative has shown that providers focus first on 
appropriate care and then on efficiencies only as obtainable in the 
setting of appropriate care. We believe that a 90-day post-discharge 
episode duration is sufficient to minimize the risk that EPM 
participants and their collaborators would compromise services 
furnished in relation to a beneficiary's care. While we recognize that 
ongoing care for underlying conditions or continued recovery may be 
required after the EPM episode ends, we believe that EPM participants 
would be unlikely to postpone key services beyond a 90-day post-
discharge period because the consequences of delaying care beyond the 
episode duration would be contrary to usual standards of care.
    However, we also proposed that additional monitoring for delayed 
care would occur as a function of the proposed EPMs. As with the CJR 
model, we proposed as part of the EPM payment policies (81 FR 50876 
through 50877) that certain post-episode payments occurring in the 30-
day window subsequent to the end of the EPM episode would be counted as 
an adjustment against savings achieved by the EPM participant. We 
believe that including such a payment adjustment would create an 
additional deterrent to delaying care beyond the episode duration. In 
addition, the data collection and calculations used to determine the 
adjustment would provide a mechanism to check whether providers are 
inappropriately delaying care. Finally, we noted in the proposed rule 
that the proposed quality measures would create additional safeguards 
against delays in medically necessary care under the EPMs, as such 
measures are used to monitor and influence clinical care at the 
institutional level, including for other CMS hospital programs.
    In the proposed rule, we invited public comment on our proposed 
methods for monitoring EPM participants' actions and compliance, as 
well as on other methods to safeguard delivery of high quality, 
clinically appropriate care.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters acknowledged that a goal of alternative 
payment models such as the proposed EPMs is to reduce unnecessary 
services and their associated costs, resulting in inherent incentives 
in such models to potentially delay or reduce medically necessary care. 
The commenters recommended that all alternative payment models should 
be designed to closely monitor health care received and protect 
beneficiaries against potential stinting of clinical treatment, delays 
in care, and case mix shifts. They recommended that CMS continue to 
offer regular and structured opportunities for stakeholder feedback to 
ensure that as the number of models increases, CMS continues to protect 
beneficiary access to care and all clinically appropriate treatment 
options.
    Several commenters expressed concern that AMI model participants 
would delay costly, medically necessary cardiac care until after the 
AMI episode ends, a practice that would be inconsistent with clinical 
guidelines. The commenters identified planned follow-up inpatient or 
outpatient PCI of lesions identified at the time of the AMI but not 
responsible for the AMI and readmissions for cardiac surgery, such as 
cardiac valve replacement or implantable cardioverter defibrillator 
implantation, as potential instances where cardiac care could be 
delayed until after the end of an AMI episode. One commenter requested 
further details regarding how CMS intends to protect beneficiaries from 
delayed care.
    Response: We appreciate the interest of the commenters in ensuring 
that the EPMs and other alternative payment models are designed to 
closely monitor care in order to detect and address any

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delays in care or other potentially harmful care patterns that could be 
incentivized by the financial incentives under the models. We agree 
with the commenters that because the EPM episodes for which an EPM 
participant is responsible extend 90 days post-discharge from the 
anchor hospitalization, there is some risk that care could be delayed 
until after the end of the episode. However, we believe that EPM 
participants and other providers and suppliers furnishing services to 
EPM beneficiaries will focus first on clinically appropriate, timely 
care consistent with evidence-based clinical guidelines. We further 
note that delaying medically necessary care for more than 90 days 
following hospital discharge could both be contrary to usual clinical 
standards of care and potentially lead to complications that could 
result in utilization of health care services that increases actual 
EPM-episode spending and endangers the EPM participant's episode cost 
and quality performance under the EPM. The potential for costly 
complications serves to counter the theoretical financial benefit that 
an EPM participant could experience when care is intentionally delayed 
until after the episode ends.
    Moreover, as discussed in section III.E.3 of this final rule, we 
use quality measures of patient outcomes and patient experience in the 
pay-for-performance methodologies of the EPMs where the financial 
opportunity for EPM participants to receive savings for any given level 
of actual EPM-episode spending increases with higher quality of care. 
Thus, we believe the use of quality measures in the pay-for-performance 
methodologies of the EPMs also serves to deter potentially harmful 
delays in care. Finally, as discussed in section III.D.7.e. of this 
final rule, EPM participants with post-episode spending in the 30 days 
following the end of EPM episodes that exceeds a threshold set at 3 
standard deviations above average spending in their region for that 
period of time need to repay Medicare for the amounts in excess of the 
threshold. This repayment is not subject to the stop-loss limitations 
under the EPMs, resulting in full risk for EPM participants. Therefore, 
we believe this policy also discourages delays in medically necessary 
care until after an EPM episode ends.
    We will be developing the specific metrics for monitoring for 
delayed care as we refine the plans with our monitoring and evaluation 
contractors so further details are currently unavailable. We note that 
EPM participants found to engage in delaying medically necessary care 
would be noncompliant with the EPM under the provisions finalized in 
Sec.  512.460(b)(1) due to actions that threaten the health or safety 
of patients. In these circumstances, CMS could utilize one of the 
compliance tools finalized in Sec. Sec.  512.460(b)(2) and (b)(3), 
which include requiring the EPM participant to develop a corrective 
action plan; reducing or eliminating the EPM participant's 
reconciliation payment; adding a 25 percent penalty to the repayment 
amount on the EPM participant's reconciliation report under certain 
conditions, or terminating the EPM participant's participation in the 
EPM. We believe that these compliance tools allow us to take timely 
remedial action for instances of noncompliance by an EPM participant 
and that the finalization of these tools provides a significant 
beneficiary safeguard against delayed care.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals for monitoring for delayed 
care, without modification.
H. Access to EPM Records and Record Retention
    Consistent with the Shared Savings Program, the BPCI initiative, 
the CJR model, and other Innovation Center models, we proposed specific 
access to EPM records and record retention requirements for individuals 
and entities involved with the EPM. For the CJR model, the record 
access and retention requirements were originally located in Subpart F 
(Financial Arrangements and Beneficiary Incentives). However, we 
proposed to include them in Subpart B (Episode Payment Model 
Participants) for the EPM and to move them to Subpart B for the CJR 
model as discussed in section V.L. of this final rule, so that these 
requirements can be applied to categories of information that are 
broader than those solely related to financial arrangements and 
beneficiary incentives, as discussed later in this section.
    We proposed that EPM participants, EPM collaborators, collaboration 
agents, downstream collaboration agents, and any other individuals or 
entities performing EPM activities must allow both scheduled and 
unscheduled access to all books, contracts, records, documents, and 
other evidence (including data related to utilization and payments, 
quality of care criteria, billings, lists of EPM collaborators, sharing 
arrangements, distribution arrangements, downstream distribution 
arrangements, and the documentation required under Sec. Sec.  
512.500(d) and 512.525(d)) sufficient to enable the audit, evaluation, 
inspection, or investigation of six categories of information. We 
further proposed that all such books, contracts, records, documents, 
and other evidence be maintained for a period of 10 years from the last 
day of the EPM participant's participation in the EPM or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless CMS determines a particular record or group 
of records should be retained for a longer period and notifies the EPM 
participant at least 30 calendar days before the disposition date; or 
there has been a dispute or allegation of fraud or similar fault 
against the EPM participant, EPM collaborator, collaboration agent, 
downstream collaboration agents, or any other individual or entity 
performing EPM activities in which case the records must be maintained 
for 6 years from the date of any resulting final resolution of the 
dispute or allegation of fraud or similar fault.
    In the CJR model, we applied these record access and retention 
obligations only to participant hospitals and CJR collaborators (80 FR 
73432 through 73433). However, because we proposed additional types of 
EPM collaborators and types of financial arrangements in section III.I. 
of this final rule for the EPM, as well as defined EPM activities as 
those related to promoting accountability for the quality, cost, and 
overall care for EPM beneficiaries, we proposed to apply the record 
access and retention obligations to EPM participants and all 
individuals and entities with EPM financial arrangements where payments 
are substantially based on quality of care and the provision of EPM 
activities, as well as to other individuals and entities providing EPM 
activities. While this proposal is an expansion of the current record 
access and retention obligations under the CJR model to additional 
categories of individuals and entities, we believe the expansion is 
necessary and appropriate for the six categories of information to 
which we proposed that the access and retention requirements would 
apply. Access to this information from those individuals and entities 
providing EPM activities that are the basis of care redesign in the EPM 
provides an important program safeguard by allowing monitoring for 
compliance with EPM requirements. The alternative of limiting the 
requirements solely to EPM participants and EPM collaborators as we 
finalized for the CJR model would result in no record access and 
retention obligation

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for certain individuals and entities that have financial arrangements 
under the EPM and engage in EPM activities, thereby limiting the 
Government's ability to audit, evaluate, inspect, or investigate 
compliance with EPM requirements. We similarly proposed changes to the 
individuals and entities subject to record access and retention 
obligations under the CJR model as discussed in section V.L. of this 
final rule.
    We have identified six categories of information related to key EPM 
parameters for which we proposed that the record access and retention 
requirements would apply. Like the CJR model, we proposed that one 
category of information consists of those documents related to the 
individual's or entity's compliance with EPM requirements. Given the 
individuals and entities who must comply with the requirements of the 
EPM either directly or through their arrangements, including EPM 
participants, EPM collaborators, collaboration agents, and downstream 
collaboration agents, an important program safeguard is record access 
and retention that allow compliance with the EPM requirements to be 
monitored and assessed.
    Additionally, similar to the CJR model, we proposed that a second 
category of information consists of documents related to the 
calculation, distribution, receipt, or recoupment of gainsharing 
payments, alignment payments, distribution payments, and downstream 
distribution payments. This list includes all types of payments 
proposed under EPM financial arrangements as discussed in section 
III.I. of this final rule and is different from the current CJR model 
requirement to the extent that we proposed additional types of EPM 
financial arrangements in view of our proposal that ACOs can be EPM 
collaborators. Because of the proposed EPM requirements for these types 
of payments that are designed to ensure that all financial arrangements 
are for the sole purpose of aligning the financial incentives of 
individuals and entities with the goals of the EPM participant to 
improve the quality and efficiency of EPM episode care, we believe that 
these records of all the individuals and entities who enter such 
arrangements should be accessible and retained to allow compliance with 
the EPM requirements for the payments to be monitored and assessed. We 
proposed similar changes to this category of information under the CJR 
model as discussed in section V.L. of this final rule.
    The third category of information for which we proposed to require 
record access and retention is related to an EPM participant's 
obligation to repay to CMS any reconciliation payment or CR incentive 
payments owed. The CR incentive payment has been added to this 
provision which otherwise applied to the CJR model because we proposed 
and finalize a CR incentive payment in section VI. of this final rule 
for AMI and CABG model participants in selected MSAs, while the CJR 
model does not include this payment. Requiring record access and 
retention about repayment obligations under the EPM provides an 
important program integrity safeguard for repayments to CMS.
    We proposed to require record access and retention on the quality 
of the services furnished to an EPM beneficiary during an EPM episode 
as the fourth category of information. While the CJR model specified 
the quality of services furnished without further limitation in the 
record access and retention requirements, given our EPM proposals that 
require gainsharing, distribution, and downstream distribution payments 
to be substantially based on quality of care and EPM activities, we 
believe that it is appropriate to specify that the record access and 
retention requirements apply specifically to the services furnished to 
an EPM beneficiary during an EPM episode. The quality of services 
furnished without further limitation could result in an overly broad 
record access and retention requirement for services that are delivered 
outside of EPM episodes, where these services are not subject to EPM 
requirements. Services furnished to EPM beneficiaries during EPM 
episodes are the services for which we will also be monitoring for 
access to care, delayed care, and quality of care, important activities 
to safeguard the program and Medicare beneficiaries, so access to 
documents to support this monitoring is necessary. We proposed similar 
changes to this category of information under the CJR model and discuss 
further in section V.L. of this final rule
    Given the beneficiary notification requirements that we proposed 
for the EPM in section III.G. of this final rule, we proposed to 
require access to records and record retention about the sufficiency of 
EPM beneficiary notifications. The beneficiary notification requirement 
is an important beneficiary protection under the EPM, and the access to 
records and record retention requirements provide a program integrity 
safeguard to monitor for compliance with this requirement. We proposed 
to add this same category of information for the CJR model and discuss 
this further in section V.L. of this final rule.
    Finally, we proposed to establish CEHRT use attestation for EPM 
participants so that an EPM participant could be in a Track 1 EPM that 
meets the requirements in the Quality Payment Program final rule with 
comment period (81 FR 77008) to be an Advanced APM as discussed in 
section III.A.2 of this final rule. Thus, we proposed to require access 
to records and record retention about the accuracy of each Track 1 EPM 
participant's submissions under CEHRT use requirements. Specifically, 
attestation to CEHRT use and submission of clinician financial 
arrangements lists are key requirements for Track 1 EPMs that are 
Advanced APMs, and the access to records and record retention 
requirements provide a program integrity safeguard by allowing us to 
assess the completeness and accuracy of the EPM participant's 
compliance with the requirements for those submissions. We proposed to 
add this same category of information for the CJR model and discuss 
this further in section V.L. of this final rule.
    As we stated in the proposed rule, we believe the proposed 
requirements regarding access to EPM records and record retention are 
necessary to safeguard program integrity and protect against abuse, in 
view of the EPM design and requirements as discussed throughout this 
final rule that would lead to achieving the EPM goals of improved EPM 
episode quality and efficiency. We also believe that by providing 
access to EPM records, we promote transparency of activities under the 
EPM. Furthermore, as stated in the proposed rule, we believe the 
proposed access to records and record retention requirements would 
promote the compliance of EPM participants, EPM collaborators, 
collaboration agents, downstream collaboration agents, and any other 
individuals or entities providing EPM activities with EPM requirements 
by ensuring that compliance with these requirements can be monitored 
and assessed. Finally, these records may be necessary in the event that 
an EPM participant appeals any matter that is subject to dispute 
resolution through CMS. As such, CMS would have the resources necessary 
to prepare and respond to any such appeal.
    The proposals for access to records and record retention are 
included in Sec.  512.110. We sought comment on our proposals, 
including whether it is necessary, reasonable and appropriate to impose 
these access and retention obligations on all of the proposed

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categories of individuals and entities for all the proposed categories 
of information to be retained and made accessible. In addition, we 
sought comment on whether additional or different safeguards would be 
needed to ensure program integrity, protect against abuse, and ensure 
that the goals of the EPM are met.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter who stated that the ten year record 
retention policy we proposed was excessive requested that CMS change 
the proposed duration of record retention from 10 years to 6 years for 
the CR incentive payment model, the EPMs and CJR model. The commenter 
believed that the proposed retention policy is excessive as it extends 
well beyond the proposed end of the fifth performance year of the EPMs 
on December 31, 2021 and that a 6-year record retention policy would be 
more consistent with other CMS programs. Another commenter recommended 
that CMS also request access to records on gainsharing and other 
savings-related payments so as to help examine the extent to which 
savings are equitably being shared by facilities with participating 
physicians and other healthcare professionals.
    Response: While we appreciate the commenter's concerns regarding 
the ten year retention period, we note that the proposed ten years is 
more consistent with other models, including the CJR. Furthermore, once 
an appeal is initiated, such disputes can be lengthy processes and we 
believe that maintaining this requirement as proposed at ten years, 
rather than the 6 years suggested by the commenter, would give both the 
participant and CMS, as well as those completing any audit, evaluation, 
inspection, or investigation, the resources to prepare and respond to 
issues that may take several years to surface. CMS will consider 
requesting access to records of gainsharing payments and other 
arrangements that will assist in evaluating and measuring the EPM goals 
of improved EPM episode quality and efficiency. CMS authority under 
Sec. Sec.  512.110(a)(1) and (2) allows the Federal Government to 
sufficiently access records and we believe this will contribute to the 
ability to enable audits, evaluations, inspections, or investigations 
to ensure that payments are consistent with model goals and are not 
abusive.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification.
I. Financial Arrangements Under the EPM
1. Background
    In November 2015 we finalized regulations for financial 
arrangements for the CJR model (80 FR 73550 through 73553), an episode 
payment model that is similar to the three new proposed EPMs. In this 
rulemaking, we proposed three new episode payments models that fall 
under the overarching term EPM, specifically the AMI model, CABG model, 
and SHFFT model. Both the CJR model and the three proposed EPMs would 
place financial responsibility for the episode on the hospital where 
the episode begins with a hospitalization and would require 
participation of hospitals in the selected MSAs for the models. Like 
LEJR episodes under the CJR model, the AMI, CABG, and SHFFT episodes in 
the proposed EPMs would be broadly defined to include most Part A and 
Part B services and extend 90 days following discharge from the 
hospitalization that initiates the EPM episode. During the design of 
the EPMs, we considered proposing the same CJR financial arrangements 
that were finalized through notice and comment rulemaking because the 
proposed EPMs have a similar design to the CJR model with the same 
goals of improving the quality and efficiency of model episodes. We 
expected that the types of financial arrangements needed to align the 
financial incentives of CJR participant hospitals and EPM participants 
with other providers and suppliers caring for CJR beneficiaries or EPM 
beneficiaries during episodes to improve episode quality and efficiency 
would be similar. We also believed that program integrity safeguards 
that would provide protections against abuse under the financial 
relationships permitted for the EPMs should be comparable to those for 
the CJR model. However, we believed that it was possible to improve on 
the current regulatory structure for financial relationships that we 
established for the CJR model in our proposals for the EPM. Our 
proposals reflected changes from the current CJR model regulations that 
generally fell into the following four categories:
     Removing duplication of requirements in similar 
provisions.
     Streamlining and reorganizing the provisions for clarity 
and consistency.
     Providing additional flexibility in response to feedback 
from CJR participant hospitals and other stakeholders.
     Expanding the scope of financial arrangements under the 
EPM.
    We note that in section V.J. of the proposed rule (81 FR 50958 
through 50968), we proposed changes to the CJR model financial 
arrangements regulations in Part 510 to parallel those we proposed for 
the EPM. These proposals would result in the same provisions and 
requirements for CJR model and EPM financial arrangements when the 
first performance year of the proposed EPM would begin on July 1, 2017.
2. Overview of EPM Financial Arrangements
    For purposes of this section, the term ``EPM'' refers to one model 
specifically among the proposed AMI model, CABG model, or SHFFT model 
and should be read throughout Subpart F--Financial Arrangements and 
Beneficiary Incentives (Sec. Sec.  512.500 through 512.525) of the 
proposed regulations as a single one of these three proposed EPMs. For 
example, when reading the proposed regulations for the CABG model, 
Sec.  512.500(b)(6), the provision would read as, ``The board or other 
governing body of the [CABG model] participant must have responsibility 
for overseeing the [CABG model] participant's participation in the 
[CABG model], its arrangements with [CABG model] collaborators, its 
payment of gainsharing payments, its receipt of alignment payments, and 
its use of beneficiary incentives in the [CABG model].'' We used this 
approach because we meant for the proposed requirements to apply to 
every participant in the EPM regardless of whether the EPM was the AMI, 
CABG, or SHFFT model.
    As discussed in section III.D.2.b. of the proposed rule (81 FR 
50844), we proposed that each EPM would be a retrospective episode 
payment model, under which Medicare payments for items and services 
included in an EPM episode would continue to be made to all providers 
and suppliers under the existing FFS payment systems, and episode 
payment would be based on later reconciliation of actual spending for 
an EPM episode under the FFS payment systems to the EPM episode's 
quality-adjusted target price. If the actual episode spending was less 
than the quality-adjusted target price, the EPM participant financially 
responsible for the EPM episode would receive a reconciliation payment, 
assuming the EPM composite quality score for the EPM participant was in 
the ``acceptable,'' ``good,'' or ``excellent'' quality category. If an 
EPM episode's actual spending exceeded the quality-adjusted target 
price, then, beginning in performance year 2, the EPM participant would 
begin to repay the difference to Medicare up to the stop-loss 
threshold.

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    Similar to our approach in the CJR model (80 FR 73412), in the 
proposed rule for the EPM we discussed our belief that EPM participants 
might wish to enter into financial arrangements with providers and 
suppliers caring for EPM beneficiaries to share financial risks and 
rewards under the EPM, in order to align the financial incentives of 
those providers and suppliers with the EPM goals of improving the 
quality and efficiency of EPM episodes. We further believed that EPM 
participants might wish to enter into financial arrangements with ACOs 
that participate in EPM care redesign and EPM beneficiary care 
management and whose ACO participants and ACO providers/suppliers care 
for EPM beneficiaries. We expected that EPM participants would identify 
key providers and suppliers caring for EPM beneficiaries, as well as 
ACOs to which EPM beneficiaries were aligned, in their communities and 
referral regions. The EPM participants then could establish close 
partnerships with these individuals and entities to promote 
accountability for the quality, cost, and overall care for EPM 
beneficiaries, including managing and coordinating care; encouraging 
investment in infrastructure, enabling technologies, and redesigned 
care processes for high quality and efficient service delivery; the 
provision of items and services during an EPM episode in a manner that 
reduces costs and improves quality; and carrying out other obligations 
or duties under the EPM. These providers, suppliers, and ACOs might 
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 believed it would be 
possible that an EPM participant that might receive a reconciliation 
payment from Medicare or might need to repay Medicare might want to 
enter into financial arrangements with other providers, suppliers, or 
ACOs to share risks and rewards under the EPM. We expected that all 
financial relationships established between EPM participants and 
providers, suppliers, or ACOs for purposes of the EPM would be those 
permitted only under applicable law and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    In addition to providers, suppliers, and ACOs with which the EPM 
participant might want to enter into financial arrangements to share 
risks and rewards under the proposed EPM, in the proposed rule we 
discussed our expectation that EPM participants might choose to engage 
with organizations that were 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; beneficiary care coordination and management; monitoring EPM 
participants' compliance with the EPM's terms and conditions; or other 
EPM-related activities. Such organizations might play important roles 
in an EPM participant's plans to implement an EPM based on the 
experience these organizations might bring, such as prior experience 
with bundled payment initiatives; care coordination expertise; 
familiarity with a particular local community; or knowledge of Medicare 
claims data. We expected that all relationships established between EPM 
participants and these organizations for purposes of the EPM would be 
those permitted only under existing law and regulation, including any 
relationships that would include the EPM participant's sharing of EPM 
risks and rewards with such organizations. We also expected that all of 
these relationships would be based solely on the level of engagement of 
the organization's resources to directly support the participants' EPM 
implementation.
    Finally, because the proposed broadly defined EPM episodes would 
extend 90 days post-discharge from their respective anchor or chained 
anchor hospitalizations, similar to the CJR model (80 FR 73433), in the 
proposed rule we discussed our belief that EPM participants caring for 
EPM beneficiaries might want to offer beneficiary engagement incentives 
to encourage adherence to recommended treatment and active patient 
engagement in recovery. Such incentives should be closely related to 
the provision of high quality EPM care and advance a clinical goal for 
an EPM beneficiary, and should not serve as inducements for 
beneficiaries to seek care from the EPM participants or other specific 
suppliers and providers. The incentives might help an EPM participant 
reach their quality and efficiency goals for EPM episodes, while also 
benefitting beneficiaries' health and the Medicare Trust Fund, if the 
EPM participant improved the quality and efficiency of episodes through 
care redesign that resulted in EPM beneficiary reductions in hospital 
readmissions, complications, days in acute care, and mortality, while 
recovery continued uninterrupted or accelerated.
    Comment: Many commenters stressed the need for waivers of existing 
fraud and abuse laws, given CMS' proposal to allow financial 
arrangements between EPM participants and other individuals and 
entities that comply with the requirements of the proposed rule. They 
stated that such waivers are necessary for aligning the financial 
incentives of providers and other entities redesigning care and 
coordinating episode care for EPM beneficiaries to improve episode 
quality and efficiency. The commenters urged CMS and OIG to use the 
full scope of their combined authority to waive certain fraud and abuse 
laws that the commenters believed may inhibit care coordination in 
order to enable EPM participants to form the financial relationships 
necessary for success in the models. They claimed that waivers must be 
issued no later than concurrently with publication of the final rule to 
allow EPM participants sufficient time to prepare for EPM 
implementation. One commenter emphasized that the requirement for 
hospitals to participate in the EPM should not take effect unless and 
until hospitals have the needed, explicit protections in place and 
adequate time to form the necessary financial arrangements.
    Response: We understand the commenters' interest in the timely 
publication of fraud and abuse waivers for the EPM and revised waivers 
for the CJR model. As we stated in the proposed rule (81 FR 50931), any 
waivers of the fraud and abuse laws for the EPM or revisions to the 
existing CJR waivers would be issued separately by OIG (as to sections 
1128A and 1128B of the Act) and CMS (as to section 1877 of the Act). No 
waivers of any fraud and abuse authorities are being issued in this 
final rule.
    The substance and timing of any such waivers is outside the scope 
of this rulemaking. However, the Department is mindful of the 
significant interest of participants in knowing waiver parameters 
sufficiently in advance of entering into financial arrangements. The 
Department's goal is that any waivers meet the legal standard under 
section 1115A, align closely and appropriately with the final rules, 
are clear, and limit burden on participants and others to the extent 
feasible while also protecting the program and patients from fraud and 
abuse. The Department is considering carefully concerns expressed by 
commenters about the existing fraud and abuse waivers for the CJR model 
and will keep those concerns in mind when considering fraud and

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abuse waivers for the EPM, as well as any adjustments to the existing 
CJR waivers. As was done for the CJR model, waivers for the EPM will be 
promulgated by notice rather than rulemaking, which will expedite 
issuance. Any fraud and abuse waivers issued in connection with the EPM 
or revisions to the existing CJR waivers of fraud and abuse laws will 
be posted on the OIG Web site and at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Fraud-and-Abuse-Waivers.html.
    Comment: Several commenters asserted that the fraud and abuse laws 
should be revised to accommodate APMs and other aspects of the modern 
health care environment. In addition, many commenters offered 
suggestions regarding how any fraud and abuse waivers should be drafted 
for the EPM and episode payment models generally. Other commenters 
advocated for the creation of a new Stark exception that would protect 
certain financial arrangements in risk-bearing models. One commenter 
requested that CMS provide a mechanism for EPM participants and CJR 
participant hospitals to ask questions about fraud and abuse law 
waivers.
    Response: These comments are outside the scope of this rulemaking, 
but we have forwarded them to appropriate staff within the Department 
for consideration. We note that the public may contact CMS with 
questions related to compliance with the EPM and CJR regulations by 
emailing [email protected] and [email protected], respectively.
3. EPM Collaborators
    As we explained in the proposed rule, given the financial 
incentives of episode payment under the EPM, an EPM participant might 
want to engage in financial arrangements with individuals and entities 
making contributions to the EPM participant's episode performance on 
spending or quality. Such arrangements would allow the EPM participant 
to share all or some of the reconciliation payments they might be 
eligible to receive from CMS, or the EPM participant's internal cost 
savings that resulted from care for beneficiaries during EPM episodes. 
Likewise, such arrangements would allow the EPM participant to share 
the responsibility for the funds needed to repay Medicare with 
individuals and entities engaged in providing care to EPM 
beneficiaries, if those individuals and entities had a role in the EPM 
participant's episode spending or quality performance. We proposed to 
use the term ``EPM collaborator'' to refer to these individuals and 
entities.
    Since each proposed EPM's episode duration would be 90 days 
following discharge from the anchor or chained anchor hospitalization 
and such episodes would be broadly defined as discussed in section 
III.C.3.b. of the proposed rule (81 FR 50832 through 50834), many 
providers and suppliers other than the EPM participant would furnish 
related services to beneficiaries during EPM episodes. Those providers 
and suppliers might include SNFs, HHAs, LTCHs, IRFs, physicians, 
nonphysician practitioners, providers or suppliers of outpatient 
therapy services, PGPs, hospitals, and critical access hospitals 
(CAHs). In addition, ACOs might be actively involved in coordinating 
the care of beneficiaries during EPM episodes. The proposed definition 
of EPM collaborator included each of these categories of individuals 
and entities as eligible to be an EPM collaborator. The proposed list 
of types of EPM collaborators was the same list as CJR collaborators, 
but with the addition of hospitals, CAHs, and ACOs.
    We expected that hospitals and CAHs that were not EPM participants 
might frequently play roles in care delivered to EPM beneficiaries 
during a chained anchor hospitalization as discussed in section 
III.C.4.a.(5) of the proposed rule (81 FR 50836 through 50840) or 
following discharge from an anchor or chained anchor hospitalization 
that initiated an EPM episode. For example, an AMI model participant 
without cardiac surgery or interventional cardiology capacity might 
need to transfer certain AMI model beneficiaries after initial 
admission to transfer hospitals or transfer CAHs for revascularization 
through PCI or through CABG. A transfer hospital might, itself, be 
participating in the AMI and CABG models (a CAH cannot be an AMI or 
CABG model participant), but the AMI model episode would be the 
responsibility of the AMI model participant that first admitted the 
beneficiary. In addition, hospital or CAH readmission during the 
proposed EPM episodes would be common for beneficiaries post-anchor or 
post-chained anchor hospitalization discharge for AMI, CABG, and SHFFT 
model beneficiaries, and, because care for these clinical conditions 
might sometimes be provided at transfer hospitals that initiated EPM 
episodes as EPM participants, we expected that readmissions during such 
episodes might sometimes be to other hospitals or CAHs that were not 
EPM participants near beneficiaries' home communities. Thus, we 
believed it would be important to allow EPM participants to enter into 
financial arrangements with other hospitals and CAHs that cared for EPM 
beneficiaries, in order to align the financial incentives of such other 
hospitals and CAHs with the EPM goals of improving the quality and 
efficiency of EPM episodes.
    Many accountable care organizations and other stakeholders had 
expressed strong interest in being collaborators in episode payment 
models generally, including sharing potential financial risks and 
rewards with model participants. Multiple commenters on the CJR Final 
Rule stated that robust accountable care organizations have proven 
track records of providing Medicare providers and suppliers with care 
redesign and care management assistance for Medicare beneficiaries, as 
well as managing the overall care of accountable care organization-
aligned beneficiaries to improve the quality and efficiency of care (80 
FR 73417). They reasoned that accountable care organizations might be 
able to provide CJR participant hospitals with care coordination 
assistance at reduced cost due to economies of scale and existing 
accountable care organization resources, as well as potentially assume 
a percentage of downside risk, in order to mitigate that risk to CJR 
participant hospitals. In the CJR Final Rule (80 FR 73417), we did not 
adopt accountable care organizations as CJR collaborators, responding 
that we decided to limit the testing of gainsharing relationships to 
solely those between hospitals and providers and suppliers enrolled in 
Medicare because we expected enrolled providers and suppliers to be 
most directly and specifically engaged with the CJR participant 
hospitals in care redesign and episode care for CJR beneficiaries who 
had surgeries at those hospitals. We also noted that a number of 
scenarios discussed by commenters to support their request to allow 
accountable care organizations to be CJR collaborators could be 
achieved outside of the context of gainsharing relationships between 
the CJR participant hospitals and those organizations.
    With the steady growth in the number of accountable care 
organizations and accountable care organization-aligned beneficiaries, 
in the proposed rule we noted that we had further considered the 
potential for accountable care organizations to be EPM collaborators. 
The proposed EPMs would include beneficiaries with cardiovascular 
disease as well as beneficiaries with hip fracture who commonly would 
be older with multiple comorbidities, and accountable care 
organizations have

[[Page 436]]

expertise in care coordination and accountability for the quality and 
expenditures for health care for accountable care organization-aligned 
beneficiaries over an annual period.
    While we proposed to exclude certain accountable care organization-
aligned beneficiaries from EPM episodes, we noted that the challenges 
of attributing savings and changes in the quality of care for 
beneficiaries simultaneously in EPM and total cost-of-care models or 
programs, such as accountable care organizations, remained under 
consideration without full resolution, as discussed further in section 
III.D.6. of the proposed rule (81 FR 50869 through 50871). Local 
relationships between providers, suppliers, and accountable care 
organizations vary in the care of beneficiaries, and it would be 
difficult for CMS at this time to provide standard program or model 
rules that would fairly distribute savings among different models and 
programs for overlapping periods of beneficiary care, when variable 
local arrangements would determine which entity provides the resources 
for coordinating and managing a particular beneficiary's care over 
time. Finally, we noted that accountable care organizations are groups 
of physicians, hospitals, and other health care providers and suppliers 
that come together to furnish coordinated, high quality care to their 
aligned Medicare beneficiaries to ensure that these beneficiaries, 
especially the chronically ill, get the right care at the right time, 
while avoiding unnecessary duplication of services and preventing 
medical errors. Accountable care organizations' goals of delivering 
high quality care and spending health care dollars more wisely are the 
same as those of hospitals that would participate in the EPM. 
Therefore, we believed it would be especially important to further 
encourage collaborative partnerships between accountable care 
organizations and EPM participants that maximize their organizational 
efficiency and effectiveness, given their shared goals.
    In considering the accountable care organizations that could be EPM 
collaborators engaged in collaborative relationships with EPM 
participants, we limited our consideration to accountable care 
organizations under Medicare because the proposed EPM would be an 
episode payment model for Medicare FFS beneficiaries. We note that in 
section III.D.6. of the proposed rule (81 FR 50869 through 50871), we 
proposed to exclude from the proposed EPM episodes beneficiaries who 
are aligned to the Next Generation ACO model or tracks of the 
Comprehensive ESRD Care Model incorporating downside risk for financial 
losses. Downside risk for financial losses and prospective alignment of 
beneficiaries were important criteria in selection of these models and 
tracks of models for this proposed exclusion. We also sought comment in 
that section on extending this exclusion proposal to Track 3 of the 
Shared Savings Program. Because we proposed to allow financial 
arrangements under the EPM only with those entities that were involved 
in the delivery of care to EPM beneficiaries with goals of improving 
the quality and efficiency of EPM episodes, we did not believe it would 
be appropriate to permit Next Generation ACOs to be EPM collaborators 
because their aligned beneficiaries would be excluded from the EPM. 
Similarly, because we proposed that beneficiaries eligible for Medicare 
on the basis of ESRD be excluded from the EPM as discussed in section 
III.C.4.a. of the proposed rule (81 FR 50834), we did not believe that 
participants in the Comprehensive ESRD Care initiative which 
predominantly include beneficiaries eligible for Medicare on the basis 
of ESRD should be permitted to be EPM collaborators. Finally, we noted 
that the Pioneer ACO model ends in CY 2016, so that model would not 
overlap with the EPM which was proposed to begin on July 1, 2017.
    Thus, we proposed that ``ACOs,'' meaning those ACOs as defined at 
Sec.  425.20 of regulations that are participating in the Shared 
Savings Program, be permitted to be EPM collaborators. This proposal 
would allow locally variable financial arrangements that could account 
for the way care in EPM episodes was coordinated and managed in 
communities, and ensure that entities with appropriate skills and 
experience were permitted to share the proposed EPM's risks and rewards 
with EPM participants. Medicare has a close relationship with such 
ACOs, which are regulated by CMS, so we could verify that these ACOs 
met current Shared Savings Program requirements that could make them 
suitable for a role as EPM collaborators. Finally, in this way, ACO 
participants and ACO providers/suppliers might be engaged in EPM care 
redesign directly through their ACO, instead of bypassing the ACO to 
become involved directly in the EPM through the EPM participant. We 
limited our proposal of entities that were not providers or suppliers 
but that were permitted to be EPM collaborators to ACOs alone. We 
proposed to allow financial arrangements under the EPM only with those 
entities that were involved in the delivery of care to EPM 
beneficiaries.
    We set forth in proposed Sec.  512.2 that ACOs and the following 
types of providers and suppliers may be EPM collaborators:
     SNF.
     HHA.
     LTCH.
     IRF.
     Physician.
     Nonphysician practitioner.
     Provider or supplier of outpatient therapy services.
     PGP.
     Hospital.
     CAH.
     ACO.
    We sought comment on the proposed definition of EPM collaborators. 
In addition to general comment, we were specifically interested in 
comment on the proposal to include hospitals, CAHs, and ACOs in the 
definition of EPM collaborators. Furthermore, we sought comment 
specifically on the accountable care organizations that we proposed to 
include in the definition of ACO and which accountable care 
organizations should be included and excluded from the definition of 
ACOs that might be EPM collaborators to best advance the goals of the 
EPM and program generally. Finally, we also sought comment on the 
regulatory and practical implications of establishing that ACOs may be 
EPM collaborators under the EPM, including without limitation how the 
requirements under the EPM would relate to how financial arrangements 
within ACOs are currently regulated under the Medicare Shared Savings 
Program.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters requested clarification about whether 
certain groups of health care professionals that do not include 
physicians could be EPM collaborators. The commenters requested that, 
in addition to PGPs, groups of certified registered nurse anesthetists 
(CRNAs), advanced practice registered nurses (APRNs), outpatient 
speech-language pathologists, physical therapists, and other qualified 
licensed healthcare professionals who are not physicians, be permitted 
to be EPM collaborators. One commenter explained that these groups are 
identified by a TIN.
    A number of commenters pointed out that while the proposed rule 
specifically listed PGPs as eligible to be EPM collaborators, CMS' 
proposal did not separately list groups of physical therapists or other 
therapists as eligible to be EPM collaborators. One commenter asserted 
that allowing only

[[Page 437]]

individual therapists to be EPM collaborators and excluding therapy 
practice groups from entering into sharing arrangements with EPM 
participants is shortsighted because rehabilitation therapy practices 
and independent therapists are likely to be significant contributors to 
SHFFT episodes. The commenters requested that CMS clarify the 
regulations to explicitly permit groups of therapists to enter into 
sharing arrangements with EPM participants. One commenter further 
proposed that once a therapy practice group contracts with a hospital 
as a collaborator, it should be up to the practice group to ensure that 
financial exchanges with the participant hospital were attributed to 
the physical therapists who directly furnished services to EPM 
beneficiaries.
    Response: We appreciate the interest of the commenters in ensuring 
groups of nonphysician practitioners and groups of therapists have the 
same opportunities to be EPM collaborators that we proposed for PGPs, 
as well as their interest in allowing financial exchanges with their 
members who furnished services to EPM beneficiaries.
    Under our proposal, individual nonphysician practitioners are 
permitted to be EPM collaborators. We also proposed that individual 
therapists would be permitted to be collaborators to the extent that 
they fell within the collaborator category for provider or supplier of 
outpatient therapy services. As collaborators, these individuals would 
be eligible to receive gainsharing payments from EPM participants. 
Moreover, our proposal defined a PGP member to include a nonphysician 
practitioner or therapist who is an owner or employee of a PGP who has 
reassigned his or her right to receive Medicare payment to the PGP. 
Accordingly, as PGP members, these nonphysician practitioners and 
therapists would be eligible for distribution payments and downstream 
distribution payments from a PGP. We agree with the commenters that 
because our proposals addressed the role of PGPs as EPM collaborators 
and collaboration agents without reference to other types of groups, we 
left some uncertainty about whether groups without a physician owner or 
employee would be eligible to be EPM collaborators and whether such 
groups would be permitted to enter into distribution arrangements or 
downstream distribution arrangements with their members. We also agree 
with the commenters that our proposal to allow providers and suppliers 
of outpatient therapy services to be EPM collaborators is potentially 
unclear, because this term did not separately identify therapists in 
private practice or groups of therapists in private practice on the 
list of EPM collaborators, as did our proposal regarding physicians and 
PGPs. We also appreciate the commenters' uncertainty associated with 
the fact that we did not address whether a collaborator that was a 
therapy group practice would be permitted to enter into distribution 
arrangements or downstream distribution arrangements with their 
members, as we proposed for PGPs.
    We do not believe it would be appropriate to allow a group of 
licensed health care professionals to be EPM collaborators if that 
group consists solely of individuals who are not among the categories 
of individuals we proposed to be EPM collaborators. However, we believe 
that if a category of individuals is eligible to be EPM collaborators, 
then Medicare-enrolled groups that include such individuals should also 
be permitted to be collaborators and that such groups should be 
permitted to enter into distribution arrangements or downstream 
distribution arrangements with their members. We clarify these policies 
through this final rule.
    Groups of nonphysician practitioners that do not include a 
physician are not included in the category of PGPs that we proposed to 
include on the list of EPM collaborators. However, we believe these 
groups of nonphysician practitioners should be permitted to be EPM 
collaborators, just as we proposed to allow both individual physicians 
and nonphysician practitioners to be EPM collaborators. We also believe 
these groups of nonphysician practitioners should be treated similarly 
to PGPs with regarding their ability to engage in distribution 
arrangements and downstream distribution arrangements with their 
members, consistent with our treatment of nonphysician practitioners 
who are PGP members. Therefore, we are adding to the list of entities 
that are eligible to be EPM collaborators a nonphysician practitioner 
group practice (NPPGP), defined as ``an entity that is enrolled in 
Medicare as a group practice, includes at least one owner or employee 
who is a nonphysician practitioner, does not include a physician owner 
or employee, and has a valid and active TIN.'' The requirements for 
sharing arrangements, distribution arrangements, and downstream 
distribution arrangements for NPPGPs and NPPGP members are discussed in 
the sections of this final rule that address our policies for these 
arrangements.
    We further believe that our proposal to include a provider or 
supplier of outpatient therapy services on the list of types of 
providers and suppliers that can be EPM collaborators should be 
modified to provide greater clarity about the providers and suppliers 
of outpatient therapy services that can be EPM collaborators. The 
Medicare Claims Processing Manual, Chapter 5, Part B Outpatient 
Rehabilitation and CORF/OPT Services, Section 10 lists the following 
Medicare-enrolled providers and suppliers that can submit claims for 
outpatient therapy services: SNF; outpatient hospital; CAH; HHA; 
outpatient physical therapy provider (OPT), otherwise known as 
rehabilitation agency; comprehensive outpatient rehabilitation facility 
(CORF); physician; nonphysician practitioner; and physical or 
occupational therapist or speech-language pathologist in private 
practice.\128\ We note that the list of EPM collaborators already 
includes hospitals, SNFs, CAHs, HHAs, physicians, and nonphysician 
practitioners so their inclusion as collaborators under the proposed 
definition of provider or supplier of outpatient therapy services is 
duplicative. Therefore, rather than finalizing our proposed definition 
of provider of outpatient therapy services which would have included 
all providers and suppliers of outpatient therapy services, we believe 
it is clearer to specify individually on the list of EPM collaborators 
all the types of Medicare-enrolled providers and suppliers that can 
bill Medicare for outpatient therapy services. Thus, we are defining a 
new term therapist in private practice as ``a therapist that either: 
complies with the special provisions for services furnished by physical 
therapists in private practice in Sec.  410.60(c) of this chapter; or 
complies with the special provisions for services furnished by 
occupational therapists in private practice in Sec.  410.59(c) of this 
chapter; or complies with the special provisions for services furnished 
by speech-language pathologists in private practice in Sec.  410.62(c) 
of this chapter.'' We are adding therapist in private practice to the 
list of EPM collaborators, which ensures that all individual suppliers 
of outpatient therapy services are on the EPM collaborator list. In 
addition, we are revising our definition of provider of outpatient 
therapy services to mean ``an entity that is enrolled in Medicare as a 
provider of therapy services and furnishes one or

[[Page 438]]

more of the following: outpatient physical therapy services as defined 
in Sec.  410.60 of this chapter; outpatient occupational therapy 
services as defined in Sec.  410.59 of this chapter; outpatient speech-
language pathology services as defined in Sec.  410.62 of this 
chapter.'' Under this revised definition, provider of outpatient 
therapy services now includes only those entities that enroll in 
Medicare specifically as a provider of outpatient physical therapy/
occupational therapy/speech-language pathology services, and we are 
revising the list of EPM collaborators to use this defined term in 
place of ``provider or supplier of outpatient therapy services.'' 
Finally, we are adding CORFs to the list of EPM collaborators because 
it is the only other type of provider that can furnish outpatient 
therapy services that is not included on the EPM collaborator list 
under our new and revised terms. Thus, with the addition of therapy 
group practices as discussed specifically later in this section, in 
total, these changes to the definitions and supplements to the list of 
EPM collaborators clarify which individuals and entities may be EPM 
collaborators by separately specifying each type of supplier and 
provider of outpatient therapy services that is eligible to be an EPM 
collaborator.
---------------------------------------------------------------------------

    \128\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c05.pdf.
---------------------------------------------------------------------------

    With respect to the specific interest of commenters in therapy 
practice groups being eligible to be EPM collaborators that can share 
payments under EPM financial arrangements with their members, we agree 
with the commenters that such groups should be permitted to be EPM 
collaborators and to enter into distribution arrangements and 
downstream distribution arrangements with their members, consistent 
with our treatment of PGPs and NPPGPs. Thus, we are defining therapy 
group practice (TGP) as ``an entity that is enrolled in Medicare as a 
therapy group in private practice, includes at least one owner or 
employee that is a therapist in private practice, does not include an 
owner or employee who is a physician or nonphysician practitioner, and 
has a valid and active TIN'' and adding TGP to the list of EPM 
collaborators. The requirements for sharing arrangements, distribution 
arrangements, and downstream distribution arrangements for TGPs and TGP 
members are discussed in the sections of this final rule that address 
our policies for these arrangements. We are finalizing, with the 
modifications discussed, the definition of EPM collaborator in Sec.  
512.2 to mean an ACO or one of the following Medicare-enrolled 
individuals or entities that enters into a sharing arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) TGP.
    Comment: A number of commenters expressed support for CMS' proposed 
definition of ``EPM collaborators,'' including the proposed addition of 
ACOs, hospitals, and CAHs to the types of collaborators that were 
previously adopted for the CJR model. The commenters claimed that 
allowing additional health care providers, suppliers, and ACOs to be 
EPM collaborators would further encourage robust care coordination 
across EPM episodes. Several commenters asserted that by recognizing 
the expertise that ACOs may offer EPM participants as EPM collaborators 
with regard to managing the cost and quality of care that Medicare 
beneficiaries receive, ACOs will be able to use their substantial 
expertise and resources to contribute to the EPM's dual goals of 
limiting spending and increasing quality. One commenter further 
commended CMS for making the list of EPM collaborators exhaustive and 
not including third party conveners, who the commenter believes lack a 
commitment to patients, local providers, or their community.
    In contrast, some commenters expressed disappointment that the list 
of EPM collaborators did not include entities such as pharmaceutical 
companies; medical device companies; medical technology companies; 
social services aging networks; and other third parties, such as the 
types of convening organizations participating in other Innovation 
Center models. Several commenters believe that were medical device and 
pharmaceutical manufacturers allowed to be EPM collaborators, those 
manufacturers may make meaningful contributions to the success of the 
EPM by ensuring their products are used appropriately; aligning 
financial and other incentives to improve patient outcomes; 
demonstrating the value of their products; and reducing costs. Other 
commenters who favored adding medical technology companies as EPM 
collaborators asserted that medical technology companies can make a 
significant, positive impact on care redesign and cost containment as 
well as provide integrated data analytic infrastructure and services to 
optimize care and to achieve quality goals. A few commenters suggested 
that CMS should expand the list of potential EPM collaborators to 
include non-provider or non-supplier entities that have a track record 
of providing Medicare providers and suppliers participating in other 
models with support services such as care redesign, data analytics, and 
general program support, as well as community-based organizations that 
are well-equipped and efficient in providing social and supportive 
services that help beneficiaries stay out of the hospital. Several 
commenters also encouraged CMS to include all APM entities as EPM 
collaborators, reasoning that APM entities are similar to ACOs in that 
they are a legal entity that is separate from its participants.
    Additionally, one commenter recommended that Next Generation ACOs 
be included in the definition of ACOs that are on list on EPM 
collaborators, so the Next Generation ACO may act on behalf of its 
providers to enter into financial arrangements with EPM participants 
for beneficiaries not assigned to the ACO. The commenter explained that 
not including Next Generation ACOs in the definition of ACOs that CMS 
proposed could be EPM collaborators will require ACO participants and 
ACO providers/suppliers of the Next Generation ACO to enter in EPM 
sharing arrangements on their own without the Next Generation ACO to 
represent them.
    Finally, one commenter shared its perspective that CMS should not 
restrict the definition of EPM collaborators because such an approach 
discourages the introduction of new entities and individuals in the 
healthcare market. The commenter requested that CMS allow market forces 
to shape the innovation of EPM participants and their community 
partners in order to determine the financial partnerships that would be 
most beneficial to achieving the overarching goals of the EPM. The 
commenter asserted that being too prescriptive regarding the 
individuals and entities that can and cannot enter into financial 
arrangements under the EPM would not allow for new organizations to 
develop in the market that may have the potential to generate 
substantial cost savings for EPM participants.
    Response: We appreciate the support of the commenters for our 
proposed list of the types of individuals and entities

[[Page 439]]

that can be EPM collaborators, including our proposal to include 
hospitals, CAHs, and ACOs that would expand the list beyond the CJR 
collaborators adopted in the CRJ Final Rule (80 FR 73418).
    We note that some of the potential contributions, such as 
integrating the data analytic infrastructure and services to optimize 
care to achieve quality goals, that were suggested by commenters as 
reasons to allow third parties, such as pharmaceutical, medical device, 
and medical technology companies as well as other types of convening 
organizations participating in other Innovation Center models, to be 
EPM collaborators can be achieved outside of the context of sharing 
arrangements through other relationships between the EPM participant 
and those entities. In response to the specific requests that we 
include APM entities on the list of EPM collaborators, given that an 
APM entity, as defined in Sec.  414.1305, means an entity that 
participates in an APM or payment arrangement with a non-Medicare payer 
through a direct agreement or through federal or state law or 
regulation, we believe that adding all APM entities to the list of EPM 
collaborators would be overly expansive and risk loosening the clinical 
link between the EPM collaborator, EPM participant, and EPM beneficiary 
that we believe is important for improving the quality and reducing the 
cost of care under the EPM. With the exception of ACOs, PGPs, NPPGPs, 
and TGPs, we continue to believe that any EPM collaborator that 
receives a gainsharing payment must have furnished a billable service 
included in the episode to an EPM beneficiary and that the payment 
arrangements for gainsharing payments must be substantially based on 
the quality of care and the provision of EPM activities. In the case of 
ACOs, PGP, NPPGPs, and TGPs that are EPM collaborators, we require that 
the entity itself must have contributed to EPM activities and been 
clinically involved in the care of EPM beneficiaries in order to be 
eligible to receive a gainsharing payment or be required to make an 
alignment payment and at this point we are not convinced any APM 
entities could meet these eligibility criteria, other than ACOs. We 
also do not agree with the commenter who recommended that we not 
restrict the definition of EPM collaborators to any specific 
individuals or entities. We believe it is important for EPM 
participants to engage EPM collaborators that have a commitment to 
their local communities, local providers, and Medicare beneficiaries in 
order to create the greatest potential for sustained improvements in 
quality and reductions in cost under the EPM.
    We appreciate the commenter's suggestion that Next Generation ACOs 
be included in the definition of ACOs that are on the list of EPM 
collaborators, so the Next Generation ACO may act on behalf of its ACO 
participants and ACO providers/suppliers to establish sharing 
arrangements with EPM participants for beneficiaries not assigned to 
the ACO. While we understand that the Next Generation ACO would like to 
enter into an EPM sharing arrangement as an EPM collaborator on behalf 
of its providers and suppliers, to be eligible to receive a gainsharing 
payment or be required to make an alignment payment under the sharing 
arrangement the Next Generation ACO itself must have contributed to EPM 
activities and been clinically involved in the care of EPM 
beneficiaries through activities such as providing care coordination 
services to EPM beneficiaries during and/or after inpatient admission; 
engaging with an EPM participant in care redesign strategies, and 
actually performing a role in implementing such strategies, that are 
designed to improve the quality of care and reduce spending for EPM 
episodes; or in coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the EPM participant, and post-
acute care providers) implementing strategies designed to address and 
manage the comorbidities of EPM beneficiaries. We are unclear of the 
role the Next Generation ACO itself would play in the care of EPM 
beneficiaries that are not assigned to the ACO, beyond serving as a 
contracting agent for its ACO participants and ACO providers/suppliers. 
We further believe that such an arrangement would require 
distinguishing activities on behalf of beneficiaries assigned to the 
ACO who are excluded from EPM episodes and beneficiaries not assigned 
to the ACO who are included in EPM episodes, and such distinctions 
could create confusion for beneficiaries, providers, and suppliers, as 
well as administrative complexity for the Next Generation ACO. 
Therefore, we do not believe it would be appropriate to include Next 
Generation ACOs in the definition of ACOs that may be EPM 
collaborators.
    Finally, we note that as discussed in section III.D.6.c.(3) of this 
final rule, we are additionally finalizing the exclusion of 
beneficiaries from EPM episodes who are prospectively assigned to a 
Shared Savings Program ACO in Track 3. Therefore, for consistency with 
our policy for Next Generation ACOs whose assigned beneficiaries are 
also excluded from EPM episodes, we are excluding Shared Savings 
Program ACOs in Track 3 from the definition of ACOs that may be EPM 
collaborators. Thus, we are modifying our definition of ACO to read 
``ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Shared Savings Program 
and is not in Track 3.'' We emphasize that no EPM policy precludes 
providers or suppliers who are ACO participants or ACO providers/
suppliers in a Next Generation ACO from entering into a sharing 
arrangement with an EPM participant on their own, provided they are on 
the list of EPM collaborators.
    In summary, at this time we will not adopt a final policy that 
includes additional entities or individuals that are not providers or 
suppliers beyond those we proposed to be EPM collaborators. We selected 
acute care hospitals as the financially responsible entity for the EPM 
because we are interested in 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 
payment arrangements. We believe that it is most appropriate to 
identify a single type of provider to bear financial responsibility for 
making repayment to CMS under the EPM. Given that hospitals perform a 
central role in coordinating episode-related care and ensuring smooth 
transitions for beneficiaries, this role factored in our decision to 
select IPPS hospitals as the financially responsible entity for this 
model. Under this structure, we believe that limiting the testing of 
gainsharing relationships to solely those between EPM participants, 
certain Shared Savings Program ACOs, and providers and suppliers 
enrolled in Medicare is most appropriate because we expect enrolled 
providers and suppliers to be most directly and specifically engaged 
with the EPM participants in care redesign and EPM episode care for 
beneficiaries. While we recognize that Shared Savings Program ACOs are 
not providers or suppliers, Medicare has a close relationship with such 
ACOs, which are regulated by CMS, so we can verify that these ACOs meet 
current Shared Savings Program requirements that make them suitable for 
a role as EPM collaborators. Further, by including such ACOs on the 
list of EPM collaborators, we are permitting locally variable financial 
arrangements that could account for the way care in EPM episodes is 
coordinated and managed in communities, and ensure that entities

[[Page 440]]

with appropriate skills and experience are permitted to share the EPM's 
risks and rewards with EPM participants.
    We are finalizing in Sec.  512.2 the definition of ACO, with 
modification to mean an accountable care organization, as defined at 
Sec.  425.20 of this chapter, that participates in the Shared Savings 
Program and is not in Track 3.
    Comment: One commenter requested clarification about whether 
outpatient speech-language pathologists are considered providers of 
outpatient therapy services and, therefore, eligible to be EPM 
collaborators.
    Response: We appreciate the opportunity to clarify that speech-
language pathologists are eligible to be EPM collaborators if they are 
furnishing outpatient services as Medicare- enrolled speech-language 
pathologists in private practice. As discussed previously in this 
section, speech-language pathologists in private practice are included 
under the new definition of therapist in private practice when they are 
therapists that comply with the special provisions for services 
furnished by speech-language pathologists in private practice in Sec.  
410.62(c). In addition, a group of speech-language pathologists in 
private practice is included under the new definition of TGP when the 
group is entity that is enrolled in Medicare as a therapy group in 
private practice, includes at least one owner or employee that is a 
therapist in private practice, does not include an owner or employee 
who is a physician or nonphysician practitioner, and has a valid and 
active TIN. Both therapists in private practice and TGPs are included 
on the final list of types of providers and suppliers that may be EPM 
collaborators so individual speech-language pathologists in private 
practice, as well as speech-language pathology groups in private 
practice, are eligible to be EPM collaborators.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.2 for the 
definition of EPM collaborator and other terms used in that definition, 
with modification to revise the definitions of provider of outpatient 
therapy services; and ACO; create new definitions for CORF, therapist 
in private practice, NPPGP, and TGP; and include additional individuals 
and entities on the list of EPM collaborators. EPM collaborator means 
an ACO or one of the following Medicare-enrolled individuals or 
entities that enters into a sharing arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) TGP.
4. Sharing Arrangements Under the EPM
a. General
    Similar to the CJR model (80 FR 73430), we proposed that certain 
financial arrangements between an EPM participant and an EPM 
collaborator be termed ``sharing arrangements.'' A sharing arrangement 
would be a financial arrangement to share only--(1) EPM reconciliation 
payments; (2) the EPM participant's internal cost savings; and (3) the 
EPM participant's repayment amount. Where a payment from an EPM 
participant to an EPM collaborator was made pursuant to a sharing 
arrangement, we proposed to define that payment as a ``gainsharing 
payment.'' A gainsharing payment may be composed only of--(1) EPM 
reconciliation payments; (2) the EPM participant's internal cost 
savings; or (3) both. A ``reconciliation payment'' was proposed to be 
defined as a payment made by CMS to an EPM participant as determined in 
accordance with proposed Sec.  512.305(d) and as discussed in section 
III.D.5. of the proposed rule (81 FR 50864 through 50867). ``Internal 
cost savings'' would be the measurable, actual, and verifiable cost 
savings realized by the EPM participant resulting from care redesign 
undertaken by such participant in connection with providing items and 
services to beneficiaries within specific EPM episodes. Internal cost 
savings would not include savings realized by any individual or entity 
that was not the EPM participant. Where a payment from an EPM 
collaborator to an EPM participant was made pursuant to an EPM sharing 
arrangement, we proposed to define that payment as an ``alignment 
payment.'' An alignment payment could consist only of a portion of the 
``repayment amount,'' which would be the amount owed by an EPM 
participant to CMS, as reflected on a reconciliation report. An EPM 
participant would not be permitted to make a gainsharing payment or 
receive an alignment payment except in accordance with a sharing 
arrangement. We proposed that a sharing arrangement must comply with 
the provisions of proposed Sec.  512.500 and all other applicable laws 
and regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements.
    We proposed that the EPM participant must develop, maintain, and 
use a set of written policies for selecting individuals and entities to 
be EPM collaborators, and that the selection criteria must include the 
quality of care delivered by the potential EPM collaborator. The 
selection criteria could not be based directly or indirectly on the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent. With the exception of adding ``past or anticipated'' to the 
selection criteria for EPM collaborators, these proposed criteria were 
similar to the existing requirements of the CJR model (80 FR 73430). By 
adding this language, all previous and future referrals between or 
among the EPM participant, any EPM collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with an EPM participant, EPM collaborator, collaboration 
agent, or downstream collaboration agent were encompassed. We did not 
believe it would be appropriate for sharing arrangements to be based on 
criteria that include the volume or value of past or anticipated 
referrals because the sole purpose of sharing arrangements would be to 
create financial alignment between EPM participants and EPM 
collaborators toward the EPM goals of improving the quality and 
efficiency of episode care. Thus, we proposed to require EPM 
participants to select EPM collaborators based on criteria that include 
the quality of care furnished by the potential EPM collaborator to 
ensure that the selection of EPM collaborators took into consideration 
the likelihood of their future performance in improving the quality of 
episode care. In addition, requiring that selection criteria include 
quality of care furnished by the potential EPM collaborator would 
provide a safeguard against abuse.
    Finally, we proposed that if an EPM participant entered into a 
sharing arrangement, its compliance program must include oversight of 
sharing arrangements and compliance with the applicable requirements of 
the EPM. Requiring oversight of sharing arrangements to be include in 
the

[[Page 441]]

compliance program would provide a program integrity safeguard.
    The proposals for the general provisions for sharing arrangements 
under the EPM were included in proposed Sec.  512.500(a). We sought 
comment about all of the provisions 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 EPM were met.
    The following is a summary of the comments received and our 
responses.
    Comment: While many commenters expressed appreciation for CMS' 
proposal that would allow EPM participant choice regarding the 
formation of specific financial relationships with other individual and 
entities as determined by the EPM participant, several commenters 
expressed concern that engaging in sharing arrangements by EPM 
participants is voluntary for hospitals. One commenter stated that CMS' 
proposal to leave the choice of sharing reconciliation payments from 
episode savings achieved under the EPM to the responsible hospitals 
would have the unintended consequences of further consolidating control 
of care at the hospital level rather than with the community providers 
at the forefront of providing patient-centered care and could restrict 
beneficiary choice. Another commenter stated that because EPM 
participants are not required to distribute their episode savings as 
gainsharing payments, the proposed model design and financial 
arrangements would exclude post-acute care providers from having a 
significant role in the EPM. One commenter who expressed appreciation 
for CMS' proposal to allow ACOs to be EPM collaborators nevertheless 
asserted that under the current and proposed policies for EPM financial 
arrangements, model participants often have little or no incentive to 
collaborate with ACOs, a situation which threatens the continuity of 
care for patients. The commenter believes that participants in bundled 
payment models have a significant incentive to take advantage of an 
ACO's ongoing efforts to coordinate care over the course of the full 
year (which includes the EPM episode), which could lead to episode 
savings achieved by the ACO's efforts, rather than hospitals' efforts 
under the EPM. The commenter urged CMS to require sharing arrangements 
between EPM participants and unrelated ACOs in the same market or 
otherwise determine that all ACO-assigned beneficiaries would be 
excluded from EPM episodes. Finally, another commenter encouraged CMS, 
at a minimum, to add stronger language to encourage EPM participants to 
enter into sharing arrangements if CMS chooses to maintain the proposed 
policy which is permissive rather than directive.
    Response: We appreciate the perspectives of the commenters 
regarding our proposal for financial arrangements under the EPM that 
would not require EPM participants to enter into sharing arrangement 
with collaborators under the model. As we finalize in section III.B.3. 
of this final rule for the EPM and as we finalized for the CJR model in 
the CJR Final Rule (80 FR 73288), we have selected acute care hospitals 
as the financially responsible entity for the EPM because we are 
interested in evaluating the impact of bundled payments and care 
redesign across a broad spectrum of hospitals with varying levels of 
infrastructure and experience in entering into risk-based financial 
arrangements. Our expectation that hospitals would perform a central 
role in coordinating episode-related care and ensuring smooth 
transitions for beneficiaries hospitalized for clinical conditions that 
are the focus of the EPM factored into our identification of hospitals 
as the financially responsible entity for the model.
    While we proposed that hospitals would be the financially 
responsible entity for episodes under the EPM as they are under the CJR 
model, we agree with the commenters that effective care redesign for 
EPM episodes likely requires meaningful collaboration among acute care 
hospitals, CAHs, post-acute care providers, ACOs, 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 and suppliers to be aligned and engaged, financially and 
otherwise, with participant hospitals, and that they have the potential 
to share financial responsibility with those hospitals. We believe that 
close alignment and engagement of certain providers, suppliers, and 
ACOs with EPM participants may be especially important, given the 
clinical complexity of many beneficiaries in EPM episodes who are 
likely to have underlying chronic condition and risk factors, such as 
advanced age that led to the acute event of AMI or hip fracture or 
progressively worsening cardiac status resulting in CABG that are the 
focus of EPM episodes. Depending on a hospital's current degree of 
clinical integration, new and different contractual relationships among 
hospitals and other health care providers and suppliers may be 
important, although not necessarily required, for EPM success in a 
community. We do not believe, however, that it would be appropriate to 
require that EPM participants engage in sharing arrangements, including 
with any specific individuals or entities such as ACOs, since, under 
the EPM, the participant hospitals are solely responsible to CMS for 
financial risk under the models. While we are providing EPM 
participants with required parameters for any financial arrangements 
with collaborators that assist them in engaging other individuals and 
entities in care redesign toward the goals of improving EPM episode 
quality and reducing cost, we believe that model participants providing 
care in their own communities are best positioned to determine whether 
sharing arrangements would advance these goals. We refer to section 
III.D.6.c.(3) of this final rule for further discussion of our final 
policies regarding overlap of EPM beneficiaries with shared savings 
models and programs.
    We emphasize that, although we allow sharing arrangements under the 
EPM, beneficiaries in EPM episodes retain their full rights to choose 
their providers and suppliers. EPM participants, providers, and 
suppliers are reminded that patient steering is not permissible and 
such entities and individuals must continue to comply with all 
applicable law and regulations. EPM participants and their 
collaborators that engage in sharing arrangements may not impede the 
rights of the beneficiary. Furthermore, we reiterate that sharing 
arrangements must not induce the EPM participant, EPM collaborator, or 
any employees, contractors, or subcontractors of the EPM participant or 
EPM collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary; or restrict the ability of an EPM collaborator to 
make decisions in the best interests of its patients, including the 
selection of devices, supplies, and treatments.
    Comment: A number of commenters commended CMS for not requiring EPM 
participants to collaborate with certain groups of providers or 
suppliers, thereby allowing market forces to feed the creative 
innovation of model participants and their community partners to 
determine the financial partnerships that would be most beneficial to 
achieving the overarching goals of the EPM. One commenter stated that 
EPM participants should not be required to offer risk-sharing

[[Page 442]]

arrangements to all post-acute care providers in their markets. Several 
commenters expressed support for CMS' proposal to require EPM 
participants to utilize quality criteria in the selection of 
collaborators, which is consistent with the goal of the EPM to improve 
the quality of episode care while reducing its cost.
    Many commenters also agreed with CMS' intent that the selection 
requirements should prevent EPM participants from developing 
methodologies for selecting collaborators that take into account the 
volume or value of past or anticipated referrals between the parties. 
However, one commenter advocated that CMS permit EPM participants to 
consider a potential EPM collaborator's relevant experience in 
collaborator selection. The commenter seemed to be recommending that 
CMS permit collaborator selection criteria to consider factors such as 
the amount of procedures a physician has performed that would be 
subject to payment under an EPM episode or the amount of other services 
a potential collaborator has performed that would be considered EPM 
activities. The commenter urged CMS not to prohibit experience from 
being a qualifying factor in the selection of collaborators on the 
grounds that such a policy would compromise the model's stated goal of 
increasing quality while reducing cost. The commenter believed it was 
only appropriate to prohibit selection criteria that consider the 
historical amount of procedures (or other services that would 
constitute EPM activities) that the potential collaborator performed 
for beneficiaries treated at the EPM participant.
    Several commenters expressed concern that allowing EPM participants 
discretion over the selection of collaborators for sharing arrangements 
could limit collaborators to a small group of preferred providers and 
lead to narrow referral networks to control costs, strategies that are 
not necessarily in the best interest of beneficiaries. The commenters 
encouraged CMS to modify the proposal for allowing EPM participants 
broad discretion to determine how they identify and choose EPM 
collaborators. The commenters further urged CMS to adopt stronger 
safeguards and to closely monitor referral patterns to ensure that the 
EPM is not diminishing patient choice or disrupting existing provider-
patient relationships that are necessary for ensuring patient-centered 
continuity of care. A few commenters believed that EPM participant 
discretion in choosing collaborators should be limited and that EPM 
participants should be required to make gainsharing payments to all 
providers who care for EPM beneficiaries. One commenter requested that 
CMS require EPM participants to allow any interested provider who meets 
basic, minimum quality standards and sees a minimum number of EPM 
beneficiaries to be included on the list of collaborators with sharing 
arrangements. Another commenter requested that EPM participants' 
written policies for the selection of collaborators be made public to 
promote transparency. One commenter emphasized that without transparent 
contracting and financial data requirements, many independent PGPs are 
hesitant to participate in sharing arrangements for episode payment 
models like the EPM managed by hospitals.
    A few commenters requested that CMS make available certain 
information to EPM participants or potential collaborators such as 
physician groups and post-acute care providers. With respect to 
information for EPM participants, the commenters recommended that CMS 
create a tool with a standardized methodology to compare costs so model 
participants could select the most cost-effective partner in the care 
that is included in the models for which they are financially 
responsible. Other commenters urged CMS to provide information to 
potential EPM collaborators about hospital accountability for episodes 
under the EPM, CJR model, and other CMS bundled payment models, 
explaining that it is currently challenging for physicians and post-
acute care providers to determine what hospital owns which episodes in 
order to seek partnerships, especially when the hospitals may be 
located in other geographic areas. One commenter further recommended 
that CMS provide a path to identify the responsible entity for episodes 
in order to alleviate the administrative burden on post-acute care 
providers that are tracking financial risk and clinical responsibility 
for episodes in bundled payment models.
    Response: We appreciate the commenters' support for our proposed 
requirements for EPM participants' policies for the selection of their 
collaborators. We proposed to allow financial arrangements in the EPM 
to incentivize higher quality care and reductions in episode spending 
through improved financial alignment between providers and suppliers 
furnishing services to beneficiaries during EPM episodes, while 
protecting against undue risk from beneficiary steering, care stinting, 
and inappropriate reductions in access to care that could otherwise 
result from the financial incentives in an episode payment model. The 
proposed requirements for the selection criteria for collaborators 
provide important safeguards for these financial arrangements.
    We are mindful of the commenter's concern that the goals of EPM may 
be more difficult to achieve if EPM participants are prohibited from 
selecting collaborators based on their relative experience in providing 
services that would constitute EPM activities. We proposed that the 
written policies for selecting EPM collaborators must contain criteria 
related to, and inclusive of, the quality of care delivered by the 
potential EPM collaborator. We also proposed that the selection 
criteria cannot be based directly or indirectly on the volume or value 
of past or anticipated referrals or other business. Because sharing 
arrangements should be for the sole purpose of aligning the parties' 
financial incentives toward the EPM goal of improving the quality and 
efficiency of care, we do not believe that collaborators should be 
selected in a manner that is based on referrals or the generation of 
other business. We believe that imposing experience qualifications that 
are tied to referrals, rather than quality, presents a significant 
program integrity risk. Specifically, such criteria could be a proxy 
for rewarding past referrals or for encouraging the initiation of an 
excessive number of EPM episodes. Nevertheless, depending on the 
circumstances, the consideration of a potential collaborator's 
experience in performing services that would constitute EPM activities 
may further the quality and efficiency goals of the EPM. For example, 
an ACO's experience in providing care coordination services or 
implementing care redesign strategies may be relevant in evaluating the 
likelihood that a potential ACO collaborator will have the requisite 
expertise to contribute to the EPM participant's success in the model. 
Similarly, we recognize that, in an effort to ensure quality of care 
and successful outcomes for certain procedures, many hospitals require 
physicians to perform a reasonable minimum number of procedures as a 
condition of maintaining medical staff privileges to perform those 
procedures. Therefore, we are modifying the selection criteria 
provision in Sec.  512.500(a)(3) to provide that a selection criterion 
requiring a potential EPM collaborator to have performed a reasonable 
minimum number of services that would qualify as EPM activities will be 
deemed not to violate the volume or value standard if

[[Page 443]]

the purpose of the criterion is to ensure the quality of care furnished 
to EPM beneficiaries. We believe this standard appropriately balances 
the commenter's concerns and the relevant program integrity risks.
    We do not agree with the commenters recommending that EPM 
participants be required to engage as collaborators all providers and 
suppliers caring for EPM beneficiaries or any interested provider 
meeting minimum standards for quality and model beneficiary volume. As 
discussed previously, there is no requirement that EPM participants 
enter into sharing arrangements under the EPM, in order to allow EPM 
participants who are financially responsible for EPM episodes the 
flexibility to determine whether sharing arrangements would advance the 
model goals. Should they choose to enter into financial arrangements 
with collaborators, we believe EPM participants are in the best 
position to select the collaborators, subject to the requirements we 
proposed, who are most willing to engage in the model participant's 
care redesign strategies and provide high quality care. However, we 
continue to believe it is appropriate to require EPM participants to 
create a written set of policies for selecting providers, suppliers, 
and ACOs for sharing risks and gains as EPM collaborators. We are 
adopting numerous safeguards to address patient steering and protect 
beneficiary freedom of choice, including the requirement that EPM 
beneficiaries be informed that they retain freedom of choice to choose 
providers and services; the requirement that EPM participants not 
restrict beneficiaries' ability to choose any Medicare-enrolled 
provider or supplier, or any physician or practitioner who has opted 
out of Medicare; the caps on gainsharing payments to physicians, 
nonphysician practitioners, PGPs, and NPPGPs; the requirement that the 
opportunity to make or receive gainsharing payments (or the opportunity 
to make or receive alignment payments) may not be conditioned on the 
volume or value of past or anticipated referrals; the requirement that 
gainsharing payments be distributed to EPM collaborators substantially 
based on the quality of care and the provision of EPM activities; and 
the requirement that opportunity to make or receive distribution 
payments or downstream distribution payments not be conditioned 
directly or indirectly on the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent. In light of these safeguards, we 
believe that EPM participants should be allowed to enter into different 
sharing arrangements with various EPM collaborators. While we 
appreciate the reasons why some commenters recommended that we require 
EPM participants to enter into financial relationships with certain 
entities and individuals, we do not agree that such a requirement is 
necessary given these protections. Furthermore, we believe these 
safeguards are sufficient to protect beneficiary choice and ensure that 
the EPM does not disrupt existing provider-patient relationships.
    We understand and agree with the commenters who believe that 
transparency in contracting under the EPM is important, so that 
providers, suppliers, and ACOs in communities that provide episode care 
for EPM beneficiaries are knowledgeable about any collaborators working 
with the EPM participant toward achieving the model goals and 
understand how the model participant selected those collaborators. This 
transparency is all the more significant in light of our decision not 
to require that EPM participants engage with any specific providers, 
suppliers, or ACOs. To the extent the commenter who mentioned PGP 
concerns about the transparency of contracting and financial data 
requirements for sharing arrangements was referring to the internal 
requirements of the EPM participant, we do not believe that sharing 
arrangements under the EPM are different in this regard from any other 
scenario in which a PGP contracts with a hospital. To address the 
transparency of the EPM participant's selection criteria for EPM 
collaborators that are required in Sec.  512.500(a)(3), we are 
requiring EPM participants to make publicly available on the EPM 
participant's Web site their policies for selecting individuals and 
entities to be EPM collaborators and to update this information at 
least quarterly. The public availability of the collaborator selection 
policies complements the requirement for EPM participants to publicly 
post on their Web site accurate current and historical lists of all EPM 
collaborators, including EPM collaborator names and addresses, and to 
update such lists on at least a quarterly basis. The policy for the 
lists of EPM collaborators is discussed in section III.I.4.d. of this 
final rule for the EPM.
    With regard to providing standard information to EPM participants 
that would allow them to select the most cost-effective providers and 
suppliers as collaborators, as discussed in section III.K.2 of this 
final rule for EPM participants, upon EPM participant request we are 
making available beneficiary-identifiable claims data no less 
frequently than on a quarterly basis for EPM episodes, as applicable to 
the participant. These data allow the EPM participant to examine 
episodes where model beneficiaries receive care by specific providers 
or suppliers in order to identify patterns in quality and cost that may 
help them identify providers and suppliers that meet the EPM 
participant's selection criteria for collaborators. However, we will 
not provide EPM participants with a tool that uses a standard 
methodology to analyze episode costs of care to allow for specific 
comparisons among potential collaborators. Instead, EPM participants 
will need to develop their own methodology to analyze the features of 
historical episodes that are relevant to their collaborator selection 
criteria.
    We appreciate the interest of potential EPM collaborators in being 
able to identify the bundled payment model episodes and responsible 
hospitals for beneficiaries for whom they provide care in order to seek 
partnerships that may contribute to improvements in the quality of 
episode care and reductions in cost. We will continue to make available 
on the CMS Web site information about bundled payment models, model 
participants, and the episodes that each model participant is testing. 
We encourage potential EPM collaborators to review this information and 
to discuss the potential for collaboration with model participants both 
in their communities and where they have historically provided post-
discharge care following hospitalization for the clinical conditions 
that are the focus of the EPM. Given the complexities of the provider 
and beneficiary overlap policies among different models and programs as 
discussed in section III.D.6. of this final rule, we are not able to 
provide any other specific information about the financially 
responsible entity for beneficiaries who are hospitalized and then 
receive related post-discharge care during their recovery.
    We are finalizing the selection criteria for EPM collaborators in 
Sec.  512.500(a)(3) as modified. We are finalizing in Sec.  
512.500(d)(1)(ii)(A) the requirement for public reporting and updating 
of the current and historical lists of EPM collaborators in Sec.  
512.500(d)(1)(ii)(A).

[[Page 444]]

We are adding the requirement in Sec.  512.500(d)(1)(ii)(B) that the 
EPM participant publicly post on the EPM participant's Web site the 
written policies for selecting individuals and entities to be EPM 
collaborators required by Sec.  512.500(a)(3). We are eliminating as 
redundant the separate verbiage in proposed Sec.  512.500(d)(1)(ii) to 
obligate the EPM participant to maintain accurate current and 
historical lists of all EPM collaborators because this obligation is 
encompassed in the obligations to publicly post and update such lists 
as required in Sec.  512.500(d)(1)(ii) as finalized.
    Comment: Several commenters expressed concern about the various 
``volume or value'' standards that CMS proposed to use in the 
regulations for EPM and CJR financial arrangements. The commenters 
pointed out that CMS' proposal made clear that the criteria for the 
selection of collaborators and the determination of who shall be 
eligible to make or receive alignment or gainsharing payments cannot be 
based directly or indirectly on the volume or value of past or 
anticipated referrals or business otherwise generated between the 
parties, their various agents, and any individuals or entities 
affiliated with them or their agents. However, the commenters observed 
that the proposal did allow for the ``amount of EPM activities'' to be 
taken into account in the methodology for calculating gainsharing 
payments. With respect to the calculation of alignment payments, the 
commenters observed that CMS proposed that EPM participants may not 
``directly'' take into account the volume or value of past or 
anticipated referrals, proposing this different ``volume or value'' 
standard for these payments. One commenter believes that the varying 
standards are confusing and will have little effect on the integrity of 
the models, while EPM participants and CJR participant hospitals will 
need to seek substantial legal consultation to avoid placing themselves 
at risk of whistleblower lawsuits. The commenter requested that CMS 
revisit the reasoning behind the ``volume or value'' standard in the 
proposed EPM and CJR model which they believed was imported from the 
Stark law, while also taking into account the significant safeguards 
built into the models and the goal of provider-supplier alignment with 
EPM and CJR participants through financial arrangements. At minimum, 
the commenter urged CMS to streamline and clarify the provisions that 
include the ``volume and value'' standard.
    Another commenter was concerned that EPM participants and CJR 
participant hospitals participants will avoid entering into financial 
arrangements due to the fear of liability under the Stark law and 
requested that CMS clarify specifically what does and does not 
constitute a violation of the ``volume or value'' standard for sharing 
and distribution arrangements. The commenter urged CMS to provide EPM 
participants and CJR participant hospitals with assurance that 
compliance with the CMS standard would not result in liability under 
the fraud and abuse laws. The commenters asserted that this would give 
model participants the confidence to enter into arrangements that will 
enable them to achieve the goals of the model.
    Response: We appreciate the commenters' interest in streamlining 
and clarifying the proposed standards for various requirements of the 
EPM and CJR financial arrangements that utilize a specific standard 
related to ``volume or value.'' We proposed volume or value standards 
for three things: (1) The selection criteria for EPM collaborators; (2) 
the opportunity to make or receive a payment (gainsharing, alignment, 
distribution, or downstream distribution payment); and (3) the 
alignment payment methodology. Our proposal was designed to ensure that 
the sole purpose of any financial relationships in the CJR model and 
the EPM is to align the financial incentives of the participants, 
collaborators, collaboration agents, and downstream collaboration 
agents so that the models can achieve the goals of improved episode 
care quality and efficiency. For the reasons provided later in this 
section, we believe that the proposed volume or value standard is 
appropriate in all three instances.
    First, we proposed in Sec.  512.500(a)(3) that the selection 
criteria for EPM collaborators cannot be based directly or indirectly 
on the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent (``affiliated individuals or entities''). We do not believe it 
would be appropriate to permit EPM collaborators to be selected based 
on the volume or value of their referrals to any of the enumerated 
parties. Without this prohibition, such arrangements could be used to 
reward collaborators for their referrals, including referrals for 
business outside the EPM.
    Second, we proposed that the opportunity to make or receive a 
gainsharing payment, alignment payment, distribution payment, or 
downstream distribution payment could not be conditioned on the volume 
or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any affiliated individual or entity. As with the collaborator 
selection criteria, we do not believe that a payment opportunity should 
be used to reward referrals. We note that in proposed Sec.  
512.500(c)(7) (regarding the opportunity to make or receive a 
gainsharing payment or an alignment payment), we did not explicitly 
state that the payment opportunity could not be conditioned ``directly 
or indirectly'' on the volume or value of referrals or other business. 
We are revising the regulation text at Sec.  512.500(c)(7) to include 
the words ``directly or indirectly'' before the volume or value 
standard. While we do not believe this revision effects a substantive 
change, we are mindful of the commenters' requests to clarify and 
streamline all the ``volume or value'' provisions. This change simply 
clarifies that the volume or value standard is the same in all payment 
opportunity provisions.
    Finally, we proposed in Sec.  512.500(c)(14) that the methodology 
for determining alignment payments must not ``directly'' account for 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any affiliated individual or entity. We deliberately avoided 
proposing that alignment payments must not ``directly or indirectly'' 
account for the volume or value of referrals or other business. 
Alignment payments represent a portion of the EPM participant's 
repayment liability to CMS, which is determined in part by summing 
actual EPM episode payments that could include payments for some items 
or services referred by the EPM collaborator. Thus, our proposal simply 
recognizes that alignment payments might indirectly account for the 
volume or value of an EPM collaborator's referrals. The commenters did 
not specifically object to the volume or value standard in Sec.  
512.500(c)(14), and we are finalizing the provision as proposed.
    We did not propose a ``volume or value'' standard for the 
methodologies used to determine the amount of any gainsharing payment, 
distribution payment, or downstream distribution payment. As we 
discussed in the

[[Page 445]]

proposed rule (81 FR 50923, 50926, and 50027), we proposed that these 
payments must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of EPM 
activities. We further proposed that the methodology may take into 
account the amount of EPM activities provided by one EPM collaborator, 
collaboration agent, or downstream collaboration agent relative to 
other EPM collaborators, collaboration agents, or downstream 
collaboration agents, as applicable to the type of payment. We proposed 
this standard because we recognized that a ``volume or value'' standard 
could be interpreted to prohibit a payment methodology that would 
result in higher compensation to individuals and entities that 
performed more EPM activities (which may result in referrals) compared 
to others. In response to the commenters who questioned the need for 
different standards for gainsharing payments and alignment payments, if 
the methodology for determining alignment payments was allowed to take 
into the account the amount of EPM activities provided by an EPM 
collaborator relative to other EPM collaborators, there would be a 
significant risk that the financial arrangement could directly account 
for the volume or value of past or anticipated referrals or business 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any affiliated individual or entity.
    Table 46 summarizes the applicability of ``volume or value'' 
standards being finalized in this rule for EPM financial arrangements.

             Table 46--Final Standards Related to ``Volume or Value'' for EPM Financial Arrangements
----------------------------------------------------------------------------------------------------------------
                                         Volume/value         Scope of volume/value
                                         prohibition?              prohibition                  Citation
----------------------------------------------------------------------------------------------------------------
Collaborator selection criteria..  Yes....................  Cannot be based directly   Sec.   512.500(a)(3).
                                                             or indirectly on past or
                                                             anticipated referrals or
                                                             business otherwise
                                                             generated by, between or
                                                             among:
 
                                                            i. EPM participant
                                                            ii. Collaborator
                                                            iii. Collaboration agent
                                                            iv. Downstream
                                                             collaboration agent
                                                            v. Any individual or
                                                             entity affiliated with
                                                             (i)-(iv)
Opportunity to make or receive a   Yes....................  Same as for collaborator   Sec.   512.500(c)(7)
 payment.                                                    selection criteria.        (gainsharing or
                                                                                        alignment payments).
                                                                                       Sec.   512.505(b)(4)
                                                                                        (distribution payment).
                                                                                       Sec.   512.510(b)(4)
                                                                                        (downstream distribution
                                                                                        payment).
Alignment Payment Methodology....  Yes....................  Cannot directly account    Sec.   512.500(c)(14).
                                                             for volume or value of
                                                             past or anticipated
                                                             referrals or business
                                                             otherwise generated by,
                                                             between or among (i)-(v)
                                                             above.
Gainsharing Payment Methodology..  No.....................  N/A--methodology must be   Sec.   512.500(c)(5)
                                                             substantially based on     (gainsharing payments).
                                                             quality of care and the
                                                             provision of EPM
                                                             activities; may consider
                                                             relative amount of EPM
                                                             activities provided.
Distribution and Downstream        No.....................  N/A--same methodology      Sec.   512.505(b)(5), (6)
 Distribution Payment                                        standard as for            (distribution payments).
 Methodologies.                                              gainsharing payments,     Sec.   512.510(b)(5), (6)
                                                             except that amounts        (downstream distribution
                                                             distributed by a PGP to    payments).
                                                             a PGP member can also be
                                                             determined in a manner
                                                             that complies with Sec.
                                                              411.352(g) of the
                                                             physician self-referral
                                                             regulations.
----------------------------------------------------------------------------------------------------------------

    Comment: Many commenters raised concerns about the burdens of 
writing EPM sharing arrangements and the overall complexity of the 
requirements for financial arrangements. Several commenters claimed 
that financial arrangements are underutilized in the BPCI initiative 
due to the complexity of CMS' requirements, the administrative burden 
associated with understanding and ensuring compliance with those 
requirements, and the lack of clearly articulated safe harbors from the 
fraud and abuse laws implicated by the arrangements. The commenters 
further asserted that few potential collaborators have sufficient 
volume of cases in episodes for the financial benefits of gainsharing 
to outweigh the administrative burdens to develop and maintain these 
arrangements.
    Another commenter stated that it is infeasible for EPM participants 
to write sharing arrangements with each party where the EPM participant 
will transfer beneficiaries with AMI. The commenter recommended that 
CMS institute a default sharing arrangement which would come into force 
when there is no specific sharing arrangement between an EPM 
participant and another hospital in order to protect receiving 
hospitals from the effects of adverse patient selection that would 
inflate the transfer hospital's costs.
    One commenter stated that the structure of CJR fraud and abuse 
waivers have hindered gainsharing arrangements because of CJR 
participant hospitals' concerns that they may lose waiver protection if 
they miss any one of the program requirements, including those that the 
commenter believes pose no fraud and abuse risk to any federal health 
care program. The commenter asserted that the program requirements for 
sharing arrangements do not appropriately balance CMS' program 
integrity interest with need for meaningful change.
    Response: We appreciate the feedback of the commenters, as well as 
the information provided regarding the potential challenges associated 
with constructing and executing sharing arrangements, both in the EPM 
and CJR model and other CMS efforts such as the BPCI initiative. We 
understand that parties may want to consider a number of factors when 
assessing whether to enter into a sharing arrangement, including the 
number of episodes in which the collaborator will be engaged,

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the quality measures used to measure performance, as well as purely 
contractual matters governing payment, appeals, and termination.
    With respect to the overall complexity of the requirements for 
financial arrangements in the EPM, we note, as we discussed in the 
proposed rule (80 FR 50917), that in response to feedback from 
participant hospitals in the CJR model, other stakeholders, and the 
general public we have made an effort to simplify the requirements in 
comparison to what was adopted for the CJR model by removing 
duplication of requirements in similar provisions; streamlining and 
reorganizing many of the provisions for clarity and consistency; and 
providing additional flexibility. We believe that these efforts have 
resulted in a set of requirements that are more accessible to EPM 
participants and involved parties. Nevertheless, we note that an EPM 
participant's decision to enter into sharing arrangements remains 
voluntary--as it is for EPM collaborators, collaboration agents, and 
downstream collaboration agents--and as stated in the proposed rule, we 
expect that all parties will carefully consider the impact of entering 
into sharing arrangements in order to align the financial incentives of 
providers and suppliers with the EPM goals of improving the quality and 
efficiency of EPM episodes.
    We note that we have proposed to exclude the term ``collaborator 
agreement'' from the EPM (and to amend the CJR model to remove this 
term). We believe that dispensing with this term and the associated 
mandates for the collaborator agreements removes an unnecessary level 
of regulatory complexity and offers useful flexibilities to parties 
developing their sharing arrangements and drafting the written 
agreements to memorialize those sharing arrangements.
    A desire to allow for flexibility is the same reason we decline to 
develop a default template for written agreements to memorialize 
sharing arrangements, as requested by one commenter. Given the 
variation and potential complexity of financial arrangements between 
EPM participants and collaborators, we believe that a sharing 
arrangement template is more likely to be constrictive than helpful. We 
would expect that any template developed by the agency would include 
provisions to account the diversity of sharing arrangements that could 
be pursed and therefore would likely include a number of provisions 
that would be inapplicable or unnecessary for the written agreements in 
many sharing arrangements.
    Regarding the specific concern of the commenter about the 
feasibility of EPM participants writing sharing arrangements with each 
party where a hospital will transfer beneficiaries with AMI, as 
discussed in section III.C.4.a.(5) of this final rule, we are 
finalizing a modification to our proposed policy and will cancel all 
AMI episodes when a beneficiary initiates an AMI episode at the initial 
treating hospital and then is transferred to another hospital for 
inpatient hospital care. We believe this revision to the proposed AMI 
model episode initiation and transfer attribution policy addresses the 
concerns of the commenter by eliminating the circumstances that would 
lead an initial treating hospital to enter into sharing arrangements 
with hospitals solely because such hospitals are receiving 
beneficiaries in transfer during AMI care because the initial treating 
hospital will no longer be responsible for an AMI episode when the 
beneficiary is transferred.
    We emphasize that all the requirements in Sec. Sec.  512.500, 
512.505, and 512.510 for sharing arrangements, distribution 
arrangements, and downstream distribution arrangements, respectively, 
are EPM programmatic requirements. As noted previously, fraud and abuse 
waivers for the EPM are outside the scope of this rulemaking.
    Comment: One commenter urged CMS to carefully consider the impact 
state law, particularly in California, would have on providers' ability 
to participate in the proposed EPM and allow time for agreements to be 
structured so hospitals are not put at risk for violating state law and 
can maintain their relationships with physicians. The commenter 
asserted that California's corporate practice of medicine prohibition 
makes financial alignment between EPM participants and certain 
collaborators particularly complicated because the prohibition mandates 
a strict separation of hospitals and physicians. They concluded that in 
developing sharing arrangements, EPM participants would need to 
undertake careful analysis of their compliance with both federal and 
state law, including the interaction of federal and state law 
requirements.
    Response: We appreciate the information provided by the commenter 
about the challenges that may arise for EPM participants developing 
sharing arrangements that comply with the requirements of the EPM and 
applicable state laws. We are mindful of the time that EPM participants 
may need to prepare and put into place the sharing arrangements that 
they believe are necessary to align their financial incentives with 
those of their collaborators toward the goal of the EPM to improve the 
quality of care while reducing its cost. Given the first performance 
year of the EPM begins on July 1, 2017, EPM participants will have 
knowledge of the federal requirements for EPM financial arrangements 
several months prior to their implementation in the EPM, which we 
believe is sufficient for the early planning about these arrangements.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.500(a) for the 
general requirements for EPM sharing arrangements, with modification to 
clarify that an EPM collaborator selection criterion that considers 
whether a potential collaborator has performed a reasonable minimum 
number of services that would qualify as EPM activities will be deemed 
not to violate the volume or value standard if the purpose of the 
criterion is to ensure the quality of care furnished to EPM 
beneficiaries. EPM sharing arrangements must comply with the following 
general provisions:
     An EPM participant may enter into a sharing arrangement 
with an EPM collaborator to make a gainsharing payment, or to receive 
an alignment payment, or both. An EPM participant must not make a 
gainsharing payment or receive an alignment payment except in 
accordance with a sharing arrangement.
     A sharing arrangement must comply with the provisions of 
this section and all other applicable laws and regulations, including 
the applicable fraud and abuse laws and all applicable payment and 
coverage requirements.
     The EPM participant must develop, maintain, and use a set 
of written policies for selecting individuals and entities to be EPM 
collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential EPM 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent. A selection criterion that considers whether a 
potential EPM collaborator has performed a reasonable minimum number of 
services that would qualify as

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EPM activities will be deemed not to violate the volume or value 
standard if the purpose of the criterion is to ensure the quality of 
care furnished to EPM beneficiaries
     If an EPM participant enters into a sharing arrangement, 
its compliance program must include oversight of sharing arrangements 
and compliance with the applicable requirements of the EPM.
b. Requirements
    We proposed a number of specific requirements for sharing 
arrangements to help ensure that their sole purpose was to create 
financial alignment between EPM participants and EPM collaborators 
toward the goals of the EPM while providing program integrity 
safeguards. We proposed that the sharing arrangement must be in 
writing, signed by the parties, and entered into before care was 
furnished to EPM beneficiaries under the sharing arrangement. In 
addition, participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation. It would be important that 
providers, suppliers, and ACOs with ACO participants and ACO providers/
suppliers rendering items and services to EPM beneficiaries during EPM 
episodes have the freedom to provide medically necessary items and 
services to EPM beneficiaries without any requirement that they 
participate in a sharing arrangement, in order to safeguard beneficiary 
freedom of choice, access to care, and quality of care. Similarly, we 
believed that if a provider, supplier, or ACO entered into a sharing 
arrangement with an EPM participant, that sharing arrangement must 
precede the provision of care to the EPM beneficiary under the sharing 
arrangement. We expected the sharing arrangement to set out the 
mutually agreeable terms for the financial arrangement between the 
parties to guide and reward EPM care redesign for future EPM episodes, 
rather than reflect the quality and financial results of EPM episodes 
that had already occurred and where the financial outcome of the 
sharing arrangement terms would be known before signing.
    We proposed that the sharing arrangement must require the EPM 
collaborator and its employees, contractors, and subcontractors to 
comply with certain requirements that would be important for program 
integrity under the arrangement. We noted that the terms contractors 
and subcontractors, respectively, included collaboration agents and 
downstream collaboration agents as defined later in this section. The 
sharing arrangement must require all of these individuals and entities 
to comply with the applicable provisions of proposed Part 512, 
including requirements regarding beneficiary notifications, access to 
records, record retention, and participation in any evaluation, 
monitoring, compliance, and enforcement activities performed by CMS or 
its designees, because these individuals and entities all would play a 
role in EPM care redesign and be part of financial arrangements under 
the EPM. The sharing arrangement must also require all of these 
individuals and entities to comply with the applicable Medicare 
provider enrollment requirement at Sec.  424.500, including having a 
valid and active TIN or NPI, during the term of the sharing 
arrangement. This would be to ensure that the individuals and entities 
have the required enrollment relationship with CMS under the Medicare 
program, although we noted that they would not be responsible for 
complying with requirements that did not apply to them. Finally, the 
sharing arrangement must require individuals and entities to comply 
with all other applicable laws and regulations.
    We proposed that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between EPM participants and EPM 
collaborators did not negatively impact beneficiary protections under 
the EPM. The sharing arrangement must require the EPM collaborator to 
have a compliance program that included oversight of the sharing 
arrangement and compliance with the requirements of the EPM, just as we 
would require EPM participants to have a compliance program for this 
purpose as a program integrity safeguard. In the proposed rule, we 
noted our understanding that some stakeholders might have interpreted 
the substantially similar requirement in the CJR model as obligating 
CJR collaborators to adopt specific compliance programs components (for 
example, an externally staffed hotline to receive complaints) and the 
perceived cost of adopting those components might be a disincentive for 
certain individuals and entities to be CJR collaborators in the CJR 
model. However, we noted that the CJR compliance program requirement 
did not mandate that a CJR collaborator's compliance program take a 
particular form or include particular components. OIG has repeatedly 
and consistently emphasized that there is no ''one size fits all'' 
compliance program (for example, refer to OIG compliance program 
guidance for Individual and Small Group Physician Practices, 65 FR 
59434, 59434-52 (October 5, 2000)). Like OIG, we noted our 
understanding of the variances and complexities within the industry and 
appreciated differences in the size and resources of different 
providers and suppliers, particularly the financial constraints on 
individual physicians and nonphysician practitioners and small PGPs. 
Accordingly, we did not believe that the compliance program requirement 
for CJR collaborators as properly understood should be a disincentive 
for individuals or small PGPs to become CJR collaborators. Thus, we 
proposed to adopt a substantially similar requirement for the EPM. We 
sought comment on the anticipated effect of the proposed compliance 
program requirement for EPM collaborators, particularly with regard to 
individual physicians and nonphysician practitioners and small PGPs, 
and whether alternative compliance program requirements for all or a 
subset of EPM collaborators should be adopted to mitigate any effect of 
the proposal that could make participation as an EPM collaborator 
infeasible for any provider, supplier, or other entity on the proposed 
list of types of EPM collaborators.
    We observed it would be necessary that EPM participants have 
adequate oversight over sharing arrangements to ensure that all 
arrangements meet the proposed requirements of this section and provide 
program integrity protections. Therefore, we proposed that the board or 
other governing body of the EPM participant have responsibility for 
overseeing the EPM participant's participation in the EPM, its 
arrangements with EPM collaborators, its payment of gainsharing 
payments, its receipt of alignment payments, and its use of beneficiary 
incentives in the EPM.
    For purposes of financial arrangements under the EPM, we proposed 
to define activities related to promoting accountability for the 
quality, cost, and overall care for EPM beneficiaries, including 
managing and coordinating care; encouraging investment in 
infrastructure and redesigned care processes for high quality and 
efficient service delivery; the provision of items and services during 
an EPM episode in a manner that reduces costs and improves quality; or 
carrying out any other obligation or duty under the EPM as ``EPM 
activities.'' In addition to the quality of care provided during 
episodes, we believed the activities that would fall under this 
proposed definition would encompass

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the totality of activities upon which it would be appropriate for 
certain financial arrangements under the EPM to be based in order to 
value the contributions of providers, suppliers, and other entities 
toward meeting the EPM goals of improving the quality and efficiency of 
episodes. We sought comment on the proposed definition of EPM 
activities as an inclusive and comprehensive framework for capturing 
direct care and care redesign for EPM episodes that contributed to 
improving the quality and efficiency of these episodes. We proposed to 
use the term EPM activities in identifying certain obligations of 
parties in a sharing arrangement that were described as ``changes in 
care coordination or delivery'' in the CJR regulations governing the 
contents of the written agreement memorializing the sharing 
arrangement. We noted that as discussed in section V.J. of the proposed 
rule (81 FR 50958), we proposed to define and use the term CJR 
activities in the CJR regulations just as we proposed to define and use 
the term EPM activities in the EPM regulations.
    We proposed that the written agreement memorializing a sharing 
arrangement must specify a number of parameters of the arrangement, 
including the following:
     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified EPM activities and other services to be performed by the 
parties under the sharing arrangement.
     The date of the sharing arrangement.
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out EPM activities.
     The financial or economic terms for payment, including the 
following:
    ++ Eligibility criteria for a gainsharing payment.
    ++ Eligibility criteria for an alignment payment.
    ++ Frequency of gainsharing or alignment payment.
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is substantially based on quality of care 
and the provision of EPM activities.
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we proposed to require that the terms of the sharing 
arrangement must not induce the EPM participant, EPM collaborator, or 
any employees, contractors, or subcontractors of the EPM participant or 
EPM collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary or restrict the ability of an EPM collaborator to 
make decisions in the best interests of its patients, including the 
selection of devices, supplies, and treatments. These proposed 
requirements were to ensure that the quality of care for EPM 
beneficiaries would not be negatively affected by sharing arrangements 
under the EPM.
    The proposals for the requirements for sharing arrangements under 
the EPM were included in proposed Sec.  512.500(b). We sought comment 
about all of the proposed 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 EPM were met.
    The following is a summary of the comments received and our 
responses.
    Comment: In general, the commenters requested that CMS simplify the 
requirements for sharing arrangements and allow gainsharing to the 
fullest extent possible consistent with the goals of preventing fraud 
and abuse and unfair business practices.
    One commenter asserted that the regulations lack a clear section 
laying out each and every requirement to be included in the written 
agreement memorializing the sharing arrangement. The commenter urged 
CMS to set forth in the final EPM and CJR regulations a comprehensive 
list of the requirements for the written sharing arrangement 
requirements.
    Some commenters urged CMS to eliminate proposed requirements for 
financial arrangements that they believe are overly inclusive or 
technical. They singled out as unnecessary the requirement that the 
written agreement memorializing the sharing arrangement include 
management and staffing information. The commenters stated that it 
should be sufficient to spell out each party's obligations and allow 
greater latitude to determine how the management and staffing aspects 
of those obligations will be met. The commenters also identified as 
overly technical and confusing the requirement that all gainsharing 
payments and any alignment payments must be administered by the EPM 
participant in accordance with generally accepted accounting 
principles. The commenters asserted this requirement does not lessen 
the fraud and abuse risk posed by any sharing arrangement.
    Response: We appreciate commenters' feedback on the requirements 
for sharing arrangements. With the specific exceptions noted later in 
this section, we continue to believe that the requirements with respect 
to financial arrangements in the EPM set forth in the proposed rule are 
necessary for program integrity purposes and to prevent the 
distribution and receipt of payments for reasons outside the goals of 
the EPM and we finalize those requirements here.
    We direct the commenters suggesting that the regulations lack a 
clear section laying out each and every requirement to be included in 
the written agreement memorializing the sharing arrangement to Sec.  
512.500(b) of the regulation text, with particular emphasis on Sec.  
512.500(b)(7). This subsection sets forth the requirements for the 
written agreement memorializing the sharing arrangement. In addition to 
providing a list of specifications for the written agreement 
memorializing a sharing arrangement, Sec.  512.500(b) is intended to 
offer flexibility to the parties to draft written agreements in a 
format most useful for them. We note that while EPM participants may 
conclude that additional provisions in their written agreements are the 
most appropriate tool to hold their EPM collaborators accountable for 
compliance with other programmatic requirements, we are not mandating 
that EPM participants adopt that approach.
    As noted previously, we have endeavored to streamline the 
requirements for financial arrangements under the EPM in areas where we 
believe the program integrity risk is low. As also noted previously, 
the removal of the collaborator agreement requirement--a term present 
in the CJR Final Rule, not included in this final rule--represents a 
result of that effort. In addition, we agree with the commenters who 
recommended that we eliminate the requirement that the written 
agreement memorializing the sharing arrangement include management and 
staffing information, including the type of personnel or contractors 
that will be primarily responsible for carrying out EPM activities. 
Upon further consideration, we believe this requirement for the written 
agreement is unnecessary as a program safeguard. While we generally 
expect that EPM participants entering into sharing arrangements will 
have an EPM care redesign plan that includes management and staffing 
information, including the types of personnel or contractors that will 
be primarily be responsible for carrying out EPM activities, we 
understand that maintaining up-to-date management and staffing 
information as part of the written agreement for the sharing 
arrangement could be administratively burdensome to EPM

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participants and EPM collaborators and reduce their flexibility to 
accommodate changes in personnel or in their plans for care redesign in 
response to their cost and quality performance under the EPM. 
Therefore, we are removing the proposed requirement in Sec.  
512.500(b)(7)(iv) that the written agreement include management and 
staffing information. However, we decline to remove provisions from the 
set of requirements for financial arrangements where we believe such 
changes would increase the risk for fraud and abuse or would be 
inconsistent with the goals of the model. We disagree with the 
commenters who suggested that we should remove the requirement that 
gainsharing payments and alignment payments be administered by the EPM 
participant in accordance with generally accepted accounting principles 
(GAAP). For purposes of program integrity, compliance, and monitoring, 
there is a benefit to all participants across the EPM applying a 
standard set of accounting principles to these types of payments. Thus, 
we decline to accept the commenters' suggestion to remove this 
requirement.
    Comment: One commenter expressed concern about CMS' proposal to no 
longer use the term ``collaborator agreement'' in the CJR model and to 
not use this term in the EPM, although the commenter supported CMS' 
proposed definition of a sharing arrangement and the related 
requirements. They claimed that not all collaborator agreements would 
be sharing arrangements. For example, the commenter explained that 
hospitals that are EPM participants could have agreements with their 
employed physicians that cascade the programmatic requirements of the 
EPM, but do not necessarily alter the physicians' underlying 
compensation or include the potential for gainsharing payments. They 
urged CMS to retain the term collaborator agreement, rather than adopt 
the proposed change to sharing arrangement, as the term collaborator 
agreement would include both the agreements that cascade programmatic 
requirements as well as those that also create explicit financial 
arrangements. The commenter added that this distinction is important 
because CMS proposed to make a financial arrangement a prerequisite to 
being placed on the list of Affiliated Practitioners for the 
determination of Eligible Clinicians who could be considered QPs based 
on services furnished under the EPM and CJR model. However, MACRA 
states that the ``entity'' must bear more than nominal risk to qualify 
for an APM incentive payment, not the clinician. By altering the terms 
used in the EPM and CJR model to eliminate the term collaborator 
agreement, the commenter concluded that CMS was suggesting that a shift 
of risk is required for a clinician to be on the list of Affiliated 
Practitioners and thus qualify for a bonus, which they believe is 
inconsistent with the statute. The commenter recommended that CMS 
retain the term collaborator agreement and clarify that the agreements 
do not need to include financial arrangements for the clinicians to be 
placed on the Affiliated Practitioners list for the determination of 
Eligible Clinicians for QP determinations.
    Response: We appreciate the information provided by the commenter 
on the agreements that hospitals may develop with their employed 
physicians and their support for the proposed requirements for sharing 
arrangements. However, the commenter appears to misunderstand the 
existing CJR provisions regarding collaborator agreements. As finalized 
in the CJR Final Rule (80 FR 73541), a collaborator agreement means a 
written, signed agreement between a CJR collaborator and a participant 
hospital that meets the requirements of Sec.  510.500(c). Among other 
requirements, Sec.  510.500(c) mandates that each collaborator 
agreement ``must contain a description of the sharing arrangement 
between the participant hospital and the CJR collaborator regarding 
gainsharing payments and alignment payments.'' (81 FR 73553). 
Therefore, an agreement between a CJR participant hospital and its 
employed physicians to require physicians to meet the programmatic 
requirements of the CJR model that does not also include the potential 
for gainsharing payments or alignment payments is not a collaborator 
agreement. Thus, the commenter's assumption that maintaining the CJR 
requirements for collaborator agreements and adopting those 
requirements for the EPM as a mechanism to include clinicians without 
sharing arrangements on the Affiliated Practitioners lists for these 
models is incorrect. As noted previously, in developing the proposed 
rule, we concluded that we could streamline the CJR requirements and 
adopted less burdensome requirements for the EPM by eliminating the 
concept of collaborator agreement and the separate requirements 
associated with these agreements. The example provided by the commenter 
does not meet the definition of a CJR collaborator agreement. We 
continue to believe that it is appropriate under the EPM and CJR model 
to focus on the requirements for a sharing arrangement, without 
imposing additional regulatory burdens associated with a collaborator 
agreement.
    For discussion of the identity of the clinicians that are reported 
on the Affiliated Practitioner List for the EPM and CJR model and the 
opportunity for clinicians without financial arrangements under the EPM 
and CJR model to be included on those lists, we refer to sections 
III.A.2.c. and V.O.3. of this final rule, respectively.
    Comment: A number of commenters commended CMS for its proposal that 
EPM sharing arrangements remain voluntary and without penalty for 
nonparticipation. One commenter added that this is especially important 
for those professionals that are non-patient facing providers who do 
not select their patients and whose contact, relationship, and services 
furnished to a beneficiary may occur during a short part of the 
episode.
    Response: We agree with the commenters who supported the voluntary 
nature of sharing arrangements, and we continue to believe that it is 
essential that sharing arrangements be voluntary and without penalty 
for nonparticipation. We are not requiring EPM participants to offer 
sharing arrangements to all providers and suppliers caring for EPM 
beneficiaries. Likewise, EPM participants are prohibited from coercing 
or requiring individuals or entities to enter into a sharing 
arrangement. EPM participants may not penalize or discriminate against 
physicians, nonphysician practitioners, and other providers, suppliers, 
or ACOs on the grounds that they are not EPM collaborators. For 
example, EPM participants may not condition the ability of individuals 
or entities to receive future referrals from the EPM participant on the 
basis of EPM collaborator status or on criteria that are outside of the 
goals of the EPM
    We are finalizing in Sec.  512.500(b)(2) that participation in 
sharing arrangements be voluntary and without penalty for 
nonparticipation.
    Comment: Several commenters expressed concerns about the level of 
control given to EPM participants over the amount of gainsharing 
payments and their allocation, urging CMS to modify its proposal to 
require greater input from collaborators on the methodology for sharing 
payments and to provide additional safeguards to ensure continued 
beneficiary choice of providers and fairness to providers. 
Specifically, they recommended that

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providers who furnished services to EPM beneficiaries should be part of 
decision-making regarding the amount and allocation of gainsharing 
payments. The commenters suggested that providers furnishing a minimum 
percentage of EPM services should be required to be part of the EPM 
participant governance structure that develops written policies for 
collaborators and the sharing arrangement methodologies. The commenters 
urged CMS to establish a maximum amount of reconciliation payments that 
hospitals may keep and a minimum amount of gainsharing payments that 
must be paid to each collaborator. They concluded that these 
modifications would strengthen beneficiary choice and promote fairness.
    Response: We appreciate the interest of the commenters in 
engagement of providers furnishing care to EPM beneficiaries in 
decision-making regarding gainsharing payment methodologies. As we 
discuss in our responses to other comments, as the financially 
responsible entities for EPM episodes, we believe that EPM participants 
should have as much flexibility as possible, subject to adequate 
program integrity safeguards, in decisions about financial 
arrangements, including whether or not to enter into them; the 
selection of collaborators; and the methodologies for determining the 
amounts of gainsharing payments and alignment payments. We do not 
believe it would be appropriate to specify certain membership of the 
board or other governing body that we proposed to require an EPM 
participant to charge with responsibility for the EPM participant's 
participation in the EPM; its arrangements with EPM collaborators; its 
payment of gainsharing payments; its receipt of alignment payments; and 
its use of beneficiary incentives in the EPM. We expect that EPM 
participants will establish a board or other governing body with 
sufficient expertise to provide responsible oversight of those 
activities.
    We have included safeguards in this final rule to protect 
beneficiary freedom of choice, to require that the potential for 
financial gain under EPM financial arrangements be based on activities 
for EPM beneficiaries that are focused on the goals of the EPM to 
improve quality and reduce the cost of care, and to limit the potential 
for undue financial gain by certain providers under the EPM. These 
safeguards include the requirement that EPM beneficiaries be informed 
that they retain freedom of choice to choose providers and services; 
the requirement that EPM participants not restrict beneficiaries' 
ability to choose any Medicare-enrolled provider or supplier, or any 
physician or practitioner who has opted out of Medicare; the cap on 
gainsharing payments to physicians, nonphysician practitioners, PGPs, 
and NPPGPs; the requirement that EPM collaborator selection must be 
based on written policies that contain criteria related to, and 
inclusive of, the quality of care delivered by the potential EPM 
collaborator and cannot be based directly or indirectly on the volume 
or value of past or anticipated referrals; the requirements that the 
opportunity to make or receive gainsharing payments, alignment 
payments, distribution payments, and downstream distribution payments 
may not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent; 
and the requirements that the amount of any gainsharing payments and, 
with limited exceptions, any distribution payments and downstream 
distribution payments be determined in accordance with a methodology 
that is substantially based on the quality of care and the provision of 
EPM activities. We believe these safeguards are sufficient to protect 
beneficiary choice and ensure that providers, suppliers, and ACOs that 
are EPM collaborators, collaboration agents, or downstream 
collaboration agents receive payments that are based on quality of care 
and activities specifically related to promoting accountability for the 
quality, cost, and overall care for EPM beneficiaries, including 
managing and coordinating care; encouraging investment in 
infrastructure; enabling technologies, and redesigned care processes 
for high quality and efficient service delivery; the provision of items 
and services during an EPM episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
the EPM.
    Comment: One commenter recommended that CMS enable individuals and 
entities, such as small PGPs, to participate in the EPM as 
collaborators without requiring major investments in infrastructure and 
electronic health records. The commenter urged CMS to provide 
appropriate resources and support to enable small practices to 
participate. They further requested that CMS monitor activities 
involving distribution of payment to guard against unfair business 
practices and to promote a fair and equitable distribution of 
gainsharing payments to all providers who are involved as 
collaborators. Finally, the commenter urged CMS to mandate distribution 
of gainsharing payments to EPM collaborators in a timely fashion.
    Response: It is our intent that the models offer opportunities for 
providers and suppliers of all sizes to be EPM collaborators, provided 
they meet the criteria in this final rule. We note that the EPM does 
not include requirements for certain infrastructure or use of 
electronic health records. While we currently do not plan to provide 
specific resources targeted to providers, suppliers, and ACOs engaged 
in sharing arrangements with EPM participants, we will broadly 
disseminate to the public information that may be useful to model 
collaborators throughout implementation of the EPM.
    In response to the commenters' desire to ensure that gainsharing 
payments are distributed fairly and equitably to EPM collaborators, as 
noted previously, we believe that the provisions of this final rule 
adequately address this point. We appreciate the commenter's concern 
about the potential for unfair business practices, but the regulation 
of such practices is outside the scope of our authority. Accordingly, 
we will not add a prohibition against unfair business practices. 
However, we believe that many of the program integrity provisions for 
sharing arrangements will also serve to deter unfair business 
practices, and we will be monitoring compliance with these 
requirements.
    Regarding the timely distribution of gainsharing payments, we 
require that gainsharing payments be distributed on an annual basis. As 
discussed previously, we are not requiring EPM participants to enter 
into sharing arrangements with all providers and suppliers caring for 
EPM beneficiaries, but where an EPM participant does enter into one or 
more sharing arrangements, the model participant must not distribute 
any gainsharing payments more than once per year. We believe that this 
requirement ensures that gainsharing payments are timed to sufficiently 
maintain an EPM collaborator's commitment to lowering costs and 
improving quality of care. To the extent the commenter was requesting 
that CMS prohibit late payment of amounts owed to EPM collaborators, we 
believe that the consequences for breach of contract offer sufficient 
protection.
    Comment: Many commenters expressed strong support for CMS' proposal 
to adopt the terms EPM

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activities and CJR activities to describe activities in support of the 
goals of the models, as well as CMS' proposed approach of utilizing 
these definitions as the comprehensive framework for capturing both 
direct patient care and care redesign for EPM and CJR episodes. Several 
commenters also supported CMS' proposal that the methodology for 
determining gainsharing payments may take into account the amount of 
EPM or CJR activities provided by an EPM or CJR collaborator relative 
to other EPM or CJR collaborators, and the application of this same 
standard to distribution payments and downstream distribution payments. 
One commenter commended CMS for recognizing that risk-sharing between 
EPM participants and CJR participant hospital and their collaborators 
should involve more elasticity by accounting for the effects of the 
collaborator's overall participation and involvement. Another commenter 
claimed that this approach would provide EPM participants and CJR 
participant hospitals greater flexibility to incentivize care redesign 
by allowing more actively involved physicians who participate in care 
redesign to receive higher gainsharing payments as compared to 
physicians that may only care for a few model beneficiaries and may not 
be actively involved in care redesign. One commenter recommended that 
CMS should add to the definitions of EPM activities and CJR activities 
a consideration of the long-term patient experience and outcomes to 
ensure that these definitions do not undermine consideration of 
decisions that potentially impact long-term value beyond the episode.
    Response: We appreciate the commenters' support for our proposal to 
adopt the terms EPM activities and CJR activities and to use these as a 
framework for capturing items and services furnished directly to 
beneficiaries in the EPM and CJR model and care redesign efforts for 
EPM episodes and CJR episodes. We also appreciate the commenters' 
support for our proposal that the methodology for determining 
gainsharing payments may take into account the amount of EPM activities 
or CJR activities provided by an EPM collaborator or CJR collaborator 
relative to other EPM collaborators or CJR collaborators, and the use 
of this same standard for distribution payments and downstream 
distribution payments. We agree with the commenters that this standard 
provides important flexibility for EPM participants and CJR participant 
hospitals to more effectively align the financial incentives of 
providers, suppliers, and ACO with the goals of the EPM and CJR model 
to improve the quality of care and reduce the cost of episode care by 
allowing financial arrangements to account for the level of the 
collaborator, collaboration agent, or downstream collaboration agent's 
overall participation and involvement in beneficiary care and care 
redesign.
    While we appreciate the interest of the commenter who sought to 
ensure that care redesign under the EPM and CJR model does not lead to 
care pathways that may negatively impact long-term patient experience 
and outcomes, we do not believe it would be appropriate to add 
consideration of long-term patient experience and outcomes to the 
definition of EPM activities and CJR activities. The goals of the EPM 
and CJR model are focused on the quality and efficiency of episode care 
and, therefore, we believe that the definition of EPM activities and 
CJR activities that are part of the basis for payments under financial 
arrangements in the EPM and CJR model should include only those 
activities related to the immediate goals of the EPM and CJR model. 
However, as discussed in section IV. of this final rule, the evaluation 
of the EPM, like the evaluation of the CJR model (80 FR 73528 through 
73530), will examine the impact of the EPM on outcomes and quality, 
including during the period following the end of episodes and on 
measures of relevant long-term quality.
    We are finalizing in Sec.  512.2 the definition of EPM activities 
and use that term throughout the regulations for EPM financial 
arrangements.
    Comment: A commenter requested that CMS provide additional guidance 
on the compliance program required for EPM collaborators. The commenter 
expressed appreciation for the discussion in the proposed rule that a 
collaborator's compliance program need not take any one particular form 
and further, that there is no ``one size fits all'' compliance program. 
However, the commenter stated that the requirement that an EPM 
collaborator include oversight of not only the sharing arrangement, but 
compliance with the requirements of the entire EPM, is a large 
undertaking for any one collaborator, let alone a collaborator who is a 
solo practitioner. The commenter urged CMS to consider the practical 
implications of this compliance program requirement in the event an EPM 
participant contracts with a physician individually, and that physician 
is also a member of a PGP that is not an EPM collaborator.
    Response: We appreciate the interest of the commenter in the 
implication of the proposed requirement for an EPM collaborator to have 
a compliance program, particularly for collaborators who are 
individuals. In our proposed requirements for sharing arrangements, we 
proposed in Sec.  512.500(b)(4) that the sharing arrangement must 
require the EPM collaborator to have a compliance program that includes 
oversight of the sharing arrangement and compliance with the 
requirements of the EPM. Any individual or entity that wants the 
benefits of becoming a collaborator must also accept the responsibility 
to ensure that its collaboration complies with the requirements of the 
EPM. The proposal requires that each collaborator implement mechanisms 
to promote compliance, while giving each collaborator the discretion to 
determine which mechanisms are appropriate for that individual or 
entity. Our intent is to require the EPM collaborator's compliance 
program to monitor its own conduct and relationships only, in contrast 
with policing independent, third parties with whom it does not have any 
direct relationship. The goal is for the EPM collaborator's compliance 
efforts to look not just at its financial relationship with the EPM 
participant but at the collaborator's overall compliance with the 
requirements of the model (for example, collaborator performance of 
clinical care under the model; the propriety of any distribution 
arrangements). Moreover, we believe that the requirement for a 
collaborator to have a compliance program should not be understood as 
requiring each collaborator to independently maintain a separate 
compliance program, but rather that every collaborator must be covered 
by a compliance program that includes the required oversight. For 
example, it may not be practical for each member of a PGP to separately 
maintain his or her own compliance program. However, the EPM 
requirement could still be met if the PGP has a compliance program that 
covers the PGP member and that includes oversight of the PGP member's 
sharing arrangement and the PGP member's compliance with the 
requirements of the model.
    Therefore, while we continue to believe that it is appropriate to 
require all EPM collaborators, including individual practitioners, to 
be covered by a compliance program that includes oversight of the 
sharing arrangement, we are clarifying that the collaborator's 
obligations may be met if the collaborator either has or is covered by 
a compliance program that includes the appropriate oversight of the 
collaborator, and that the requirements of the EPM that are relevant 
for the EPM

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collaborator's compliance program are those requirements of the EPM 
that apply to its role as an EPM collaborator, including any 
distribution arrangements, rather than all requirements of the entire 
model.
    We are finalizing in Sec.  512.500(b)(4) that the EPM collaborator 
must have or be covered by a compliance program that includes oversight 
of the sharing arrangement and compliance with the requirements of the 
EPM that apply to its role as an EPM collaborator, including any 
distribution arrangements.
    Comment: Several commenters requested clarification about the 
timing for entering into sharing arrangements, distribution 
arrangements, or downstream distribution arrangements with respect to 
EPM episodes in view of CMS' proposals that the three types of 
arrangements must be in writing and signed by the parties, and entered 
into before care is furnished to EPM beneficiaries under the applicable 
arrangement. One commenter further inquired about whether a sharing 
arrangement needs to be signed prior to an episode beginning in order 
for an EPM collaborator to receive a gainsharing payment for savings 
associated with the episode or whether it is also possible for a 
collaborator to receive a gainsharing payment for savings associated 
with the episode if the sharing arrangement is signed prior to an 
episode ending.
    Response: We appreciate the need to understand when ``care is 
furnished to EPM beneficiaries under the applicable arrangement'' in 
order to ensure that execution of the written agreements is timely. A 
sharing arrangement, distribution arrangement, or downstream 
distribution arrangement requires that the amount of a gainsharing 
payment, distribution payment, or downstream distribution payment to an 
EPM collaborator, collaboration agent, or downstream collaboration 
agent, respectively be determined in accordance with a methodology that 
is substantially based on the quality of care and the provision of EPM 
activities, which by definition must be for EPM beneficiaries during 
EPM episodes. EPM activities include, but are not limited to, billable 
items and services furnished to EPM beneficiaries during EPM episodes. 
Therefore, ``care is furnished to EPM beneficiaries under the 
applicable arrangement'' when the individual or entity in the financial 
arrangement (or designee to the extent permitted by regulation) first 
provides EPM activities that may be considered in the methodology for 
determining the amount of the applicable payment. Accordingly, the 
written agreement memorializing the sharing arrangement, distribution 
arrangement, or downstream distribution arrangement must have been 
signed by the parties and entered into before the date the first EPM 
activities that may be considered in the methodology for determining 
the applicable payment amount are provided.
    We note that once a sharing arrangement is signed by an EPM 
collaborator in a performance year, there is no restriction for that 
performance year on the timing of the specific episodes that result in 
savings that can be paid to the EPM collaborator as a gainsharing 
payment. According to our requirements in Sec.  512.500(b)(2), to be 
eligible to receive a gainsharing payment, an EPM collaborator must 
meet quality of care criteria for the performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment, as well 
as meet the other criteria specific to the type of collaborator, namely 
directly furnished an item or service to an EPM beneficiary during an 
EPM episode; billed for an item or service that was rendered by one or 
more PGP member, NPPGP member, or TGP member respectively to an EPM 
beneficiary during an EPM episode, contributed to EPM activities, and 
been clinically involved in the care of EPM beneficiaries; or had an 
ACO provider/supplier that directly furnished, or an ACO participant 
that billed for, an item or service that was rendered to an EPM 
beneficiary during an EPM episode, contributed to EPM activities, and 
been clinically involved in the care of EPM beneficiaries during the 
same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.500(b) for the 
requirements for EPM sharing arrangements, with modification to specify 
that the EPM collaborator must have or be covered by a compliance 
program which must include oversight of the sharing arrangement and 
compliance with the requirements of the EPM that apply to its role as 
an EPM collaborator, including any distribution arrangements. We are 
also modifying our proposal as discussed previously and removing the 
requirement that the written agreement memorializing a sharing 
arrangement include management and staffing information, a change which 
results in renumbering proposed Sec.  512.500(b)(7)(v) (requiring the 
financial or economic terms for payment be specified in the written 
agreement about the sharing arrangement) to Sec.  512.500(b)(7)(iv). 
EPM sharing arrangements must meet the following general requirements:
     A sharing arrangement must be in writing and signed by the 
parties, and entered into before care is furnished to EPM beneficiaries 
under the sharing arrangement.
     Participation in a sharing arrangement must be voluntary 
and without penalty for nonparticipation.
     The sharing arrangement must require the EPM collaborator 
and its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with the following:
    ++ The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees);
    ++ All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement; and
    ++ All other applicable laws and regulations.
     The sharing arrangement must require the EPM collaborator 
to have or be covered by a compliance program that includes oversight 
of the sharing arrangement and compliance with the requirements of the 
EPM that apply to its role as an EPM collaborator, including any 
distribution arrangements.
     The sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care.
     The board or other governing body of the EPM participant 
must have responsibility for overseeing the EPM participant's 
participation in the EPM, its arrangements with EPM collaborators, its 
payment of gainsharing payments, its receipt of alignment payments, and 
its use of beneficiary incentives in the EPM.
     The written agreement memorializing a sharing arrangement 
must specify the following:
    ++ The purpose and scope of the sharing arrangement.
    ++ The identities and obligations of the parties, including 
specified EPM activities and other services to be performed by the 
parties under the sharing arrangement;

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    ++ The date of the sharing arrangement.
    ++ The financial or economic terms for payment, including the 
following:

--Eligibility criteria for a gainsharing payment.
--Eligibility criteria for an alignment payment.
--Frequency of gainsharing or alignment payment.
--Methodology and accounting formula for determining the amount of a 
gainsharing payment that is substantially based on quality of care and 
the provision of EPM activities.
--Methodology and accounting formula for determining the amount of an 
alignment payment.

     The sharing arrangement must not--
    ++ Induce the EPM participant, EPM collaborator, or any employees, 
contractors, or subcontractors of the EPM participant or EPM 
collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary; or
    ++ Restrict the ability of an EPM collaborator to make decisions in 
the best interests of its patients, including the selection of devices, 
supplies, and treatments.
c. Gainsharing Payment, Alignment Payment, and Internal Cost Savings 
Conditions and Restrictions
    We proposed a number of conditions and limitations for gainsharing 
payments, alignment payments, and internal cost savings as program 
integrity protections for the payments to and from EPM collaborators. 
We proposed to require that gainsharing payments be derived solely from 
reconciliation payments, internal costs savings, or both; that they be 
distributed on an annual basis, not more than once per calendar year; 
that they not be a loan, advance payment, or payment for referrals or 
other business; and that they be clearly identified as a gainsharing 
payment at the time they are paid.
    In the proposed rule, we discussed our belief that gainsharing 
payment eligibility for EPM collaborators should be conditioned on two 
requirements--(1) meeting quality of care criteria; and (2) rendering 
items and services to EPM beneficiaries during EPM episodes--as 
safeguards to ensure that eligibility for gainsharing payments would be 
solely based on aligning financial incentives for EPM collaborators 
with the EPM goals of improving EPM episode quality and efficiency. 
With respect to the first requirement, we proposed that to be eligible 
to receive a gainsharing payment, an EPM collaborator must meet quality 
of care criteria for the performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprised the gainsharing payment. The quality of care criteria 
that would be established by the EPM participant must be directly 
related to EPM episodes. With regard to the second requirement, which 
is also applicable to being required to make an alignment payment, we 
proposed different criteria depending on the type of collaborator 
involved. We proposed that to be eligible to receive a gainsharing 
payment, an EPM collaborator other than a PGP or an ACO must have 
directly furnished a billable item or service to an EPM beneficiary 
during an EPM episode that occurred in the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprised the gainsharing payment or 
was assessed a repayment amount. For purposes of this requirement, we 
considered a collaborator that is a hospital, CAH, or post-acute care 
provider to have ``directly furnished'' a billable service if one of 
these entities billed for an item or service for an EPM beneficiary 
during an EPM episode that occurred in the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprised the gainsharing payment or 
was assessed a repayment amount. We explained that the phrase 
``performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprised the 
gainsharing payment or was assessed a repayment amount'' did not mean 
the year in which the gainsharing payment was made. These proposed 
requirements would ensure that there is a required relationship between 
eligibility for a gainsharing payment and the quality of direct care 
for EPM beneficiaries during EPM episodes for these EPM collaborators. 
We believed the provision of direct care was essential to the 
implementation of effective care redesign, and the requirement would 
provide a safeguard against payments to EPM collaborators other than a 
PGP or an ACO that were unrelated to direct care for EPM beneficiaries 
during EPM episodes.
    We proposed to establish variations on this requirement for PGPs 
and ACOs because these entities do not themselves directly furnish 
billable services. We proposed that for a PGP to be eligible to receive 
a gainsharing payment or required to make an alignment payment, the PGP 
must have billed for an item or service that was rendered by one or 
more members of the PGP to an EPM beneficiary during an EPM episode 
that occurred during the same performance year for which the EPM 
participant accrued the internal cost savings or earned the 
reconciliation payment that comprised the gainsharing payment or was 
assessed a repayment amount. We proposed that for an ACO to be eligible 
to receive a gainsharing payment or required to make an alignment 
payment, the ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprised the gainsharing payment or was assessed a repayment 
amount. With respect to ACOs, we proposed that an ``ACO participant'' 
and ``ACO provider/supplier'' have the meaning set forth in Sec.  
425.20 of regulations. Thus, these proposed variations on the 
requirements for other collaborator types also required a linkage 
between the EPM collaborator that is the PGP or ACO and the provision 
of items and services to EPM beneficiaries during EPM episodes by PGP 
members or ACO participants or ACO providers/suppliers, respectively.
    Moreover, we further proposed that because PGPs and ACOs do not 
directly furnish items and services to beneficiaries, in order to be 
eligible to receive a gainsharing payment or be required to make an 
alignment payment, the PGP or ACO must have contributed to EPM 
activities and been clinically involved in the care of EPM 
beneficiaries during the same performance year for which the EPM 
participant accrued the internal cost savings or earned the 
reconciliation payment that comprised the gainsharing payment or was 
assessed a repayment amount. For example, a PGP or ACO might have been 
clinically involved in the care of EPM beneficiaries by providing care 
coordination services to EPM beneficiaries during and/or after 
inpatient admission; engaging with an EPM participant in care redesign 
strategies, and actually performing a role in implementing such 
strategies that were designed to improve the quality of care for EPM 
episodes and reduce EPM episode spending; or in coordination with 
providers and suppliers (such as members of the PGP, ACO participants, 
ACO providers/suppliers, the EPM participant, and post-acute care 
providers),

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implementing strategies designed to address and manage the 
comorbidities of EPM beneficiaries.
    Because internal cost savings might be shared through gainsharing 
payments with EPM collaborators, we proposed certain requirements for 
their calculation as a program integrity safeguard. First, the 
methodology for accruing, calculating and verifying internal cost 
savings must be transparent, measurable, and verifiable in accordance 
with generally accepted accounting principles (GAAP) and Government 
Auditing Standards (The Yellow Book). Second, because we believed it 
would be necessary that the internal cost savings reflect care redesign 
under the EPM in order to be eligible to be shared through gainsharing 
payments, the methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the EPM 
participant through the documented implementation of EPM activities 
identified by the EPM participant and must exclude any savings realized 
by any individual or entity that was not the EPM participant and 
``paper'' savings from accounting conventions or past investment in 
fixed costs. In the proposed rule, we noted that, unlike the current 
CJR model policy where we require that sharing arrangements document 
the methodology for accruing, calculating, and verifying the internal 
cost savings generated by the participant hospital based on the care 
redesign elements specifically associated with the particular 
collaborator (80 FR 73431), we did not propose to require in the EPM 
that the calculation of internal cost savings be tied to the activities 
of any specific EPM collaborator. Rather, we believed it would be 
appropriate for EPM participants to calculate internal cost savings 
based on the implementation of EPM activities and then provide 
gainsharing payments to EPM collaborators that might include internal 
cost savings, reconciliation payments, or both based on a methodology 
that met the requirements described later in this section. We proposed 
this same change to the internal cost savings calculation requirements 
for the CJR model in section V.J. of the proposed rule (81 FR 50961).
    We proposed to limit the total amount of gainsharing payments for a 
performance year to EPM collaborators that were physicians, 
nonphysician practitioners, or PGPs. For EPM collaborators that were 
physicians or nonphysician practitioners, that proposed limit was 50 
percent of the Medicare-approved amounts under the PFS for items and 
services furnished by that physician or nonphysician practitioner to 
the EPM participant's EPM beneficiaries during EPM episodes that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprised the gainsharing payment being made. For EPM 
collaborators that were PGPs, the proposed limit was 50 percent of the 
Medicare-approved amounts under the PFS for items and services billed 
by the PGP and furnished to the EPM participant's EPM beneficiaries by 
members of the PGP during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprised the 
gainsharing payment being made. These proposed limits were consistent 
with those in the CJR model (80 FR 73430).
    We proposed that the amount of any gainsharing payments must be 
determined in accordance with a methodology that was substantially 
based on quality of care and the provision of EPM activities. The 
methodology could take into account the amount of such EPM activities 
provided by an EPM collaborator relative to other EPM collaborators. 
While we emphasized in the proposed rule that financial arrangements 
may not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent so 
that their sole purpose was to align the financial incentives of the 
EPM participant and EPM collaborators toward the EPM goals of improved 
EPM episode care quality and efficiency, we believed that accounting 
for the relative amount of EPM activities by EPM collaborators in the 
determination of gainsharing payments did not undermine this objective. 
Rather, the proposed requirement would allow flexibility in the 
determination of gainsharing payments where the amount of an EPM 
collaborator's provision of EPM activities (including direct care) to 
EPM beneficiaries during EPM episodes might contribute to both the 
internal cost savings and EPM participant's reconciliation payment that 
might be available for making a gainsharing payment. Greater 
contributions of EPM activities by one EPM collaborator versus another 
EPM collaborator that resulted in greater differences in the funds 
available for gainsharing payments could be appropriately valued in the 
methodology used to make gainsharing payments to those EPM 
collaborators in order to reflect these differences in EPM activities 
among EPM collaborators. For example, a physician who was an EPM 
collaborator who treated 100 EPM beneficiaries during EPM episodes that 
resulted in high quality, less costly care could receive a larger 
gainsharing payment than a physician who was an EPM collaborator who 
treated 10 EPM beneficiaries during episodes that similarly resulted in 
high quality, less costly care.
    However, we did not believe it would be appropriate to allow the 
selection of EPM collaborators or the opportunity to make or receive a 
gainsharing payment or an alignment payment to take into the account 
the amount of EPM activities provided by a potential or actual EPM 
collaborator relative to other potential or actual EPM collaborators 
because these financial relationships were not to be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent. Specifically, with respect to the selection of EPM 
collaborators or the opportunity to make or receive a gainsharing 
payment or an alignment payment, we did not believe that the amount of 
EPM activities provided by a potential or actual EPM collaborator 
relative to other potential or actual EPM collaborators could be taken 
into consideration by the EPM participant without a significant risk 
that the financial arrangement in those instances could be based 
directly or indirectly on the volume or value of past or anticipated 
referrals or business generated by, between or among the parties. 
Similarly, if the methodology for determining alignment payments was 
allowed to take into the account the amount of EPM activities provided 
by an EPM collaborator relative to other EPM collaborators there would 
be a significant risk that the financial arrangement could directly 
account for the volume or value of past or anticipated referrals or 
business generated by, between or among the

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parties and, therefore, we proposed that the methodology for 
determining alignment payments could not directly take into account the 
volume or value of past or anticipated referrals or business generated 
by, between or among the parties.
    We proposed a change to this same standard for gainsharing payments 
under the CJR model as discussed in section V.J. of the proposed rule 
(81 FR 50961 through 50962). We sought comment on this proposal for 
gainsharing payments, where the methodology may take into account the 
amount of EPM activities provided by an EPM collaborator relative to 
other EPM collaborators. We were particularly interested in comments 
about whether this standard would provide sufficient additional 
flexibility in the gainsharing payment methodology to allow the 
financial reward of EPM collaborators commensurate with their level of 
effort that achieved improvements in EPM episode quality and 
efficiency. In addition, we were interested in comments on whether 
additional safeguards or a different standard was needed to allow for 
greater flexibility to provide certain performance-based payments 
consistent with the goals of program integrity, protecting against 
abuse and ensuring the goals of the EPM were met.
    We proposed that for a performance year, the aggregate amount of 
all gainsharing payments that were derived from a reconciliation 
payment must not exceed the amount of the reconciliation payment the 
EPM participant received from CMS. In accordance with the prior 
discussion, no entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments on the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent. We proposed that an EPM participant must not make a gainsharing 
payment to an EPM collaborator that was subject to any action for 
noncompliance with this part or the fraud and abuse laws, or for the 
provision of substandard care in EPM episodes or other integrity 
problems. Finally, we proposed that the sharing arrangement must 
require the EPM participant to recoup any gainsharing payment that 
contained funds derived from a CMS overpayment on a reconciliation 
report or was based on the submission of false or fraudulent data. 
These requirements would provide program integrity safeguards for 
gainsharing under sharing arrangements.
    With respect to alignment payments, we proposed that alignment 
payments from an EPM collaborator to an EPM participant may be made at 
any interval that was agreed upon by both parties. They must not be 
issued, distributed, or paid prior to the calculation by CMS of a 
repayment amount reflected in a reconciliation report; loans, advance 
payments, or payments for referrals or other business; or assessed by 
an EPM participant if it did not owe a repayment amount. The EPM 
participant must not receive any amounts under a sharing arrangement 
from an EPM collaborator that were not alignment payments.
    We also proposed certain limitations on alignment payments that 
were consistent with the CJR model (80 FR 73430). For a performance 
year, we proposed that the aggregate amount of all alignment payments 
received by the EPM participant must not exceed 50 percent of the EPM 
participant's repayment amount. Given that the EPM participant would be 
responsible for developing and coordinating care redesign strategies in 
response to its EPM participation, we believed it was important that 
the participant retain a significant portion of its responsibility for 
repayment to CMS. For example, upon receipt of a reconciliation report 
indicating that the EPM participant owed $100 to CMS, the EPM 
participant would be permitted to receive no more than $50 in alignment 
payments, in the aggregate, from its EPM collaborators. In addition, we 
proposed that the aggregate amount of all alignment payments from an 
EPM collaborator to the EPM participant may not be greater than 25 
percent of the EPM participant's repayment amount for an EPM 
collaborator that was not an ACO and 50 percent of the EPM 
participant's repayment amount for an EPM collaborator that was an ACO. 
We proposed to allow a higher percentage of the EPM participant's 
repayment amount to be paid by an ACO than by EPM collaborators that 
were not ACOs in recognition that some ACOs are sizable organizations 
with significant financial and other resources. In addition, their 
expertise in managing the cost and quality of care for Medicare 
beneficiaries over a period of time may make some ACOs uniquely capable 
of sharing a higher percentage of downside risk under the EPM with the 
EPM participant under a sharing arrangement between the ACO and EPM 
participant that met all requirements for such arrangements, including 
that participation in the sharing arrangement must be voluntary and 
without penalty for nonparticipation as discussed previously. We sought 
comment on our proposed aggregate and individual EPM collaborator 
limitations on alignment payments, and particularly on the proposed 
limitation that would apply to ACOs that are EPM collaborators.
    The following examples in the proposed rule illustrated the effects 
of the proposed limitations on alignment payments. In one scenario, 
upon receipt of a reconciliation report indicating that the EPM 
participant owed $100 to CMS, the EPM participant would be permitted to 
receive no more than $25 in an alignment payment from a single entity 
or individual that was one of the EPM participant's EPM collaborators 
that was not an ACO. In the second scenario where an ACO was an EPM 
collaborator, upon receipt of that same reconciliation report, the EPM 
participant would be permitted to receive no more than $50 in an 
alignment payment from the ACO. Finally, in accordance with the prior 
discussion, the methodology for determining alignment payments must not 
directly account for the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent.
    We proposed that all gainsharing payments and any alignment 
payments must be administered by the EPM participant in accordance with 
GAAP and Government Auditing Standards (The Yellow Book). Additionally, 
we proposed that all gainsharing payments and alignment payments must 
be made by check, electronic funds transfer, or another traceable cash 
transaction. We noted that while the CJR model required gainsharing 
payments and alignment payments to be made by electronic funds transfer 
(EFT) (80 FR 73431), we proposed a different requirement for the EPM to 
provide additional flexibility for entities making gainsharing payments 
and alignment payments. We made this proposal to mitigate the 
administrative burden that the EFT requirement would place on the 
financial arrangements between certain EPM participants and EPM 
collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, which could discourage participation of 
those suppliers as EPM collaborators. We

[[Page 456]]

proposed a change to adopt this same standard under the CJR model as 
discussed in section V.J. of the proposed rule (81 FR 50962). We sought 
comment on the effect of this proposal on reducing the administrative 
barriers to individual physician and nonphysician practitioner and 
small PGP participation in the EPM as EPM collaborators.
    The proposals for the conditions and restrictions on gainsharing 
payments, alignment payments, and internal cost savings under the EPM 
were included in proposed Sec.  512.500(c). We sought comment about all 
of the conditions and restrictions set out in the preceding discussion, 
including the feasibility of implementing the proposed safeguards in 
the context of the current regulatory framework applicable to ACOs and 
whether additional or different safeguards would be needed to ensure 
program integrity, protect against abuse, and ensure that the goals of 
the EPM were met.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters opposed CMS' proposal that gainsharing 
payments be distributed on annual basis, but not more than once per 
year. The commenters believe this periodicity is too restrictive and 
creates an unintended advantage for BPCI participants who distribute 
gainsharing payments monthly and quarterly. While one commenter 
acknowledged that CMS responded to this same concern in the CJR Final 
Rule based primarily on operational considerations regarding the 
frequency of the reconciliation process, the commenter does not believe 
that such challenges should be resolved at the expense of an effective 
gainsharing program for EPM participants and CJR participant hospitals. 
The commenter pointed out that current CJR participant hospitals 
choosing to make gainsharing payments containing NPRA are prohibited 
from making any gainsharing payment until after the annual 
reconciliation process, which may take up to 18 months from the start 
of a performance year. They claimed that this lengthy process is 
stifling meaningful change and ultimately reducing quality and cost 
savings because the potential rewards for CJR collaborators are so far 
removed from the care for beneficiaries during CJR episodes. The 
commenter requested that quarterly gainsharing payments be permitted 
under the EPM and CJR model. As an alternative, the commenter 
recommended that CMS consider adopting a modified gainsharing payment 
schedule, limiting gainsharing payments to no more than once per 
performance year for the initial performance year and then thereafter 
allow for quarterly gainsharing payments. They believe this alternative 
could alleviate some of the operational concerns, while allowing EPM 
participants and CJR participant hospitals the flexibility to create a 
more impactful, long-term gainsharing strategy.
    Response: We appreciate that some commenters are interested in 
aligning the periodicity for gainsharing payments under the EPM and CJR 
model with the periodicity of similar payments permitted in the BPCI 
models. However, we believe the differences in periodicity are 
warranted in light of the substantive difference between BPCI and the 
EPM and CJR model. Under the BPCI initiative, the frequency of 
gainsharing of internal cost savings is not specified, while quarterly 
gainsharing of reconciliation payments is permitted in association with 
the BPCI quarterly reconciliation process. BPCI participants are also 
required to submit their gainsharing methodologies in an implementation 
plan for review and acceptance by CMS prior to their use. In contrast, 
as finalized for the CJR model (80 FR 73386) and as discussed and 
finalized for the EPM in section III.D.5. of this final rule, the 
reconciliation process for the EPM and CJR model will be conducted 
annually, and specific gainsharing methodologies are not required to be 
submitted to CMS, although the EPM and CJR gainsharing methodologies 
must meet all the requirements finalized in this final rule.
    We note again that gainsharing payments may only consist of 
reconciliation payments and internal cost savings, although, as 
discussed in more detail later in this section, we expect a majority of 
gainsharing payments to not include internal cost savings, and thus 
would contain only dollars from reconciliation payments. Given that 
gainsharing of reconciliation payments cannot be carried out until 
after reconciliation is performed and the funds available are known to 
the model participant, we cannot change the permissible frequency of 
gainsharing payments derived from reconciliation payments to allow a 
closer temporal linkage between the gainsharing payment and the 
performance period for which the EPM participant or CJR participant 
hospital earned the reconciliation payment without carrying out the 
reconciliation process more frequently. Under our annual reconciliation 
process, there is a delay of 6 to18 month between the time EPM episode 
care occurs and savings are represented in a reconciliation payment 
from which gainsharing payments can be made. We do not believe the 
commenters are requesting that quarterly reconciliation payments be 
permissible after the reconciliation payment is made under an annual 
reconciliation process, which would only lead to an even longer delay 
between the EPM episode care that occurred and the gainsharing payment 
that ultimately was made. Thus, the only way to allow more frequent 
gainsharing payments than annually, and to shorten the time lag between 
EPM episode care and gainsharing payments derived from reconciliation 
payments, would be to carry out the reconciliation process on a more 
frequent basis, such as quarterly. However, for the reasons discussed 
in section III.D.5. of this final rule, we will not conduct the 
reconciliation process more frequently than annually for any 
performance years of the EPM, including for any performance year after 
the first year of the EPM.
    While an EPM participant's calculation of internal cost savings 
could occur more frequently than annually, because internal cost 
savings do not rely on determinations by CMS, to allow more frequent 
gainsharing of internal cost savings would increase the documentation 
burden on EPM participants. Based on the comments received, we believe 
the commenters' primary interest is in being able to make more frequent 
gainsharing payments derived from reconciliation payments, rather than 
those derived from internal cost savings. Additionally, based on the 
implementation plans submitted by BPCI Awardees and anecdotal 
information from CJR participant hospitals, we expect that few EPM 
participants will choose to distribute gainsharing payments derived 
from internal cost savings. Therefore, while we will consider whether a 
change may be warranted in the future to allow more frequent 
gainsharing of internal cost savings under the EPM and CJR model as we 
gain implementation experience with the models, we are not making a 
change now to allow gainsharing payments to be made more frequently 
than annually because we do not expect the increased complexity of such 
a policy would be useful to EPM participants and CJR participant 
hospitals.
    Given that the BPCI initiative is scheduled to end late in CY 2018 
and no longer is adding participants, we do not believe the different 
EPM and CJR gainsharing payment periodicity policies in comparison with 
those of the BPCI initiative provide any meaningful advantage to BPCI 
Awardees for those EPM participants and CJR participant

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hospitals seeking to enter into sharing arrangements with EPM 
collaborators and CJR collaborators. While we appreciate the potential 
financial reward for EPM collaborators and CJR collaborators may be 
initially 6 to 18 months removed from their contributions of EPM 
activities and CJR activities to beneficiaries in the EPM and CJR 
model, we expect that many collaborators will have sustained engagement 
in the EPM and CJR model and will understand that assessing the cost 
and quality outcomes of care redesign for episodes requires a 
substantial period of time for relevant, reliable performance 
information to become available. For EPM collaborators and CJR 
collaborators that do have sustained engagement in the model(s), 
gainsharing payments to those collaborators could potentially be 
distributed as early as two quarters following the end of the 
performance year. We also expect that some EPM participants and CJR 
participant hospitals who request beneficiary-identifiable data as 
discussed in section III.D.K.2. of this final rule will be monitoring 
episode spending performance throughout the EPM and CJR performance 
years. Thus, model participants may be able to provide their 
collaborators with interim information regarding their estimates of 
episode spending performance and the implications for gainsharing 
payments that may ultimately be available to help sustain collaborator 
engagement throughout the performance years.
    We are finalizing in Sec.  512.500(c)(1)(ii) the annual 
distribution of gainsharing payments (not more than once per calendar 
year).
    Comment: A number of commenters urged CMS to allow EPM participants 
to financially reward collaborators through gainsharing payments on the 
basis of the individual collaborator's performance as CMS proposed. One 
commenter in favor of this approach interpreted CMS' proposal as 
requiring payment of gainsharing payments to post-acute care providers 
based on the pool of post-acute care providers with which the EPM 
participant had a sharing arrangement rather than based on individual 
collaborator performance. Another commenter requested that CMS advise 
EPM participants to treat advanced practice nurses and physicians 
equally in their gainsharing methodologies. In general, many commenters 
urged CMS to ensure reconciliation payments are distributed in a fair 
and equitable manner to collaborators.
    MedPAC expressed support for the proposed gainsharing safeguards in 
the EPM. In addition, they recommended that gainsharing payments to 
individual physicians and nonphysician practitioners who are part of 
the same sharing arrangement should not be allowed to vary based on 
whether these practitioners were involved in high- or low cost-
episodes. MedPAC claimed this requirement would reduce practitioners' 
incentive to treat primarily low-cost patients and steer high-cost 
patients to other physicians or nonphysician practitioners at the EPM 
participant. To operationalize this policy, MedPAC suggested that if a 
gainsharing arrangement results in hospital internal cost savings or 
savings on episode spending, the total gainsharing payment under that 
sharing arrangement should be divided evenly among all the episodes 
that are part to the arrangement. In other words, the per-episode 
gainsharing payment amount should be equal for all practitioners in the 
arrangement, although practitioners who are responsible for more 
episodes could receive higher total payments, yet they would receive 
the same per-episode gainsharing payment as all physicians and 
nonphysician practitioners who are part of the same sharing 
arrangement.
    MedPAC further urged CMS to adopt safeguards similar to those they 
recommended for gainsharing between EPM participants and physicians for 
sharing arrangements between hospitals and post-acute care providers. 
They recommended that EPM participants not be required to offer risk-
sharing arrangements to all post-acute care providers in their markets 
and that model participants should be able to discontinue their risk-
sharing arrangements with post-acute care providers that do not 
contribute to lowering episode spending. MedPAC further suggested that 
the risk or reward should be calculated for all post-acute care 
providers in the arrangement, not on a patient-specific or post-acute 
care provider-specific basis. They stated that pooling the savings on 
episode spending and quality performance of the post-acute care 
providers would create incentives for them to cooperate to jointly 
lower EPM episode spending. Under this approach, the risk-sharing 
arrangement between an EPM participant and its post-acute care provider 
collaborators would be based on the change in per-episode spending in 
the performance period, resulting in the same per-episode gainsharing 
payment for all post-acute care providers in the arrangement.
    Response: We appreciate the interest of the commenters in ensuring 
that reconciliation payments are distributed in a fair and equitable 
manner to collaborators, including different types of individual 
providers and post-acute care providers. We further appreciate the 
support of the commenters for our proposal to allow EPM participants to 
use a methodology for determining a gainsharing payment that is 
substantially based on quality of care and the provision of EPM 
activities for each collaborator, without requiring standardization of 
the methodologies across any groups of collaborators. Thus, our 
proposal would allow each sharing arrangement to be based on the 
contributions of the specific collaborator. With regard to the 
commenter who interpreted our proposal as requiring gainsharing payment 
based on a pool of post-acute care providers with which the EPM 
participant enters into sharing arrangements, rather than based on 
individual collaborator performance, we note that we did not propose 
any pooling of funds for making gainsharing payment to groups of 
collaborators under the EPM.
    While we understand the potential benefits of a policy 
standardizing sharing arrangements to protect against selection of low-
cost patients and the resulting patient steering, as well as to provide 
an incentive for providers of the same type to cooperate to jointly 
improve quality and reduce episode spending, we believe that EPM 
participants may have legitimate reasons to enter into a sharing 
arrangement with a particular provider, supplier, or ACO that differs 
from the EPM participant's arrangements with other similar providers, 
suppliers, or ACO. For example, it is possible there may be instances 
in which a particular SNF that has greater capacity to monitor the 
cardiac status of beneficiaries or has resources that an EPM 
participant believes will especially benefit beneficiaries with 
cognitive impairments who are recovering from hip fracture surgery. In 
these instances, it may be prudent for an EPM participant to enter into 
a different sharing arrangement with that SNF, as opposed to other 
SNFs. Furthermore, EPM participants may have legitimate reasons to 
enter into different sharing arrangements with EPM collaborators that 
agree to take on a portion of the EPM participant's downside risk, such 
as one particular ACO, compared to sharing arrangements with other EPM 
participants, including other ACOs that do not take on such downside 
risk. The EPM policies that hold EPM participants responsible for 
episode quality and cost performance will

[[Page 458]]

encourage EPM participants to seek EPM collaborators that are 
especially supportive of these goals. As discussed earlier in our 
response to comments on EPM participant policies for selecting 
collaborators, we have included robust safeguards in this final rule to 
address concerns about patient steering and protect beneficiary freedom 
of choice.
    We believe the MedPAC recommendation to require the same per-
episode payments for collaborators of the same type (physicians and 
post-acute care providers) would likely limit physician and post-acute 
care provider commitment to the goals of the EPM, resulting in less 
chance of model success. Our experience in other models that 
incorporate gainsharing has indicated that the financially responsible 
entity may have legitimate reasons to construct different sharing 
arrangements with different physicians, depending on factors such as 
the involvement of the physician in the entity's care redesign efforts, 
adoption of leadership roles requiring direction and instruction of 
other physicians, and the number and magnitude of disruptions in the 
physician's existing practice patterns. Similarly, the responsible 
entity may have legitimate reasons to construct different sharing 
arrangements with different post-acute care providers, such as the 
higher care capacity of a SNF that allows the SNF to accept an EPM 
beneficiary earlier than typical post-surgery or greater capacity of 
one HHA versus other to closely coordinate care for frail beneficiaries 
discharged directly to home following a hospitalization.
    We stress that there is no requirement that EPM participants enter 
into sharing arrangements with any providers, suppliers, or ACOs. 
Accordingly, EPM participants are not required to enter into sharing 
arrangements with all post-acute care providers in their markets. There 
also are no requirements for EPM participants to continue any specific 
sharing arrangements, so EPM participants would be able to discontinue 
sharing arrangements if they believe those arrangements are not 
contributing to meeting the EPM goals, subject to any contract 
termination provisions in their contracts with EPM collaborators.
    We are finalizing in Sec.  512.500(c)(5) that the amount of any 
gainsharing payments must be determined in accordance with a 
methodology that is substantially based on the quality of care and the 
provision of EPM activities. The methodology may take into account the 
amount of such EPM activities provided by an EPM collaborator relative 
to other EPM collaborators.
    Comment: One commenter urged CMS to amend the proposed regulation 
in Sec.  512.500(c)(6) which states, ``For a performance year, the 
aggregate amount of all gainsharing payments that are derived from a 
reconciliation payment must not exceed the amount of the reconciliation 
payment the EPM participant receives from CMS.'' The commenter asserted 
that this text is unclear regarding whether the gainsharing amount can 
also include internal cost savings. The commenter believes the proposed 
text is confusing because it either suggests that the total dollars 
available for gainsharing are limited to the total reconciliation 
payment amount, which is inconsistent with the definition of 
gainsharing, or it suggests that the proportion of the gainsharing that 
is from the reconciliation payment cannot be more than that payment, 
which by definition is true.
    Response: We appreciate the commenter's suggestion that we clarify 
whether a gainsharing payment may include internal cost savings; 
however, we believe that the commenter's suggested change to the 
proposed provision in Sec.  512.500(c)(6) is inadvisable. The purpose 
of this requirement is to ensure that the total amount of all 
gainsharing payments made to collaborators and derived from the 
reconciliation payment the EPM participant receives from CMS does not 
exceed the amount of that reconciliation payment. The commenter is 
correct that as specified in Sec.  512.500(c)(1)(i), gainsharing 
payments, if any, must be derived solely from reconciliation payments, 
or internal cost savings, or both. We believe it would be confusing to 
revise Sec.  512.500(c)(6) as the commenter suggested to add that the 
gainsharing amount can include internal cost savings, as that is 
specified elsewhere in regulation and is not necessary for this 
requirement specific to gainsharing payments derived from a 
reconciliation payment. However, we believe that reordering of the 
terms in the provision eliminates any confusion about the requirement. 
Therefore, we are modifying Sec.  512.500(c)(6) to state, ``For a 
performance year, the aggregate amount of all gainsharing payments that 
are derived from a reconciliation payment the EPM participant receives 
from CMS must not exceed the amount of that reconciliation payment.''
    We are finalizing in Sec.  512.500(c)(6) the limit on the aggregate 
amount of all gainsharing payments that are derived from a 
reconciliation payment with the modifications discussed.
    Comment: While several commenters, including MedPAC, supported CMS' 
proposal to cap the amount of gainsharing payments to physicians, 
nonphysician practitioners, and PGPs, most commenters either 
recommended that CMS eliminate the caps for PGPs; eliminate the caps 
altogether for PGPs, physicians, and nonphysician practitioners; or 
apply the caps on a different basis than CMS' proposal of 50 percent of 
the Medicare-approved amounts under the PFS for items and services 
furnished by the physician or nonphysician practitioner to the EPM 
participant's EPM beneficiaries during the EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    One commenter who objected to the proposed caps on physicians 
stated that physicians are singled out for different treatment than 
other provider and supplier types because the commenter believed 
physicians were the only type of EPM collaborator with a cap, and 
contended that the cap dampens the ability of gainsharing to support 
physician behavior change by relegating payments to a nominal amount. 
Another commenter claimed that the proposed EPM financial arrangements 
may not be sufficiently flexible for the breadth of agreements EPM 
participants may wish to set up with PGPs, noting that the proposed 
gainsharing cap of 50 percent was based on services furnished by 
individual physicians in the PGP to EPM beneficiaries as opposed to the 
BPCI initiative where the commenter believes the cap is set at 50 
percent for the entire physician group. They claimed that under CMS' 
proposal, there is no way for a PGP to stabilize risk among higher- and 
lower-performing physicians and, therefore, the group risk-sharing 
potential will be less than 50 percent in total.
    A number of commenters recommended changes to the proposed 
methodology for setting the cap on physician, nonphysician 
practitioner, and PGP gainsharing payments. One commenter asserted that 
due to the importance of primary care management in preventing 
readmissions, it is likely that the potential value of care management 
services provided during the post-discharge period is significantly 
greater than the total PFS payments a physician will receive for these 
services. The commenter urged CMS to increase the proposed 50 percent 
cap to reflect the value provided by these primary care physicians' 
services. Several other commenters requested that if the cap was not

[[Page 459]]

dropped altogether, the cap should be set at 50 percent of episode 
savings rather than Part B billings, reasoning that limiting the cap 
based on the Medicare-approved amounts paid under the PFS negatively 
impacts EPM participants' flexibility in determining the amount of 
savings to share, as well as targets physicians individually. The 
commenters reasoned that physicians are the key to driving improved 
quality and efficiency due to their direct relationships with patients, 
access to the patient's current health status, and ability to recommend 
the appropriate level of post-acute care services, and that the 
proposed cap would eliminate meaningful financial incentives for 
physicians to fully engage in the EPM. Several commenters further added 
that because CMS has entrusted hospitals with the responsibility to 
oversee and implement EPM care redesign, CMS should grant hospitals 
greater flexibility in designing their respective gainsharing programs 
and determining the amount of episode savings to share with their EPM 
collaborators.
    Other commenters interpreted CMS' proposal as allowing EPM 
participants to share up to 50 percent of savings achieved via Part B 
services with physicians and recommended that the cap be revised to 
include savings from both Part A and Part B services in gainsharing 
payments. The commenters asserted that accounting for unplanned care 
necessitating Part B services is critical, and that to improve patient 
outcomes, unplanned clinically appropriate care must be accounted for 
which potentially results in more physician involvement than originally 
anticipated. They concluded that significant reductions in Part A 
spending may be achieved through reducing the lengths-of-stay and 
unnecessary readmissions during EPM episodes, but those savings are 
unlikely to be accomplished without active physician participation and, 
therefore, physicians should be eligible to share in those Part A 
savings.
    Response: We acknowledge the many different perspectives of the 
commenters on the proposed cap on gainsharing payments to physicians, 
nonphysician practitioners, and PGPs in the EPM. We reiterate that we 
proposed to limit the total amount of gainsharing payments for a 
performance year to EPM collaborators, collaboration agents, or 
downstream collaboration agents that are physicians, nonphysician 
practitioners, or PGPs. For physicians and nonphysician practitioners 
the proposed limit was 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the EPM participant's EPM beneficiaries 
during EPM episodes that occurred during the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that is included in the payment being made 
to the physician or nonphysician practitioner. For PGPs, the proposed 
limit on gainsharing payments was 50 percent of the Medicare-approved 
amounts under the PFS for items and services billed by the PGP and 
furnished to the EPM participant's EPM beneficiaries by members of the 
PGP during EPM episodes that occurred during the same performance year 
for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that is included in the payment being 
made to the PGP. We note that the proposed EPM gainsharing caps for PGP 
members operate in the same way as the caps on PGP member gainsharing 
in the BPCI initiative. In both instances, the cap is set at 50 percent 
of the total Medicare-approved amounts under the PFS for services 
furnished by the physician or nonphysician practitioner PGP member to 
model beneficiaries during the applicable time period. Accordingly, it 
is not correct that the proposal for gainsharing caps under the EPM 
provides less flexibility than under the BPCI initiative.
    We do not agree with commenters that the proposed caps on payments 
under EPM financial arrangements to physicians, nonphysician 
practitioners, and PGPs should be eliminated because we proposed these 
caps for a specific purpose. The purpose of the cap is to serve as a 
safeguard against the potential risks of stinting, steering, and denial 
of medically necessary care due to financial arrangements specifically 
allowed under the EPM by providing an upper limit on the potential 
additional funds a physician, nonphysician practitioner, or PGP can 
receive for their engagement with EPM participants in caring for EPM 
beneficiaries beyond the FFS payments that those suppliers are also 
paid and that are included in the actual episode spending calculation 
for the episodes.
    We do not believe it would be appropriate to identify certain types 
of physicians, such as those providing primary care management 
services, for higher caps under the EPM because we believe EPM 
participants should have the flexibility to enter into sharing 
arrangements with those EPM collaborators that help them execute their 
care redesign plans, which we expect to vary from EPM participant to 
EPM participant. We further note that the proposed caps were based on 
the Medicare-approved amounts under the PFS paid to physicians and 
nonphysician practitioners for care furnished to EPM beneficiaries, and 
not based on Part B episode savings as some commenters interpreted the 
proposal. Therefore, we do not agree with concerns of some commenters 
that Part B spending could increase even if total episode spending 
decreased and, therefore, could affect the potential for physician 
gainsharing payments because we do not specify where the episode 
savings included in a reconciliation payment must come from (Part A or 
Part B) in order for part of the reconciliation payment to be paid to a 
physician, nonphysician practitioner, or PGP as a gainsharing payment. 
While we appreciate the information provided by the commenters 
regarding the valuable role physicians may play in reducing Part A 
spending, we do not believe it would be appropriate to cap physician, 
nonphysician practitioner, and PGP gainsharing payments at 50 percent 
of total episode savings beyond the quality-adjusted target price. 
Historical EPM episodes include average episode spending ranging from 
approximately $23,000 to $47,000, with Part B spending (predominantly 
PFS) accounting for 7 percent to 14 percent of the total.\129\ Thus, 
depending on actual episode savings experienced by the EPM participant, 
we believe the proposed cap at 50 percent of Part B billings would 
generally allow a physician, nonphysician practitioner, or PGP to 
receive a gainsharing payment that is comprised of a reconciliation 
payment that includes Part A savings. Further, setting the gainsharing 
cap based on Part B billings for physicians, nonphysician 
practitioners, and PGPs helps to maintain a connection between their 
gainsharing payments and their payments under the PFS for items and 
services furnished to EPM beneficiaries so as not to create a 
disproportionate opportunity and associated program integrity risk for 
physicians, nonphysician practitioners, and PGPs to dramatically 
increase their payments on behalf of Medicare beneficiaries based on 
their participation in EPM financial arrangements.
---------------------------------------------------------------------------

    \129\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in the 
proposed rule that began in CYs 2012 2014.
---------------------------------------------------------------------------

    We emphasize that we have applied the 50 percent cap on gainsharing 
payments to physicians, nonphysician

[[Page 460]]

practitioners, and PGPs in the CJR model as well as the BPCI 
initiative, and participants have not voiced significant complaints 
that this financial limitation has hampered their ability to engage 
physicians, nonphysician practitioners, and PGPs in care redesign to 
improve episode quality and reduce costs. We acknowledge the important 
role physicians play in providing quality, efficient health care to 
beneficiaries, but we believe that allowing a physician, nonphysician 
practitioner, and PGP to be paid up to 50 percent more for engagement 
with the episode care of EPM beneficiaries than the payments they are 
paid for furnishing direct services to those beneficiaries under the 
PFS provides EPM participants with substantial flexibility to develop 
and implement meaningful financial arrangements that align the 
financial interests of physicians, nonphysician practitioners, and PGPs 
with the quality and cost goals of the EPM participant under the EPM.
    We note that as discussed previously in this section, we are adding 
NPPGPs to the list of EPM collaborators. Consistent with our cap on 
gainsharing payments to PGPs, as well as our cap on gainsharing 
payments to physicians and nonphysician practitioners, we are adding 
NPPGPs to Sec.  512.500(4)(ii) where we specify the cap on gainsharing 
payments to PGPs so that those caps are also applied to gainsharing 
payments to NPPGPs.
    We are finalizing in Sec. Sec.  512.500(4)(i) and 512.500(4)(ii) 
the caps on the total amount of gainsharing payments for a performance 
year paid to physicians, nonphysician practitioners, PGPs, and NPPGs.
    We note that our proposals were not clear or consistent regarding 
whether caps applied to individual therapists or TGPs. We did not 
propose to cap gainsharing payments to EPM collaborators that are 
providers or suppliers of outpatient therapy services, which include 
individual therapists and therapy group practices, and we did not 
propose to cap the distribution payments to therapists who are members 
of a PGP under proposed Sec.  512.505(8)(i). However, we proposed that 
therapists who are members of a PGP and receive downstream 
collaboration payments would have their payments capped under proposed 
Sec.  512.510(b)(7) as members of the PGP. As discussed in section 
III.I.3. of this final rule, we have created new terms and revised 
certain proposed terms for this final rule to separately define 
therapist in private practice and TGP and the revised definition of EPM 
collaborator now separately identifies therapists in private practice 
and TGPs as eligible to be collaborators. While capping gainsharing 
payments to therapists and TGPs would be most consistent with our 
treatment of gainsharing payments to other individual clinicians and 
their practice groups and it would be possible to apply such caps in 
view of the new definitions of therapist in private practice and TGP 
adopted in this final rule, we do not believe it would be appropriate 
to adopt gainsharing caps for therapists in private practice or TGPs 
because we did not solicit comment on caps for any providers or 
suppliers of outpatient therapy services, including therapists in 
private practice and TGPs. However, our reasoning for the caps on 
gainsharing payments to physicians, nonphysician practitioners, PGPs, 
and NPPGs could similarly apply to therapists and TGPs. Namely, a cap 
on therapists and TGPs could serve as a safeguard against the potential 
risks of stinting, steering, and denial of medically necessary care due 
to financial arrangements specifically allowed under the EPM by 
providing an upper limit on the potential additional funds the 
clinician or group can receive for their engagement with EPM 
participants in caring for EPM beneficiaries beyond the FFS payments 
that those suppliers are also paid and that are included in the actual 
episode spending calculation for the episodes. Therefore, while we are 
not adopting gainsharing caps for therapists in private practice and 
TGPs in this final rule and we are revising proposed Sec.  
512.510(b)(7) which is final Sec.  512.510(b)(8) to remove the cap as 
applied to therapists who are PGP members, we will monitor payments 
under financial arrangements to these individuals and entities and may 
consider proposing caps in the future if we have program integrity 
concerns during EPM implementation.
    We are finalizing the in Sec.  512.500(c)(4) the cap on the 
aggregate amount of gainsharing payments for a performance year paid to 
physicians, nonphysician practitioners, and PGPs, with modification to 
also apply the cap to NPPGPs.
    Comment: Some commenters urged CMS to eliminate the proposed caps 
on alignment payments at the entity level, specifically mentioning 
ACOs, PGPs, and post-acute care providers in their discussion. One 
commenter was concerned that under CMS' proposal a single EPM 
collaborator other than an ACO could possibly be accountable for up to 
25 percent of an EPM participant's repayment amount, highlighting that 
such an amount could post serious financial jeopardy to the EPM 
collaborator's existence. To mitigate this risk, the commenter 
recommended that all the EPM collaborators other than ACOs in aggregate 
would pay no more than 25 percent of the EPM participant's repayment 
amount or, alternatively would pay proportionally based upon the 
Medicare-approved amounts the EPM collaborator was paid for items and 
services furnished to EPM beneficiaries.
    Response: We appreciate the commenters' recommendation to eliminate 
caps on alignment payments by entities that are EPM collaborators. We 
note that we proposed for a performance year, the aggregate amount of 
all alignment payments received by the EPM participant must not exceed 
50 percent of the EPM participant's repayment amount. In regards to the 
50 percent cap on the aggregate amount of alignment payments, the 
commenters did not provide specific justification for eliminating this 
cap on alignment payments provided to EPM participants. As such, given 
that the EPM participant is responsible for developing and coordinating 
care redesign strategies in response to its EPM participation, we 
believe it is important that the EPM participant retain a significant 
portion of its responsibility for repayment to CMS. Therefore, we are 
maintaining the cap on the aggregate amount of all alignment payments 
at 50 percent of the EPM participant's repayment amount, ensuring that 
EPM participants retain a minimum of 50 percent of the repayment amount 
as their responsibility.
    In addition, we proposed that the aggregate amount of all alignment 
payments from an EPM collaborator other than an ACO to the EPM 
participant may not be greater 25 percent of the EPM participant's 
repayment amount. In response to the commenter's concern about the 
potential for an EPM collaborator that is not an ACO to experience 
serious financial jeopardy due to this amount, we emphasize that there 
is no requirement that any provider, supplier, or ACO enter into a 
sharing arrangement as an EPM collaborator, including a sharing 
arrangement that requires them to make an alignment payment. We also 
emphasize that the 25 percent cap on alignment payments represents the 
upper threshold for risk sharing that a single EPM collaborator may 
assume, and that the parties may agree to lower amounts. Furthermore, 
participation in sharing arrangements must be voluntary and without 
penalty for nonparticipation. Thus, we cap the aggregate amount of all 
alignment payments from an EPM collaborator

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other than an ACO at 25 percent of the EPM participant's repayment 
amount as a broad safeguard for EPM collaborators and EPM participants 
from excessive financial risk or undue influence from the EPM 
participant's contractual relationship with a single EPM collaborator. 
However, this cap is not a substitute for the deliberation of both the 
EPM participant and EPM collaborator before entering into a sharing 
arrangement that would require the EPM collaborator to make an 
alignment payment to the EPM participant if the EPM participant has a 
repayment amount due to Medicare. We believe that the EPM collaborator 
is best-positioned to make financial decisions on its own behalf and to 
bear the consequence of those decisions, and that flexibility in 
sharing arrangements between different parties is important. Therefore, 
we see no need to provide a more protective cap on the accountability 
for a single EPM collaborator by aggregating the accountability of all 
EPM collaborators or requiring that the EPM collaborator only assume 
accountability for paying a portion of the EPM participant's repayment 
amount that is proportionate to the EPM episode spending on items and 
services furnished by that EPM collaborator. Therefore, we are 
maintaining the cap on the aggregate amount of all alignment payments 
from an EPM collaborator other than an ACO to the EPM participant at 25 
percent of the EPM participant's repayment amount.
    We are finalizing in Sec. Sec.  512.500(c)(12) and 512.500(c)(13) 
the cap on the aggregate amount of all alignment payments received by 
the EPM participant and the cap on alignment payments that may be made 
by EPM collaborators to the EPM participant.
    Comment: One commenter opposed CMS' proposal to cap the aggregate 
amount of all alignment payments from an EPM collaborator that is an 
ACO to an EPM participant at 50 percent of the EPM participant's 
repayment amount, arguing that setting such a limit interferes the 
negotiations between an EPM participant and its collaborators. The 
commenter asserted that ACOs should be able to use their substantial 
expertise and resources to contribute to the EPM's dual goals of 
limiting spending and increasing quality. They urged CMS to permit an 
EPM participant and its collaborators to jointly agree on the terms and 
conditions of a sharing arrangement, including specifics around 
gainsharing or repayment percentages, because it is unnecessary to 
place limits on repayment amounts as long as they do not collectively 
exceed the amount the EPM participant would have to repay. Another 
commenter pointed out that the risk threshold for an EPM consisting of 
beneficiaries discharged from several MS-DRGs is substantially less 
than that of two-sided risk ACO models, approximately $500,000 versus 
$2,000,000 for a small ACO, respectively. They suggested that CMS 
consider the risk alignment of ACOs and the EPM as an opportunity for 
ACOs to phase-in downside risk incrementally and at a substantially 
lower entry point of dollars than current two-sided ACO options. The 
commenter believes that adopting such an approach would encourage ACOs 
to take on more downside risk.
    Response: We appreciate the commenter's recommendation to eliminate 
the proposed cap on alignment payments made by an EPM collaborator that 
is an ACO to an EPM participant. We agree with the commenter about the 
expertise that ACOs may offer EPM participants with regard to managing 
the cost and quality of care Medicare beneficiaries receive. We 
proposed that the aggregate amount of all alignment payments from an 
EPM collaborator to the EPM participant may not be greater than 25 
percent of the EPM participant's repayment amount for an EPM 
collaborator that is not an ACO and 50 percent of the EPM participant's 
repayment amount for an EPM collaborator that is an ACO. We proposed to 
allow a higher percentage of the EPM participant's repayment amount to 
be paid by an ACO than by EPM collaborators that are not ACOs in 
recognition that some ACOs are sizable organizations with significant 
financial and other resources that can may benefit EPM episode spending 
and quality performance.
    We have constructed a framework for EPM financial arrangements that 
we believe leaves EPM participants and EPM collaborators relatively 
unconstrained to develop sharing arrangements in a manner they see fit 
based on the contributions of different parties to the goals of the 
EPM, provided that all the requirements for financial arrangements 
included in this final rule are met. We did not propose that EPM 
participants would need to use a particular methodology for determining 
alignment payments that are made by either an EPM collaborator that is 
an ACO or an EPM collaborator that is not an ACO. However, as discussed 
in the response to the previous comment, given that the EPM participant 
is responsible for developing and coordinating care redesign strategies 
in response to its EPM participation, we believe it is important that 
the EPM participant retain a significant portion of its responsibility 
for repayment to CMS. The EPM was not designed to test the phase-in of 
ACO downside risk or specifically encourage ACOs to take on more 
downside risk, but rather to test the EPM where acute care hospitals 
are the financially accountable entity to CMS for episode quality and 
cost performance, with sufficient flexibility to share their upside and 
downside risk with EPM collaborators based on the financial alignment 
needs arising from EPM episode care redesign.
    Therefore, we are maintaining the cap on the aggregate amount of 
all alignment payments at 50 percent of the EPM participant's repayment 
amount, while allowing an ACO to assume responsibility for the 
remaining 50 percent of the repayment amount through an alignment 
payment to be made to the EPM participant. While we appreciate the 
commenter's view that we should let the market determine the best 
arrangements for the parties without constrain, in the early 
performance years of the first required episode payment models and in 
our first experience with ACOs as model collaborators, we believe the 
alignment payment limit allows sufficient flexibility for the 
development of market-based arrangements between EPM participants and 
ACOs, while providing assurance of the EPM participant's active 
involvement in developing and implementing EPM care redesign 
strategies.
    Comment: One commenter urged CMS to apply a cap on gainsharing 
payments to all EPM collaborators, arguing that because CMS proposed 
caps only on gainsharing payments to physicians, nonphysician 
practitioners, and PGPs that EPM participants may conclude that sharing 
arrangements with other types of providers, such as post-acute care 
providers, is not encouraged by CMS. The commenter further contended 
that CMS' proposal to cap gainsharing payments for physician, 
nonphysician practitioners, and PGPs at a certain percentage of the 
amount billed to Medicare is ill-advised given that the goal of the EPM 
is to reduce costs to Medicare by better managing services and reducing 
unnecessary services. They recommended that CMS adopt a gainsharing cap 
policy that specifies that no one type of collaborator (for example, 
physicians) nor individual provider or organization can receive more 
than 50 percent of the available gainsharing amount in order to ensure 
that all EPM collaborators may be eligible for a gainsharing payment

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should they meet the requirements of their sharing arrangement.
    Response: We do not agree with the commenter that the lack of a 
proposed cap on gainsharing payments to providers, suppliers, and ACOs 
other than physicians, nonphysician practitioners, and PGPs in our 
proposal implies that these other individuals and entities are not 
worthy of consideration by EPM participants as potential EPM 
collaborators. We note that we proposed to add ACOs, hospitals, and 
CAHs, none of whom have gainsharing caps, to the list of types of 
providers and suppliers that may be EPM collaborators, thereby 
expanding the list initially adopted for the CJR model.
    The purpose of the final cap on gainsharing payments for 
physicians, nonphysician practitioners, PGPs, and NPPGs (as adopted in 
this final rule) is to serve as a safeguard against the potential risks 
of stinting, steering, and denial of medically necessary care due to 
financial arrangements specifically allowed under the EPM by providing 
an upper limit on the potential additional funds a physician, 
nonphysician practitioner, PGP, or NPPGP can receive for their 
engagement with EPM participants in caring for beneficiaries in the EPM 
beyond the FFS payments that those suppliers are also paid and that are 
included in the actual episode spending calculation for the episodes. 
With the exception of physicians, nonphysician practitioners, PGPs, and 
NPPGPs, we do not limit the amount of gainsharing payments to other 
eligible EPM collaborators. As discussed earlier in this section, as 
the financially responsible entities for EPM episodes, we believe that 
EPM participants should have as much flexibility as possible, subject 
to adequate program integrity safeguards, in decisions about financial 
arrangements, including whether or not to enter into them; the 
selection of collaborators; and the methodologies for determining the 
amounts of gainsharing payments and alignment payments. Therefore, we 
do not believe it would be appropriate to limit the gainsharing payment 
of an EPM participant to any EPM collaborator or single type of EPM 
collaborator based on the available gainsharing amount in order to 
ensure that all EPM collaborators receive a portion of the gainsharing 
amount that is available.
    Comment: One commenter claimed that CMS' proposal applies some 
unnecessary limits to when an EPM collaborator can receive a 
gainsharing payment. The commenter reasoned that if the goal of the EPM 
is to redesign care, then the possibility should be considered that an 
EPM collaborator may furnish a service that is not ``billable'' under 
Medicare FFS today and yet could play an important role in changing the 
outcomes and cost under an EPM episode. They recommended that CMS not 
limit the eligibility for receiving gainsharing payments to just 
services that are billable but instead allow the EPM collaborator to 
receive some payment after the fact for a service or item that 
contributed positively to the EPM episode. To accomplish this change, 
the commenter specifically suggested that CMS delete ``billable'' in 
proposed Sec.  512.500(c)(2)(ii) where CMS proposed to require that to 
be eligible to receive a gainsharing payment or to be required to make 
an alignment payment, an EPM collaborator other than a PGP or an ACO 
must have directly furnished a billable item or service to an EPM 
beneficiary during an EPM episode that occurred in the same performance 
year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment or was assessed a repayment amount. They believe it is unlikely 
that this change would be abused as it is not in the EPM participant's 
best interest to issue a gainsharing payment to an EPM collaborator 
that offered them no benefit in the EPM.
    The commenter further recommended that the proposed gainsharing 
eligibility criteria for ACOs, specifically that their involvement in 
an EPM beneficiary's care was either: 1) related to the provision of 
care coordination services and/or 2) related to engaging in care 
redesign strategies and helping to implement those strategies, be added 
to the gainsharing eligibility requirement for other EPM collaborators 
that are not ACOs or PGPs in Sec.  512.500(c)(2)(ii). They believe that 
providers and suppliers should also be eligible for gainsharing if they 
engage in those tasks. The commenter concluded that making both of 
their recommended changes to Sec.  512.500(c)(2)(ii) would contribute 
to comparable gainsharing opportunities being available for EPM 
collaborators carrying out the same activities to advance the goals of 
the EPM.
    Response: We appreciate the commenter's detailed suggestions about 
changes to the proposed gainsharing eligibility criteria for EPM 
collaborators that are not PGPs or ACOs to ensure comparable 
gainsharing opportunities for different types of EPM collaborators. 
First, we want to clarify that while our proposal would require an EPM 
collaborator other than a PGP or an ACO to have directly furnished a 
billable item or service to an EPM beneficiary during an EPM episode 
that occurred in the same performance year for which the EPM 
participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment to be 
eligible to receive a gainsharing payment, there is no requirement that 
the gainsharing payment methodology rely only upon billable items and 
services. As proposed in Sec.  512.500(c)(5), the amount of any 
gainsharing payments must be determined in accordance with a 
methodology that is substantially based on the quality of care and the 
provision of EPM activities. We proposed that EPM activities means 
activities related to promoting accountability for the overall quality, 
cost, and overall care for EPM beneficiaries, including managing and 
coordinating care; encouraging investment in infrastructure, enabling 
technologies, and redesigned care processes for high quality and 
efficient service delivery; the provision of items and services that 
reduce costs and improves quality, or carrying out any other obligation 
of duty under the EPM. Thus, all EPM collaborators may receive a 
gainsharing payment determined by a methodology that takes into account 
their contribution of items and services that are not billable but 
which contributed to changes in EPM episode outcomes and cost, an 
outcome which is consistent with the commenter's recommendation.
    For those EPM collaborators who can directly furnish items and 
services to Medicare beneficiaries, which are all EPM collaborators 
that are not ACOs, PGPs, NPPGPs, or TGPs, we believe a connection to 
the actual care of EPM beneficiaries is essential so that the financial 
incentives of providers furnishing billable items and services to EPM 
beneficiaries are aligned with those of EPM participants to improve the 
quality of care and reduce the costs of episode. It is difficult to 
contemplate how model success can be achieved without significant care 
redesign that involves billable items and services furnished by the 
providers and suppliers actually caring for EPM beneficiaries. The 
requirement that EPM collaborators other than ACOs, PGPs, NPPGPs, and 
TGPs directly furnish billable items or services to EPM beneficiaries 
to be eligible for gainsharing payments ensures a nexus between the 
financial incentives and actual care to EPM beneficiaries. This 
requirement also provides a program integrity safeguard against the 
free flow of gainsharing payments to an EPM collaborator who does not 
furnish items or services to EPM beneficiaries as a

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means of impacting the referral patterns of the EPM collaborator to 
particular hospitals. Thus, we do not believe that adopting the 
recommendation of the commenter that we use the criteria for ACOs, that 
do not directly furnish items or services to beneficiaries, to define 
the clinical involvement of EPM collaborators that are not ACOs PGPs, 
NPPGPs, or TGPs in the care of EPM beneficiaries that is required for 
gainsharing eligibility is necessary or appropriate. It is only in the 
case of ACOs, PGPs, NPPGPs, and TGPs that do not directly furnish items 
or services to EPM beneficiaries that we needed to develop another 
definition for the clinical involvement that is a requirement for 
gainsharing payment eligibility. We expect that EPM collaborators that 
are not ACOs, PGPs, NPPGPs, or TGPs will commonly provide care 
coordination services to EPM beneficiaries, engage in care redesign 
strategies, and perform a role in implementing such strategies, just as 
we expect similar activities for ACOs, PGPs, NPPGPs, and TGPs that are 
EPM collaborators. We further note that an EPM participant can factor 
these types of activities into the methodology that determines the 
amount of the gainsharing payment for EPM collaborators. However, for 
the reasons described previously, we will not allow EPM collaborators 
that are not ACOs, PGPs, NPPGPs, or TGPs to be eligible for gainsharing 
payments if they have not directly furnished a billable item or service 
to an EPM beneficiary during an EPM episode during the applicable time 
period. We believe that the gainsharing payment eligibility policies 
provide the potential for comparable gainsharing opportunities for all 
types of EPM collaborators, while taking into consideration the reality 
that individuals and entities with different potential for providing 
billable services to EPM beneficiaries may be EPM collaborators.
    We are finalizing in Sec.  512.500(c)(2)(ii) that to be eligible to 
receive a gainsharing payment or to be required to make an alignment 
payment, an EPM collaborator that is not an ACO, PGP, NPPGP, or TGP 
must have directly furnished a billable item or service to an EPM 
beneficiary during an EPM episode.
    Comment: Several commenters expressed concern about the proposed 
restrictions on paper savings in the methodology used to calculate the 
EPM participant's internal cost savings from which the participant may 
make gainsharing payments to EPM collaborators. The commenters claimed 
that very few hospital accounting systems can clearly separate 
``paper'' savings from ``real'' savings. They claimed that introducing 
systems to account for savings will require time and resources that may 
restrict ability of many EPM participants to meet the proposed 
requirements, yet ``paper'' savings may yield real benefits for 
patients. As an example, one commenter pointed out that ``paper'' 
savings due to reductions in nursing time may permit that time to be 
dedicated to other patients improving coverage and benefiting the 
quality of care.
    Response: We appreciate the information provided by the commenters 
on the types of internal cost savings that EPM participants might 
achieve based on care redesign under the EPM. We note that we proposed 
in Sec.  512.500(c)(3)(ii) that the methodology used to calculate 
internal cost savings must reflect the actual, internal cost savings 
achieved by the EPM participant through the documented implementation 
of EPM activities identified by the EPM participant, and in Sec.  
512.500(c)(3)(ii)(B) proposed that the methodology must exclude 
``paper'' savings from accounting conventions or past investment in 
fixed costs.
    In considering the EPM participant's methodology for calculating 
internal cost savings achieved based on their implementation of EPM 
activities, EPM participants should consider all of these requirements 
and others we proposed for internal cost savings in their totality. We 
believe that any methodology that meets the proposed requirements for 
the methodology to calculate internal cost savings would require some 
system to account for savings. Moreover, we do not believe it would be 
appropriate to allow gainsharing payments derived from an EPM 
participant's internal cost savings that cannot be specifically 
accounted for due to the program integrity risk that such payments may 
pose. We appreciate that accounting for the savings resulting from the 
implementation of EPM activities by the EPM participant could require 
accounting systems of different complexities based on the specific 
types of internal cost savings that the EPM participant wants to 
capture for purposes of making gainsharing payments. For example, 
internal cost savings due to physician collaboration to achieve device 
standardization in EPM episodes that results in the EPM participant 
being able to purchase the device at a lower price reflecting volume 
discounts may be relatively easily accounted for by comparing device 
purchase invoices during the EPM performance year to those during the 
immediately prior period. On the other hand, reductions in nursing time 
for EPM beneficiaries due to a shorter hospital stay that results from 
streamlined discharge planning may require more complex systems to 
track and compare nursing time and its associated hospital cost for EPM 
beneficiaries during the EPM performance period to those during the 
immediately prior period. Thus, while we recognize the challenges 
identified by the commenters in tracking real savings associated with 
EPM care redesign, given that we proposed to allow EPM participants to 
select their own methodologies for calculating internal cost savings 
(provided that such methodologies meet the requirements in this final 
rule to be included in gainsharing payments to EPM collaborators), we 
believe that we have provided sufficient flexibility to allow each EPM 
participant the ability to develop a methodology for calculating 
internal cost savings that aligns with its technical capacity to track 
those savings. We note that the purpose of this prohibition on paper 
savings is to bar the distribution of gainsharing payments comprised of 
funds that did not derive from real savings, as well as bar payments 
made for purposes other than the provision of EPM activities by EPM 
collaborators that results in reduced episode spending or increased 
quality. As such, we believe the proposed requirements prohibiting EPM 
participants from sharing internal cost savings that results merely 
from paper savings--rather than real savings arising from the 
successful implementation of care redesign strategies by the EPM 
participant--are necessary as a program integrity safeguard, and so we 
are declining to accept the commenters' suggestion.
    We are finalizing in Sec.  512.500(c)(3)(ii)(B) that the 
methodology used to calculate internal cost savings must exclude paper 
savings from accounting conventions or past investment in fixed costs.
    Comment: One commenter requested clarification regarding CMS' 
proposal that an EPM participant must not make a gainsharing payment to 
an EPM collaborator that is subject to any action for noncompliance 
with the EPM requirements or fraud and abuse laws, or for the provision 
of substandard care in EPM episodes or other integrity problems. The 
commenter expressed concerns regarding the absence of a bright line 
standard EPM participants could use to ensure compliance with this 
standard. The commenter expressed particular concern about how a 
participant could determine if a collaborator was subject to an action 
for

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the ``provision of substandard care in EPM episodes or other integrity 
problems.'' The commenter further recommended that CMS should apply a 
reasonable knowledge standard to compliance with this provision.
    Response: We appreciate the commenter's interest in additional 
clarification regarding how a participant can ensure it complies with 
this payment restriction. We believe that we can provide additional 
clarity to the standard for not making a gainsharing payment by 
establishing that this provision only restricts an EPM participant's 
ability to make a gainsharing payment if CMS notifies the EPM 
participant of the action that would trigger the payment restriction. 
Specifically, we are modifying the provision to state, ``An EPM 
participant must not make a gainsharing payment to an EPM collaborator 
if CMS has notified the EPM participant that such collaborator is 
subject to any action for noncompliance with this part or the fraud and 
abuse laws, or for the provision of substandard care in EPM episodes or 
has other integrity problems.'' This change should eliminate any 
uncertainty by the EPM participant about circumstances in which an EPM 
collaborator must not be paid a gainsharing payment, while also 
providing a sufficient safeguard against gainsharing with individuals 
and entities that present risk of patient harm or program abuse. 
Therefore, we are revising Sec.  512.500(c)(8) accordingly.
    We believe that adopting the alternative approach recommended by 
the commenter and using a reasonable knowledge standard would make 
enforcing this prohibition of distributing gainsharing payments to EPM 
collaborators under certain circumstances highly challenging, if not 
impossible. We believe the notification approach discussed previously 
allows for the ``bright line'' that the commenter was seeking, while 
maintaining the agency's ability to prevent gainsharing payments to an 
EPM collaborator that has program integrity concerns.
    We are finalizing in Sec.  512.500(c)(8) that an EPM participant 
must not make a gainsharing payment to an EPM collaborator if CMS has 
notified the EPM participant that such collaborator is subject to any 
action for noncompliance with this part or the fraud and abuse laws, or 
for the provision of substandard care in EPM episodes or has other 
integrity problems.
    Comment: Several commenters requested that CMS extend financial 
arrangements permitted under the EPM and CJR model to scenarios that 
extend beyond EPM episodes. The commenters believe that these requests 
would require fraud and abuse law waivers. One commenter encouraged CMS 
to allow for gainsharing on commercial and Medicaid episode payment 
arrangements that are similar to the CJR model or proposed under the 
EPM to increase the volume of cases on which hospitals can share gains 
with collaborators. Another commenter urged CMS to allow EPM 
participants and CJR participant hospitals to provide care management 
tools and services to beneficiaries and providers prior the start of 
the episode, consistent with activities contemplated by the Medicare 
Shared Savings Program, ACO participation waiver. While acknowledging 
that CMS is not inclined to start the episode prior to the date of the 
admission for the anchor hospitalization, the commenter explained that 
pre-episode services have been proven to not only improve patient 
outcomes and satisfaction but also to result in the delivery of more 
efficient and higher quality care. The commenter provided examples of 
pre-episode services they requested be allowed under the EPM and CJR 
model: comprehensive patient evaluation to assess a beneficiary's 
overall condition and chronic comorbid conditions' patient education 
videos and materials; discharge planning review and counseling; home 
safety reviews; and patient and caregiver education. Finally, another 
commenter requested that EPM participants and CJR participant hospitals 
be able to provide other providers, including post-acute care providers 
and PGPs in their communities with whom they collaborate, necessary 
telehealth equipment, health IT support, and items and services 
necessary to achieve the type of care integration necessary for the EPM 
and CJR model without fear of liability under anti-kickback, physician 
self-referral, and beneficiary inducement prohibitions.
    Response: We appreciate the descriptions provides by the commenters 
of additional care redesign strategies beyond care for EPM and CJR 
beneficiaries that could ultimately contribute to improvements in the 
quality of care and reductions in the cost of EPM and CJR episodes. 
While we understand that being able to share cost savings based on a 
larger volume of cases that includes patients in similar episode 
payment arrangements under Medicaid and commercial insurers could 
provide EPM participants and CJR participant hospitals more funds for 
aligning the financial incentives of their collaborators with the goals 
of the episode payment arrangements, we will not regulate arrangements 
for beneficiaries outside of those in EPM and CJR episodes in this 
rulemaking because it would be inappropriate to do so.
    We are finalizing the initiation of EPM episodes with admission for 
the anchor hospitalization as discussed in sections III.4.a.(2) through 
(4) of this final rule, just as we finalized that same policy for the 
CJR model (80 FR 73318). We note that all AMI and SHFFT beneficiaries, 
as well as a significant percentage of CABG and CJR beneficiaries, 
would be admitted emergently to the EPM participant or CJR participant 
hospital, making pre-episode services not possible for these 
beneficiaries even if we were to permit them under the models. We did 
not propose to allow sharing arrangements for pre-episode services 
under the EPM and CJR model because we believe there are significant 
program integrity risks of patient steering and adverse patient 
selection for admissions for elective surgery, such as some CABG 
surgery and LEJR, that would be difficult to overcome if EPM 
participants and CJR participant hospitals were permitted to furnish 
pre-episode services beyond those allowed under current laws and 
regulations, including the fraud and abuse laws.
    Similarly, we did not propose parameters for the provision of 
equipment and other items and services by EPM participants and CJR 
participant hospitals to their collaborators to aid in care integration 
beyond those that are permissible under current laws and regulations, 
including the fraud and abuse laws. We believe that it would be very 
challenging to establish sufficient safeguards to protect beneficiary 
freedom of choice and guard against patient steering in such EPM and 
CJR model scenarios where EPM participants and CJR participant 
hospitals provided resources to collaborators that were not 
specifically based on the quality of care and the provision of EPM 
activities or CJR activities for beneficiaries in EPM episodes or CJR 
episodes by that collaborator.
    Comment: One commenter recommended that disclosure of sharing 
arrangements be required by the EPM participant to receive a 
reconciliation payment, so that CMS can confirm that hospitals have 
contracts in place with all the involved clinicians and post-acute care 
providers. The commenter further urged CMS to also require full 
disclosure of the total amount of all gainsharing payments and how much 
is

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being distributed to each provider or supplier who furnished care to an 
EPM beneficiary, in order to ensure that payments for care delivery are 
as transparent as possible. Another commenter requested that CMS 
collect documents related to the calculation, distribution, receipt, or 
recoupment of gainsharing payments, alignment payments, distribution 
payments, and downstream distribution payments and other savings-
related payments and the distribution to collaborating physicians and 
other healthcare professionals. The commenter believes that CMS could 
utilize these data for future efforts and to ensure program integrity, 
as well as to help examine the extent to which savings are equitably 
being shared by EPM participants with collaborating physicians and 
other healthcare professionals
    Response: As discussed previously in this section, we do not 
require EPM participants to enter into sharing arrangements, and we do 
not require that those sharing arrangements include any specific groups 
of providers, suppliers, or ACOs. Thus, we do not need to confirm the 
sharing arrangements that are in place with specific EPM collaborators 
prior to making a reconciliation payment to an EPM participant. 
However, we do require that EPM participants report the historical and 
current lists of collaborators on a Web page on the EPM participant's 
Web site of EPM collaborators as discussed in section III.I.4.d. of 
this final rule, which provides transparency regarding the identities 
of collaborators with EPM participants. In addition, CMS has the 
ability to request this information from EPM participants under the 
provisions regarding access to records and retention for the EPM.
    We appreciate the requests that CMS consider routinely collecting 
specific information on the calculation, distribution, receipt, or 
recoupment of gainsharing payments, alignment payments, distribution 
payments, and downstream distribution payments and other savings-
related payments and the distribution to collaborators. While EPM 
participants are required to provide this information to CMS upon 
request under the access to records and retention provisions for the 
EPM and CMS will exercise this authority where appropriate, we believe 
the routine submission of this information would create a substantial 
and unnecessary administrative burden on EPM participants given the 
large number of potential EPM collaborators and the expected varied 
nature of their respective arrangements with EPM participants. We also 
are mindful of the challenges associated with creating a universal 
collection tool that would account for all the various iterations of 
financial arrangements into which EPM participants and their 
collaborators may enter into.
    We agree with the commenters that transparency is important to 
ensure program integrity and to assist with evaluation of the model. We 
have tried, where possible, to ensure transparency regarding sharing, 
distribution, and downstream distribution arrangements without imposing 
undue administrative burden on the individuals and entities that enter 
into such arrangements. Because documenting financial arrangements is 
consistent with general business practices, we believe that our 
documentation requirements impose minimal additional administrative 
burden on EPM participants, their collaborators, collaboration agents, 
and downstream collaboration agents. The regulations require 
contemporaneous documentation of all arrangements and the written 
agreements must be in writing and signed by the parties, contain the 
date of the agreement, and be entered into before care is furnished to 
EPM beneficiaries under the arrangement. The written agreement for 
sharing arrangements also must specify the purpose and scope of the 
sharing arrangement, the identities and obligations of the parties, 
management and staffing information, and the financial or economic 
terms for payment. We believe that the goals of transparency and 
program integrity can be achieved by requiring EPM participants, EPM 
collaborators, collaboration agents, downstream collaboration agents, 
and any other individual and entities performing EPM activities 
maintain documentation for at least 10 years following the last day of 
the EPM participant's participation in the EPM and allowing CMS, OIG, 
HHS, and the Comptroller General or their designees access to such 
records. The evaluation for the EPM intends to examine factors 
associated with variations in success under the EPM and the likelihood 
of experiencing unintended consequences. Factors of interest include 
variations in how gainsharing, distribution, and downstream 
distribution payments are implemented between the parties. At this 
time, it is intended that such information on payments will be 
collected through mechanisms such as provider surveys, interviews and 
in case studies.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.500(c) for EPM 
gainsharing payment, alignment payment, and internal cost savings 
conditions and restrictions, with modifications. In addition to the 
modifications previously discussed in this section, we are specifying 
that like PGPs, to be eligible to receive a gainsharing payment or to 
be required to make an alignment payment, a NPPGP or TGP must have 
billed for an item or service that was rendered by one or more NPPGP 
member or TGP member respectively to an EPM beneficiary during an EPM 
episode that occurred during the same performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount. In addition, like PGPs, the NPPGP or TGP 
must have contributed to EPM activities and been clinically involved in 
the care of EPM beneficiaries during the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment or 
was assessed a repayment amount. Gainsharing payments, alignment 
payments, and internal cost savings must meet the following conditions 
and restrictions:
     Gainsharing payments, if any, must--
    ++ Be derived solely from reconciliation payments, or internal cost 
savings, or both;
    ++ Be distributed on an annual basis (not more than once per 
calendar year);
    ++ Not be a loan, advance payment, or payment for referrals or 
other business; and
    ++ Be clearly identified as a gainsharing payment at the time it is 
paid.
    ++ To be eligible to receive a gainsharing payment, an EPM 
collaborator must meet quality of care criteria for the performance 
year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment. The quality of care criteria must be established by the EPM 
participant and directly related to EPM episodes.
    ++ To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator other than 
an ACO, PGP, NPPGP, or TGP must have directly furnished a billable item 
or service to an EPM beneficiary during an EPM episode that occurred in 
the same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that

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comprises the gainsharing payment or was assessed a repayment amount.
    ++ To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:

--The PGP, NPPGP, or TGP must have billed for an item or service that 
was rendered by one or more PGP member, NPPGP member, or TGP member 
respectively to an EPM beneficiary during an EPM episode that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount; 
and
--The PGP, NPPGP, or TGP must have contributed to EPM activities and 
been clinically involved in the care of EPM beneficiaries during the 
same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
For example, a PGP, NPPGP, or TGP might have been clinically involved 
in the care of EPM beneficiaries by--
    [caret][caret] Providing care coordination services to EPM 
beneficiaries during and/or after inpatient admission;
    [caret][caret] Engaging with an EPM participant in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are designed to improve the quality of care for EPM 
episodes and reduce EPM episode spending; or
    [caret][caret] In coordination with other providers and suppliers 
(such as PGP members, NPPGP members, or TGP members; the EPM 
participant; and post-acute care providers), implementing strategies 
designed to address and manage the comorbidities of EPM beneficiaries.
    ++ To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is an 
ACO must meet the following criteria:

--The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount; and
--The ACO must have contributed to EPM activities and been clinically 
involved in the care of EPM beneficiaries during the same performance 
year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment or was assessed a repayment amount. For example, an ACO might 
be have been clinically involved in the care of EPM beneficiaries by--
    [caret][caret] Providing care coordination services to EPM 
beneficiaries during and/or after inpatient admission;
    [caret][caret] Engaging with an EPM participant in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are designed to improve the quality of care and reduce 
spending for EPM episodes; or
    [caret][caret] In coordination with providers and suppliers (such 
as ACO participants, ACO providers/suppliers, the EPM participant, and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of EPM beneficiaries.
    ++ The methodology for accruing, calculating and verifying 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 used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the EPM 
participant through the documented implementation of EPM activities 
identified by the EPM participant and must exclude:

--Any savings realized by any individual or entity that is not the EPM 
participant; and
    ++ ``Paper'' savings from accounting conventions or past investment 
in fixed costs.
     The total amount of a gainsharing payment for a 
performance year paid to certain individuals and entities that are EPM 
collaborators must not exceed the following:
    ++ In the case of an EPM collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the EPM participant's EPM beneficiaries 
during EPM episodes that occurred during the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment being 
made.
    ++ In the case of an EPM collaborator that is a PGP or NPPGP, 50 
percent of the Medicare-approved amounts under the PFS for items and 
services billed by that PGP or NPPGP and furnished to the EPM 
participant's EPM beneficiaries by the PGP members or NPPGP members 
respectively during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being made.
     The amount of any gainsharing payments must be determined 
in accordance with a methodology that is substantially based on quality 
of care and the provision of EPM activities. The methodology may take 
into account the amount of such EPM activities provided by an EPM 
collaborator relative to other EPM collaborators.
     For a performance year, the aggregate amount of all 
gainsharing payments that are derived from a reconciliation payment the 
EPM participant receives from CMS must not exceed the amount of that 
reconciliation payment.
     No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent.
     An EPM participant must not make a gainsharing payment to 
an EPM collaborator if CMS has notified the EPM participant that such 
collaborator is subject to any action for noncompliance with this part 
or the fraud and abuse laws, or for the provision of substandard care 
to EPM beneficiaries or other integrity problems.
     The sharing arrangement must require the EPM participant 
to recoup any gainsharing payment that contained funds derived from a 
CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
     Alignment payments from an EPM collaborator to an EPM 
participant may be made at any interval that is agreed upon by both 
parties, and must not be--
    ++ Issued, distributed, or paid prior to the calculation by CMS of 
a

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repayment amount reflected in a reconciliation report;
    ++ Loans, advance payments, or payments for referrals or other 
business; or
    ++ Assessed by an EPM participant if it does not owe a repayment 
amount.
     The EPM participant must not receive any amounts under a 
sharing arrangement from an EPM collaborator that are not alignment 
payments.
    For a performance year, the aggregate amount of all alignment 
payments received by the EPM participant must not exceed 50 percent of 
the EPM participant's repayment amount.
     The aggregate amount of all alignment payments from an EPM 
collaborator to the EPM participant may not be greater than--
    ++ With respect to an EPM collaborator other than an ACO, 25 
percent of the EPM participant's repayment amount; or
    ++ With respect to an EPM collaborator that is an ACO, 50 percent 
of the EPM participant's repayment amount.
     The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent.
     All gainsharing payments and any alignment payments must 
be administered by the EPM participant in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
     All gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction.
d. Documentation Requirements
    To ensure the integrity of the sharing arrangements, we proposed 
that EPM participants must meet a variety of documentation requirements 
for these arrangements. Specifically, we proposed that the EPM 
participant must--
     Document the sharing arrangement contemporaneously with 
the establishment of the arrangement;
     Maintain accurate current and historical lists of all EPM 
collaborators, including EPM collaborator names and addresses; update 
such lists on at least a quarterly basis; and publicly report the 
current and historical lists of EPM collaborators on a Web page on the 
EPM participant's Web site; and
     Maintain and require each EPM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--
    ++ Nature of the payment (gainsharing payment or alignment 
payment);
    ++ Identity of the parties making and receiving the payment;
    ++ Date of the payment;
    ++ Amount of the payment;
    ++ Date and amount of any recoupment of all or a portion of an EPM 
collaborator's gainsharing payment; and
    ++ Explanation for each recoupment, such as whether the EPM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation report, or was based 
on the submission of false or fraudulent data.
    In addition, we proposed that the EPM participant must keep records 
for all of the following:
     Its process for determining and verifying its potential 
and current EPM collaborators' eligibility to participate in Medicare.
     Its plan to track internal cost savings.
     Information on the accounting systems used to track 
internal cost savings;
     A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings; and
     Its plan to track gainsharing payments and alignment 
payments.
    Finally, we proposed that the EPM participant must retain and 
provide access to, and must require each EPM collaborator to retain and 
provide access to, the required documentation in accordance with 
proposed Sec.  512.110.
    The proposals for the requirements for documentation of sharing 
arrangements under the EPM were included in proposed Sec.  512.500(d). 
We sought comment 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 EPM were met.
    We received no specific comments on the proposed documentation 
requirements for EPM sharing arrangements other than the comment 
discussed previously requesting further documentation related to the 
criteria for selection of EPM collaborators.
    Final Decision: We are finalizing the proposals in Sec.  512.500(d) 
for EPM documentation requirements, with the modification previously 
discussed to require the EPM participant to publicly post the written 
policies for selecting EPM collaborators on a Web page on the EPM 
participant's Web site and the reorganization to consolidate and 
streamline the documentation requirements related to public posting. 
EPM sharing arrangements must meet the following documentation 
requirements:
     The EPM participant must do all of the following:
    ++ Document the sharing arrangement contemporaneously with the 
establishment of the arrangement.
    ++ Publicly post (and update on at least a quarterly basis) on a 
Web page on the EPM participant's Web site:
    ++ Accurate current and historical lists of all EPM collaborators, 
including EPM collaborator names and addresses.
    ++ Written policies for selecting individuals and entities to be 
EPM collaborators required by Sec.  512.500(a)(3).
    ++ Maintain and require each EPM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
all of the following:

--Nature of the payment (gainsharing payment or alignment payment).
--Identity of the parties making and receiving the payment.
--Date of the payment.
--Amount of the payment.
--Date and amount of any recoupment of all or a portion of an EPM 
collaborator's gainsharing payment.
--Explanation for each recoupment, such as whether the EPM collaborator 
received a gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation report, or was based on the submission 
of false or fraudulent data.

     The EPM participant must keep records of the following:
    ++ Its process for determining and verifying its potential and 
current EPM collaborators' eligibility to participate in Medicare.
    ++ Its plan to track internal cost savings.
    ++ Information on the accounting systems used to track internal 
cost savings.
    ++ A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    ++ Its plan to track gainsharing payments and alignment payments.

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     The EPM participant must retain and provide access to, and 
must require each EPM collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.
5. Distribution Arrangements Under the EPM
a. General
    Similar to the CJR model, we proposed that certain financial 
arrangements between EPM collaborators and other individuals or 
entities called ``collaboration agents'' be termed ``distribution 
arrangements.'' A distribution arrangement would be a financial 
arrangement between an EPM collaborator that was an ACO or PGP and a 
collaboration agent for the sole purpose of sharing a gainsharing 
payment received by the ACO or PGP. We proposed that a collaboration 
agent would be an individual or entity that was not an EPM collaborator 
and that was either a PGP member that had entered into a distribution 
arrangement with the same PGP in which he or she was an owner or 
employee or an ACO participant or ACO provider/supplier that had 
entered into a distribution arrangement with the same ACO in which it 
was participating. Where a payment from an EPM collaborator to a 
collaboration agent was made pursuant to an EPM distribution 
arrangement, we proposed to define that payment as a ``distribution 
payment.'' A collaboration agent could only make a distribution payment 
in accordance with a distribution arrangement which complied with the 
provisions of proposed Sec.  512.505 and all other applicable laws and 
regulations, including the fraud and abuse laws.
    The proposals for the general provisions for distribution 
arrangements under the EPM were included in proposed Sec.  512.505(a). 
We sought comment about all of the provisions 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 EPM were met.
    We received no specific comments on the proposed general provisions 
for distribution arrangements under the EPM.
    Final Decision: We are finalizing the proposals in Sec.  512.505(a) 
for the general requirements for EPM distribution arrangements, with 
modification to allow NPPGPs or TGPs to enter into distribution 
arrangements with NPPGP members or TGP members respectively. Similar to 
PGPs when they are EPM collaborators, we believe it is appropriate to 
allow NPPGPs or TGPs to enter into distribution arrangements with NPPGP 
members or TGP members respectively for the sole purpose of sharing a 
gainsharing payment received by the NPPGP or TGP. Distribution 
arrangements under the EPM must comply with the following general 
provisions:
     An ACO, PGP, NPPGP, or TGP that has entered into a sharing 
arrangement with an EPM participant may distribute all or a portion of 
any gainsharing payment it receives from the EPM participant only in 
accordance with a distribution arrangement.
     All distribution arrangements must comply with the 
provisions of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
b. Requirements
    We proposed a number of specific requirements for distribution 
arrangements as a program integrity safeguard to help ensure that their 
sole purpose was to create financial alignment between EPM 
collaborators and collaboration agents toward the goals of the EPM to 
improve the quality and efficiency of EPM episodes. These requirements 
largely paralleled those proposed in Sec.  512.500(b) and (c) for 
sharing arrangements and gainsharing payments based on similar 
reasoning for these two types of arrangements and payments. We proposed 
that all distribution arrangements must be in writing and signed by the 
parties, contain the date of the agreement, and be entered into before 
care was furnished to EPM beneficiaries under the distribution 
arrangement. Furthermore, we proposed that participation must be 
voluntary and without penalty for nonparticipation, and the 
distribution arrangement must require the collaboration agent to comply 
with all applicable laws and regulations.
    Like our proposal for gainsharing payments, we proposed that the 
opportunity to make or receive a distribution payment must not be 
conditioned directly or indirectly on the volume or value of past or 
anticipated referrals or business otherwise generated by, between or 
among the EPM participant, any EPM collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with an EPM participant, EPM collaborator, collaboration 
agent, or downstream collaboration agent. We proposed more flexible 
standards for the determination of the amount of distribution payments 
from ACOs and PGPs for the same reasons we proposed this standard for 
the determination of gainsharing payments. Specifically, for ACOs we 
proposed that the amount of any distribution payments must be 
determined in accordance with a methodology that was substantially 
based on quality of care and the provision of EPM activities and that 
may take into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents. In the 
proposed rule, we discussed our belief that the amount of a 
collaboration agent's provision of EPM activities (including direct 
care) to EPM beneficiaries during EPM episodes might contribute to the 
EPM participant's internal cost savings and reconciliation payment that 
might be available for making a gainsharing payment to the EPM 
collaborator with which the collaboration agent had a distribution 
arrangement. Greater contributions of EPM activities by one 
collaboration agent versus another collaboration agent that resulted in 
different contributions to the gainsharing payment made to the EPM 
collaborator with which those collaboration agents both had a 
distribution arrangement might be appropriately valued in the 
methodology used to make distribution payments to those collaboration 
agents. Accordingly, we believed this would be the appropriate standard 
for determining the amount of distribution payments from an ACO to its 
collaboration agents.
    We noted that for distribution payments made by a PGP to PGP 
members, the requirement that the amount of any distribution payments 
must be determined in accordance with a methodology that was 
substantially based on quality of care and the provision of EPM 
activities might be more limiting in how a PGP paid its members than 
was allowed under existing law. Therefore, to retain existing 
flexibility for distribution payments by a PGP to PGP members, we 
proposed that the amount of the distribution payment from a PGP to PGP 
members must be determined either using the methodology previously 
described for distribution payments from an ACO or in a manner that 
complied with Sec.  411.352(g). We noted that the proposed option to 
allow the amount of the distribution payment from a PGP to a PGP member 
to be determined in a manner that complied with Sec.  411.352(g) was 
not currently permitted under the CJR model, although we proposed this 
change for

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the CJR model in section V.J. of the proposed rule (81 FR 50965). This 
proposal would allow a PGP the choice either to comply with the general 
standard that the amount of a distribution payment must be 
substantially based on quality of care and the provision of EPM 
activities or to provide its members a financial benefit through the 
EPM without consideration of the PGP member's individual quality of 
care. In the latter case, PGP members who were not collaboration agents 
(including those who furnished no services to EPM beneficiaries) would 
be able receive a share of the profits from their PGP that included the 
monies contained in a gainsharing payment. We believed this would be an 
appropriate exception to the general standard for determining the 
amount of distribution payment under the EPM from a PGP to a PGP member 
because CMS has determined under the physician self-referral law that 
payments from a group practice as defined under Sec.  411.352 to its 
members that comply with Sec.  411.352(g) are appropriate.
    We sought comment on this proposal and specifically whether there 
were additional safeguards or a different standard was needed to allow 
for greater flexibility in calculating the amount of distribution 
payments that would avoid program integrity risks and whether 
additional or different safeguards were reasonable, necessary, or 
appropriate for the amount of distribution payments from a PGP to its 
members.
    Similar to our proposed requirements for sharing arrangements for 
those EPM collaborators that furnished or billed for items and 
services, except for a distribution payment from a PGP to a PGP member 
that complied with Sec.  411.352(g), we proposed that a collaboration 
agent would be eligible to receive a distribution payment only if the 
collaboration agent furnished or billed for an item or service rendered 
to an EPM beneficiary during an EPM episode that occurred during the 
same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprised the gainsharing payment being distributed. We noted that all 
individuals and entities that fell within our proposed definition of 
collaboration agent might either directly furnish or bill for items and 
services rendered to EPM beneficiaries. This proposal ensured that, 
absent the alternative safeguards afforded by a PGP's distribution 
payments in compliance with Sec.  411.352(g), there would be the same 
required relationship between direct care for EPM beneficiaries during 
EPM episodes and distribution payment eligibility that we proposed to 
require for gainsharing payment eligibility. We believed this 
requirement would provide a safeguard against payments to collaboration 
agents that were unrelated to direct care for EPM beneficiaries during 
EPM episodes when the amount of the distribution payment was not 
determined in a manner that complies with Sec.  411.352(g).
    Except for a distribution payment from a PGP to a PGP member that 
complied with Sec.  411.352(g), we proposed the same limitations on the 
total amount of distribution payments to physicians, nonphysician 
practitioners, and PGPs as we proposed for gainsharing payments. In the 
case of a collaboration agent that was a physician or nonphysician 
practitioner, we proposed to limit the total amount of distribution 
payments paid for a performance year to the collaboration agent to 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services furnished by the collaboration agent to the EPM 
participant's EPM beneficiaries during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprised the gainsharing payment being distributed. In the case of a 
collaboration agent that was a PGP, we proposed that the limit would be 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services billed by the PGP for items and services furnished 
by members of the PGP to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprised the gainsharing payment being 
distributed. In the proposed rule, we discussed our belief that, absent 
the alternative safeguards afforded by a PGP's distribution payments in 
compliance with Sec.  411.352(g), these proposed limitations on 
distribution payments, which were the same as those for proposed for 
gainsharing payments to physicians, nonphysician practitioners, and 
PGPs, were necessary to eliminate any financial incentives for these 
individuals or entities to engage in a financial arrangement as an EPM 
collaborator versus as a collaboration agent. Furthermore, we believed 
that PGPs should be able to choose whether to engage in financial 
arrangements directly with EPM participants as EPM collaborators or in 
distribution arrangements with the ACO in which they were an ACO 
participant if that ACO played a role in EPM care redesign as an EPM 
collaborator, without having a different limit on their maximum 
financial gain from one arrangement versus another.
    We further proposed that with respect to the distribution of any 
gainsharing payment received by a PGP or ACO, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the EPM collaborator from the EPM participant. Like 
gainsharing and alignment payments, we proposed that all distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. The collaboration agent must retain the 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments. Finally, 
we proposed that the distribution arrangement must not induce the 
collaboration agent to reduce or limit medically necessary items and 
services to any Medicare beneficiary or reward the provision of items 
and services that were medically unnecessary.
    We proposed that the EPM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
proposed Sec.  512.110, including:
     The relevant written agreements;
     The date and amount of any distribution payment(s);
     The identity of each collaboration agent that received a 
distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any distribution payment.
    We proposed that the EPM collaborator may not enter into a 
distribution arrangement with any individual or entity that has a 
sharing arrangement with the same EPM participant. This proposal would 
ensure that the proposed separate limitations on the total amount of 
gainsharing payment and distribution payment to PGPs, physicians, and 
nonphysician practitioners that were substantially based on quality of 
care and the provision of EPM activities were not exceeded in absolute 
dollars by a PGP, physician, or nonphysician practitioner's 
participation in both a sharing arrangement and distribution 
arrangement for the care of the same EPM beneficiaries during EPM 
episodes. Allowing both types of arrangements for the same individual 
or entity for care of the same EPM beneficiaries during EPM episodes 
could also allow for duplicate counting of the individual or entity's

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same quality of care and provision of EPM activities in the 
methodologies for both gainsharing and distribution payments, leading 
to financial gain that was disproportionate to the quality of care and 
provision of EPM activities by that individual or entity. Finally, we 
proposed that the EPM collaborator must retain and provide access to, 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with proposed Sec.  512.110.
    The proposals for requirements for distribution arrangements under 
the EPM were included in proposed Sec.  512.505(b). We sought comment 
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 EPM were met. In addition, we sought comment on how the 
regulation of the financial arrangements under this proposal might 
interact with how these or similar financial arrangements are regulated 
under the Medicare Shared Savings Program.
    The following is a summary of the comments received and our 
responses.
    Comment: One commenter who expressed support for the proposed cap 
on distribution and downstream distribution payments by PGPs to 
individual clinicians at 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the clinician 
to the EPM participant's EPM beneficiaries during EPM episodes in the 
applicable time period opposed CMS' proposal to eliminate the 
requirements to link quality to these payments and for the clinicians 
to provide services to EPM beneficiaries in EPM episodes for PGP 
payments to clinicians under a methodology that complies with Sec.  
411.352(g). The commenter observed that under CMS' proposal, 
distribution arrangements would be subject to many of the same 
requirements as sharing arrangements. They claimed that while some PGPs 
may want to cascade funds in the same way as other funds that are paid 
in accordance with Sec.  411.352(g), a provision that prohibits 
physicians in a group practice from being directly or indirectly 
compensated based on the volume or value of his or her referrals, the 
commenter believes that the provision of all payments under EPM 
financial arrangements, including gainsharing payments, distribution 
payments, and downstream distribution payments, should have a direct 
association with high-quality, cost-effective care furnished to EPM 
beneficiaries.
    Response: We appreciate the commenter's concerns about our proposal 
to allow distribution payments and downstream distribution payments to 
be made by a PGP to PGP members either based on a methodology that 
complies with Sec.  411.352(g) or in accordance with a methodology that 
is substantially based on quality of care and the provision of EPM 
activities. Under the latter methodology, we proposed that the PGP 
member who is a collaboration agent or a downstream collaboration agent 
would be eligible to receive a payment if he or she furnished or billed 
for an item or service rendered to an EPM beneficiary during an EPM 
episode during the applicable time period and the total amount of 
payment for a performance year would be subject to a cap. These 
requirements would not apply to distribution or downstream distribution 
payments by a PGP to PGP members based on a methodology that complies 
with Sec.  411.352(g).
    We remain concerned that without the Sec.  411.352(g) exception 
that we proposed, the distribution and downstream distribution 
methodologies would be more limiting in how a PGP pays its members than 
is allowed under existing law. Our proposal would allow a PGP the 
choice either to comply with the standard under the EPM that the amount 
of a distribution payment or downstream distribution payment must be 
substantially based on quality of care and the provision of EPM 
activities or to provide its members a financial benefit under the 
general standard at Sec.  411.352(g) without consideration of the PGP 
member's individual quality of care. In the latter case, PGP members 
who are not collaboration agents or downstream collaboration agents 
(including those who furnished no services to EPM beneficiaries) would 
be able receive a share of the profits from their PGP that includes the 
monies contained in a gainsharing or distribution payment. We continue 
to believe this is an appropriate exception to the standard created 
under the EPM for determining the amount of distribution payment under 
the EPM from a PGP to a PGP member because CMS has determined under the 
physician self-referral law that payments from a group practice as 
defined under Sec.  411.352 to its members that comply with Sec.  
411.352(g) are appropriate. We note that even in such cases, our 
proposal includes some requirements to ensure a nexus between the 
financial arrangements and the care provided by PGP members to 
beneficiaries in EPM episodes. In addition to the requirement in Sec.  
512.500(c)(2)(i) that for any EPM collaborator to be eligible receive a 
gainsharing payment, the EPM collaborator must meet quality of care 
criteria for the performance year, under Sec.  512.500(c)(2)(iii) we 
further specify that for PGPs to be eligible to receive a gainsharing 
payment the PGP also must have billed for an item or service that was 
rendered by one or more members of the PGP to an EPM beneficiary during 
an EPM episode during the applicable time period and that the PGP must 
have contributed substantially to EPM activities and been clinically 
involved in the care of EPM beneficiaries during that same time period. 
We believe these requirements for gainsharing eligibility establish a 
clear link between the quality of care furnished to EPM beneficiaries 
by PGP members and EPM activities by the PGP and the subsequent 
financial arrangements between the PGP and its members. In addition, we 
require in Sec.  512.505(b)(5) that the amount of any distribution 
payments from an ACO (including those to a PGP) must be determined in 
accordance with a methodology that is substantially based on quality of 
care and the provision of EPM activities. Therefore, we believe there 
is a sufficiently close link between distribution payments and 
downstream distribution payments that comply with Sec.  411.352(g) and 
the quality of care furnished to EPM beneficiaries by PGP members and 
EPM activities by the PGP that allowing payments by the PGP to its 
members that comply with Sec.  411.352(g) does not substantially 
threaten the important relationship between payments under the EPM 
financial arrangements and the quality of furnished to EPM 
beneficiaries in EPM episodes.
    We are finalizing in Sec. Sec.  512.505(6) and 512.510(6) that the 
amount of any distribution payments or downstream distribution payments 
from a PGP to a PGP member must be determined either in a manner that 
complies with Sec.  411.352(g) of this chapter or in accordance with a 
methodology that is substantially based on quality of care and the 
provision EPM activities.
    Comment: One commenter requested clarification about whether a 
provider of outpatient therapy services can receive distribution 
payments or downstream distribution payments as either a member of a 
PGP who is an EPM collaborator or as a member of a PGP that is an ACO 
participant in an ACO that has a distribution arrangement with an EPM 
collaborator.
    Other commenters sought to clarify whether groups of nonphysician

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practitioners could enter into financial arrangements under the EPM.
    Response: The definition of a member of a PGP or PGP member means 
``a physician, nonphysician practitioner, or therapist who is an owner 
or employer of a PGP and who has reassigned to the PGP his or her right 
to receive Medicare payment.'' Thus, therapists who are PGP members may 
be eligible to receive distribution payments or downstream distribution 
payments when those PGPs enter into financial arrangements under the 
EPM in accordance with all the requirements in this final rule. We are 
finalizing in Sec.  512.2 the definition of member of the PGP or PGP 
member to include therapists.
    Moreover, as we discussed previously, in response to commenters' 
confusion regarding the permissibility of financial arrangements for 
therapists both as individuals and as part of groups we adopt multiple 
clarifications in this final rule to affirm the permissibility of such 
arrangements and to clarify the applicable requirements. In addition to 
the adoption of new definitions that clarify the sharing arrangements 
available to therapists in private practice or TGPs as discussed 
previously, this final rule adopts parameters for TGPs and therapists 
in private practice to receive distribution payments from an ACO that 
is an EPM collaborator, for TGPs to make distribution payments and 
downstream distribution payments to their members, and for therapists 
to receive distribution payments and downstream distribution payments 
as either members of NPPGPs or members of TGPs.
    Similarly, in response to commenters seeking clarity on whether 
groups of nonphysician practitioners are eligible to enter into 
financial arrangements under the EPM that mirror those expressly 
permitted for PGPs, in this final rule, we affirm the permissibility of 
and parameters for such arrangements for NPPGPs. In addition to the 
provisions discussed previously and as discussed further later in this 
section, the final rule establishes parameters for distribution 
payments to NPPGPs that directly parallel the parameters we proposed 
and now finalize for such payments to PGPs. Similarly, as is also 
discussed further later in this section, the parameters for 
distribution payments and downstream distribution payments by an NPPGP 
to its members directly parallel the parameters for distribution 
payments and downstream distribution payments by a PGP to its members 
as proposed and adopted in this final rule except for, due to the 
inapplicability of the physician self-referral law and its exceptions, 
NPPGPs do not have the options afforded to PGPs to make distributions 
to their members in a manner that complies with Sec.  411.352(g) of 
this chapter.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.505(b) for the 
requirements for EPM distribution arrangements, with modification to 
include policies for NPPGPs or TGPs that enter into distribution 
arrangements with NPPGP members or TGP members respectively. Like a 
PGP, an NPPGP that is an ACO participant in an ACO that is an EPM 
collaborator may enter into distribution arrangement with the ACO. The 
distribution payments to the NPPGP are subject to the same requirements 
as the distribution payments to PGPs that are collaboration agents. The 
NPPGP is eligible to receive a distribution payment only if the 
collaboration agent billed for an item or service rendered to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed. The distribution payment to the 
NPPGP is capped at 50 percent of the total Medicare-approved amounts 
under the PFS for items and services billed by the NPPGP for items and 
services furnished by NPPGP members to the EPM participant's EPM 
beneficiaries during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed.
    If an NPPGP is an EPM collaborator, it may enter into a 
distribution arrangement with a NPPGP member, who is a nonphysician 
practitioner or therapist who is an owner or employee of a NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment. The requirements for NPPGP distribution payments under those 
distribution arrangements are the same as those for PGPs, except that 
we allow the amount of any distribution payments from a PGP to a PGP 
member to be determined in a manner that complies with Sec.  
411.352(g). While CMS has determined that under the physician self-
referral law payments from a group practice as defined under Sec.  
411.352 to its members that comply with Sec.  411.352(g) are 
appropriate, NPPGPs do not fall under this definition of group 
practice. Therefore, the amount of any distribution payments from a 
NPPGP to a NPPGP member must always be determined in accordance with a 
methodology that is substantially based on quality of care and the 
provision EPM activities, the same standard that applies to PGP 
distribution payments that are not determined in a manner that complies 
with Sec.  411.352(g). Like the requirement for PGP members when a 
distribution payment does not comply with Sec.  411.352(g), a NPPGP 
member is eligible to receive a distribution payment only if the 
collaboration agent furnished an item or service to an EPM beneficiary 
during an EPM episode that occurred during the same performance year 
for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed. Finally, the total amount of distribution 
payments paid for a performance year to the NPPG member may not exceed 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services furnished by the NPPGP member to the EPM 
participant's EPM beneficiaries during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed. In addition, with 
respect to the distribution of any gainsharing payment received by a 
NPPGP, the total amount of all distribution payments must not exceed 
the amount of the gainsharing payment received by the EPM collaborator 
from the EPM participant.
    Like a PGP and NPPGP, a TGP that is an ACO participant in an ACO 
that is an EPM collaborator may enter into distribution arrangement 
with the ACO. The distribution payments to the TGP are not subject to 
the cap that applies to PGPs and NPPGPs. While we cap distribution 
payments to physicians and nonphysician practitioners, we will not cap 
such payments to therapists in private practice for the same reasons 
discussed for gainsharing payments to these individuals and, therefore, 
we will not cap distribution payments to TGPs. Like PGPs and NPPGPs, 
the TGP is eligible to receive a distribution payment only if the 
collaboration agent billed for an item or service rendered to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed.
    If a TGP is an EPM collaborator, it may enter into a distribution 
arrangement with a TGP member, who is a therapist who is an owner or

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employee of a TGP and who has reassigned to the TGP his or her right to 
receive Medicare payment. Like distribution payments from a NPPGP to a 
NPPGP member, the amount of any distribution payments from a TGP to a 
TGP member must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision EPM 
activities, the same standard that applies to PGP distribution payments 
that are not determined in a manner that complies with Sec.  
411.352(g). Like the requirement for PGP members when a distribution 
payment does not comply with Sec.  411.352(g) and for NPPG members, a 
TGP member is eligible to receive a distribution payment only if the 
collaboration agent furnished an item or service to an EPM beneficiary 
during an EPM episode that occurred during the same performance year 
for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed. We will not cap the total amount of 
distribution payments paid for a performance year to a TGP member for 
the reasons discussed previously for not applying caps on gainsharing 
payments to therapists in private practice. Finally, with respect to 
the distribution of any gainsharing payment received by a TGP, the 
total amount of all distribution payments must not exceed the amount of 
the gainsharing payment received by the EPM collaborator from the EPM 
participant.
    Distribution arrangements under the EPM must comply with the 
following requirements:
     All distribution arrangements must be in writing and 
signed by the parties, contain the date of the agreement, and be 
entered into before care is furnished to EPM beneficiaries under the 
distribution arrangement.
     Participation in a distribution arrangement must be 
voluntary and without penalty for nonparticipation.
     The distribution arrangement must require the 
collaboration agent to comply with all applicable laws and regulations.
     The opportunity to make or receive a distribution payment 
must not be conditioned directly or indirectly on the volume or value 
of past or anticipated referrals or business otherwise generated by, 
between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent.
     The amount of any distribution payments from an ACO, from 
a NPPGP to a NPPGP member, or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision EPM activities and that may take 
into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents.
     The amount of any distribution payments from a PGP must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on quality of care and the provision EPM activities and that may 
take into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents.
     Except for a distribution payment from a PGP to a PGP 
member that complies with Sec.  411.352(g) of this chapter, a 
collaboration agent is eligible to receive a distribution payment only 
if the collaboration agent furnished or billed for an item or service 
rendered to an EPM beneficiary during an EPM episode that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
     Except for a distribution payment from a PGP to a PGP 
member that complies with Sec.  411.352(g) of this chapter, the total 
amount of distribution payments for a performance year paid to a 
collaboration agent must not exceed the following:
    ++ In the case of a collaboration agent that is a physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
distributed.
    ++ In the case of a collaboration agent that is a PGP or NPPGP, 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services billed by that PGP or NPPGP for items and services 
furnished by PGP members or NPPGP members to the EPM participant's EPM 
beneficiaries during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed.
     With respect to the distribution of any gainsharing 
payment received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the EPM collaborator from the EPM participant.
     All distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
     The collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments.
     The distribution arrangement must not--
    ++ Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The EPM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.110, including the following:
    ++ The relevant written agreements;
    ++ The date and amount of any distribution payment(s);
    ++ The identity of each collaboration agent that received a 
distribution payment; and
    ++ A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
     The EPM collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same EPM participant.
     The EPM collaborator must retain and provide access to, 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with Sec.  512.110.
6. Downstream Distribution Arrangements Under the EPM
a. General
    We proposed that the EPM allow for certain financial arrangements 
within an ACO between a PGP and its members. Specifically, we proposed 
that certain financial arrangements between a collaboration agent that 
was both a PGP and an ACO participant and other individuals termed 
``downstream collaboration agents'' be termed a ``downstream 
distribution arrangement.'' A downstream distribution arrangement would 
be a

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financial arrangement between a collaboration agent that was both a PGP 
and an ACO participant and a downstream collaboration agent for the 
sole purpose of sharing a distribution payment received by the PGP. We 
proposed that a downstream collaboration agent would be an individual 
who was not an EPM collaborator or a collaboration agent and who was a 
PGP member that had entered into a downstream distribution arrangement 
with the same PGP in which he or she was an owner or employee, and 
where the PGP was a collaboration agent. Where a payment from a 
collaboration agent to a downstream collaboration agent was made 
pursuant to a downstream distribution arrangement, we proposed to 
define that payment as a ``downstream distribution payment.'' A 
collaboration agent may only make a downstream distribution payment in 
accordance with a downstream distribution arrangement which complied 
with the requirements of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
    The proposals for the general provisions for downstream 
distribution arrangements under the EPM were included in proposed Sec.  
512.510(a). We sought comment about all of the provisions 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 EPM were met.
    We received no specific comments on the proposed general provisions 
for downstream distribution arrangements under the EPM; however, the 
comments described previously regarding commenters' confusion regarding 
the permissibility of financial arrangements for individuals and groups 
of therapists and nonphysician practitioners under our proposal are 
relevant to these provisions.
    Final Decision: We are finalizing the proposals in Sec.  512.510(a) 
for the general requirements for EPM downstream distribution 
arrangements, with modification to allow NPPGPs or TGPs to enter into 
downstream distribution arrangements with NPPGP members or TGP members 
respectively. Downstream distribution arrangements under the EPM must 
comply with the following general provisions:
     An ACO participant that is a PGP, NPPGP, or TGP and that 
has entered into a distribution arrangement with an EPM collaborator 
that is an ACO may distribute all or a portion of any distribution 
payment it receives from the EPM collaborator only in accordance with a 
downstream distribution arrangement.
     All downstream distribution arrangements must comply with 
the provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
b. Requirements
    We proposed a number of specific requirements for downstream 
distribution arrangements as a program integrity safeguard to help 
ensure that their sole purpose was to create financial alignment 
between collaboration agents that were PGPs which were also ACO 
participants and downstream collaboration agents toward the goals of 
the EPM to improve the quality and efficiency of EPM episodes. These 
proposed requirements largely paralleled those proposed in proposed 
Sec.  512.500(b) and (c) and Sec.  512.505(b) for sharing and 
distribution arrangements and gainsharing and distribution payments 
based on similar reasoning for these three types of arrangements and 
payments. We proposed that all downstream distribution arrangements 
must be in writing and signed by the parties, contain the date of the 
agreement, and entered into before care was furnished to EPM 
beneficiaries under the downstream distribution arrangement. 
Furthermore, we proposed that participation must be voluntary and 
without penalty for nonparticipation, and the downstream distribution 
arrangement must require the downstream collaboration agent to comply 
with all applicable laws and regulations.
    Like our proposals for gainsharing and distribution payments, we 
proposed that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent. We proposed the more flexible standard for the determination of 
the amount of downstream distribution payments for the same reasons we 
proposed this standard for the determination of distribution payments 
by a PGP to PGP members. Specifically, the amount of any downstream 
distribution payments must be determined either in a manner that 
complies with Sec.  411.352(g) or in accordance with a methodology that 
was substantially based on quality of care and the provision of EPM 
activities and that may take into account the amount of such EPM 
activities provided by a downstream collaboration agent relative to 
other downstream collaboration agents. In the proposed rule, we 
discussed our belief that the amount of a downstream collaboration 
agent's provision of EPM activities (including direct care) to EPM 
beneficiaries during EPM episodes might contribute to the EPM 
participant's internal cost savings and reconciliation payment that 
might be available for making a gainsharing payment to the EPM 
collaborator that was then shared through a distribution payment to the 
collaboration agent with which the downstream collaboration agent had a 
downstream distribution arrangement. Greater contributions of EPM 
activities by one downstream collaboration agent versus another 
downstream collaboration agent that resulted in different contributions 
to the distribution payment made to the collaboration agent with which 
the downstream collaboration agents both had a downstream distribution 
arrangement might be appropriately valued in the methodology used to 
make downstream distribution payments to those downstream collaboration 
agents. Just as we proposed an alternative to a methodology that was 
substantially based on quality of care and the provision of EPM 
activities for determining the amount of a distribution payment from a 
PGP to a PGP member, we similarly proposed an alternative that the 
amount of a downstream distribution payment from a PGP to a PGP member 
may be determined in a manner that complied with Sec.  411.352(g)
    Similar to our proposed requirements for distribution arrangements 
for those EPM collaborators that were PGPs, we proposed that, except 
for a downstream distribution arrangement that complied with Sec.  
411.352(g), a downstream collaboration agent would be eligible to 
receive a downstream distribution payment only if the PGP billed for an 
item or service furnished by the downstream collaboration agent to an 
EPM beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprised the 
gainsharing payment from which the ACO made the distribution payment to 
the PGP that was an ACO participant. This proposal would ensure that, 
absent the alternative safeguards afforded by a

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PGP's downstream distribution payments in compliance with Sec.  
411.352(g), there would be the same required relationship between 
direct care for EPM beneficiaries during EPM episodes and downstream 
distribution payment eligibility that we proposed to require for 
gainsharing and distribution payment eligibility. We believed this 
requirement would provide a safeguard against payments to downstream 
collaboration agents that were unrelated to direct care for EPM 
beneficiaries during EPM episodes when the amount of the downstream 
distribution payment was not determined in a manner that complied with 
Sec.  411.352(g).
    We proposed the same limitations on downstream distribution 
payments to downstream collaboration agents as we proposed for 
distribution payments by EPM collaborators that were PGPs. We proposed 
that, absent the alternative safeguards afforded by compliance with 
Sec.  411.352(g), the total amount of downstream distribution payments 
paid for a performance year to the downstream collaboration agent would 
be limited to 50 percent of the total Medicare-approved amounts under 
the PFS for services billed by the PGP and furnished by the downstream 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprised the gainsharing payment from 
which the ACO made the distribution payment to the PGP. We believed 
that, absent the alternative safeguards afforded by a PGP's downstream 
distribution payments in compliance with Sec.  411.352(g), this 
proposed limitation on downstream distribution payments that was the 
same as those for distribution payments to physicians and nonphysician 
practitioners was necessary to eliminate any financial incentives for a 
PGP member to engage in a specific financial arrangement as a 
collaboration agent versus a downstream collaboration agent.
    We further proposed that the total amount of all downstream 
distribution payments made to downstream collaboration agents must not 
exceed the amount of the distribution payment received by the 
collaboration agent (that is, the PGP that was an ACO participant) from 
the ACO that was an EPM collaborator. Like gainsharing, alignment, and 
distribution payments, we proposed that all downstream distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. The downstream collaboration agent must 
retain the ability to make decisions in the best interests of the 
patient, including the selection of devices, supplies, and treatments. 
The distribution arrangement must not induce a downstream collaboration 
agent to reduce or limit medically necessary items and services to any 
Medicare beneficiary or reward the provision of items and services that 
were medically unnecessary.
    We proposed that the PGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with proposed Sec.  512.110, including all of the following:
     The relevant written agreements.
     The date and amount of any downstream distribution 
payment(s).
     The identity of each downstream collaboration agent that 
received a downstream distribution payment.
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We proposed that the PGP may not enter into a downstream 
distribution arrangement with any PGP member who had a sharing 
arrangement with an EPM participant or distribution arrangement with 
the ACO the PGP was a participant in. This proposal would ensure that 
the proposed separate limitations on the total amount of gainsharing 
payment, distribution payment, and downstream distribution payment to 
PGP members that were substantially based on quality of care and the 
provision of EPM activities were not exceeded in absolute dollars by a 
PGP member's participation in more than one type of arrangement for the 
care of the same EPM beneficiaries during EPM episodes. Allowing more 
than one arrangement for the same PGP member for the care of the same 
EPM beneficiaries during EPM episodes could also allow for duplicate 
counting of the PGP member's same quality of care and provision of EPM 
activities in the methodologies for the different payments. Finally, we 
proposed that the PGP must retain and provide access to, and must 
require downstream collaboration agents to retain and provide access 
to, the required documentation in accordance with proposed Sec.  
512.110.
    The proposals for requirements for downstream distribution 
arrangements under the EPM were included in proposed Sec.  512.510(b). 
We sought comment 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 EPM were met.
    We received no specific comments on the proposed requirements for 
downstream distribution arrangements under the EPM; however, the 
comments described previously regarding commenters' confusion regarding 
the permissibility of financial arrangements for individuals and groups 
of therapists and nonphysician practitioners under our proposal and 
regarding the request to simplify and reduce the burdens associated 
with the programmatic requirements are relevant to these provisions.
    Final Decision: We are finalizing the proposals in Sec.  512.510(b) 
for the requirements for EPM downstream distribution arrangements, with 
modification to include policies for NPPGPs or TGPs that enter into 
downstream distribution arrangements with NPPGP members or TGP members 
respectively. Consistent with commenters' overall request that we 
streamline the regulations, we are also modifying proposed Sec.  
512.510(b)(6), which is final Sec.  512.510(b)(7), to eliminate one of 
the two proposed requirements for eligibility of a downstream 
collaboration agent to receive a downstream distribution payment, 
specifically the requirement that the PGP bill for the item or service 
furnished by the downstream collaboration agent. Instead, we base 
downstream collaboration agent eligibility only on whether the 
downstream collaboration agent furnished an item or service to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment from which the ACO made the distribution payment to 
the PGP, NPPGP, or TGP that is an ACO participant. This approach is 
parallel to Sec.  512.505(b)(7), which applies to distribution payments 
from ACOs to ACO participants or ACO providers/suppliers and certain 
distribution payments from PGPs to PGP members, and ensures that the 
member of the PGP, NPPGP, or TGP receiving the downstream distribution 
payment furnished items and services to an EPM beneficiary during an 
EPM episode, without explicitly requiring that the PGP, NPPGP, or TGP 
to which the member of the PGP, NPPGP, or TGP would have reassigned his 
or her benefits also billed for the item or service. This latter 
additional requirement adds complexity that is unnecessary when our 
objective of the

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requirement is only to ensure that the recipient of the downstream 
distribution payment furnished an item or service to an EPM beneficiary 
during an EPM episode in order to link the payment to actual care. 
Finally, as discussed previously, in order to achieve consistency in 
the parameters for gainsharing payments and distribution payments to 
therapists and to streamline programmatic requirements, we are revising 
proposed Sec.  512.510(b)(7), which is final in Sec.  512.510(b)(8), by 
removing the cap on downstream distribution payments to PGP members as 
applied to therapists who are PGP members.
    A NPPGP that is an ACO participant that has entered into a 
distribution arrangement with an EPM collaborator that is an ACO may 
enter into a downstream distribution arrangement with a NPPGP member, 
who is a nonphysician practitioner or therapist who is an owner or 
employee of a NPPGP and who has reassigned to the NPPGP his or her 
right to receive Medicare payment. The requirements for NPPGP 
downstream distribution payments under those downstream distribution 
arrangements are the same as those for PGPs, except that we allow the 
amount of any downstream distribution payments from a PGP to be 
determined in a manner that complies with Sec.  411.352(g). The amount 
of any downstream distribution payments from a NPPGP to a NPPGP member 
must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision EPM 
activities, the same standard that applies to PGP downstream 
distribution payments that are not determined in a manner that complies 
with Sec.  411.352(g). Like the requirement for PGP members when a 
downstream distribution payment does not comply with Sec.  411.352(g), 
a NPPGP member is eligible to receive a downstream distribution payment 
only if the downstream collaboration agent furnished an item or service 
to an EPM beneficiary during an EPM episode that occurred during the 
same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the NPPGP that is an ACO participant. Finally, 
the total amount of downstream distribution payments paid for a 
performance year to the NPPGP member who is a nonphysician practitioner 
may not exceed 50 percent of the total Medicare-approved amounts under 
the PFS for items and services furnished by the NPPGP member to the EPM 
participant's EPM beneficiaries during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the NPPGP that is an ACO participant. In 
addition, the total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the NPPGP from the ACO.
    A TGP that is an ACO participant that has entered into a 
distribution arrangement with an EPM collaborator that is an ACO may 
enter into a downstream distribution arrangement with a TGP member, who 
is a therapist who is an owner or employee of a NPPGP and who has 
reassigned to the TGP his or her right to receive Medicare payment. 
Like downstream distribution payments from a NPPGP to a NPPGP member, 
the amount of any downstream distribution payments from a TGP to a TGP 
member must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision EPM 
activities, the same standard that applies to PGP distribution payments 
that are not determined in a manner that complies with Sec.  
411.352(g). Like the requirement for PGP members when a distribution 
payment does not comply with Sec.  411.352(g) and for NPPG members, a 
TGP member is eligible to receive a distribution payment only if the 
downstream collaboration agent furnished an item or service to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment from which the ACO made the distribution payment to 
the NPPGP that is an ACO participant. We will not cap the total amount 
of downstream distribution payments paid for a performance year to a 
TGP member. Finally, the total amount of all downstream distribution 
payments made to downstream collaboration agents must not exceed the 
amount of the distribution payment received by the TGP from the ACO.
    Like PGPs, NPPGPs and TGPs must maintain contemporaneous 
documentation regarding downstream distribution arrangements. 
Similarly, the NPPG or TGP may not enter into a downstream distribution 
arrangement with any NPPG member or TGP member respectively who has a 
sharing arrangement with an EPM participant or a distribution 
arrangement with the ACO the NPPG or TGP is a participant in.
    Downstream distribution arrangements under the EPM must comply with 
the following requirements:
     All downstream distribution arrangements must be in 
writing and signed by the parties, contain the date of the agreement, 
and be entered into before care is furnished to EPM beneficiaries under 
the downstream distribution arrangement.
     Participation in a downstream distribution arrangement 
must be voluntary and without penalty for nonparticipation.
     The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
     The opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent.
     The amount of any downstream distribution payments from a 
NPPGP to a NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision EPM activities and that may take 
into account the amount of such EPM activities provided by a downstream 
collaboration agent relative to other downstream collaboration agents.
     The amount of any downstream distribution payments from a 
PGP must be determined either in a manner that complies with Sec.  
411.352(g) of this chapter or in accordance with a methodology that is 
substantially based on quality of care and the provision EPM activities 
and that may take into account the amount of such EPM activities by a 
downstream collaboration agent relative to other downstream 
collaboration agents.
     Except for a downstream distribution payment from a PGP to 
a PGP member that complies with Sec.  411.352(g) of this chapter, a 
downstream collaboration agent is eligible to receive a downstream

[[Page 476]]

distribution payment only if the downstream collaboration agent 
furnished an item or service to an EPM beneficiary during an EPM 
episode that occurred during the same performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprise the gainsharing payment from which 
the ACO made the distribution payment to the PGP, NPPGP, or TGP that is 
an ACO participant.
     Except for a downstream distribution payment from a PGP to 
a PGP member that complies with Sec.  411.352(g) of this chapter, the 
total amount of downstream distribution payments for a performance year 
paid to a downstream collaboration agent who is a physician or 
nonphysician practitioner and is either a PGP member or NPPGP member 
must not exceed 50 percent of the total Medicare-approved amounts under 
the PFS for items and services furnished by the downstream 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the distribution payment being 
distributed.
     The total amount of all downstream distribution payments 
made to downstream collaboration agents must not exceed the amount of 
the distribution payment received by the PGP, NPPGP, or TGP from the 
ACO.
     All downstream distribution payments must be made by 
check, electronic funds transfer, or another traceable cash 
transaction.
     The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     The downstream distribution arrangement must not--
    ++ Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The PGP, NPPG, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  512.110, including the following:
    ++ The relevant written agreements.
    ++ The date and amount of any downstream distribution payment.
    ++ The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    ++ A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
     The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    ++ A sharing arrangement with an EPM participant; or
    ++ A distribution arrangement with the ACO that the PGP, NPPGP, or 
TGP is a participant in.
     The PGP, NPPGP, or TGP must retain and provide access to, 
and must require downstream collaboration agents to retain and provide 
access to, the required documentation in accordance with Sec.  512.110.
7. Summary of Policies for Sharing, Distribution, and Downstream 
Distribution Arrangements Under the EPM
    Figure 2 summarizes the proposals for the defined terms and 
financial arrangements discussed in sections III.I.4. through 6. of the 
proposed rule (81 FR 50920 through 50929).

[[Page 477]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.011

    Our final policies for financial arrangements reflect a number of 
changes to the proposals for EPM financial arrangements in response to 
comments on the proposed rule. Accordingly, Figure 2 summarizes the 
final policies for the defined terms and financial arrangements 
discussed in sections III.I.4. through 6. of this final rule.

[[Page 478]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.012

8. Enforcement Authority
    As discussed in the proposed rule, OIG authority is not limited or 
restricted by the provisions of the EPM, including the authority to 
audit, evaluate, investigate, or inspect the EPM participant, EPM 
collaborators, collaboration agents, or any other person or entity or 
their records, data, or information, without limitations. Additionally, 
no EPM provisions would limit or restrict the authority of any other 
Government Agency to do the same.
    The proposals for enforcement authority under the EPM were included 
in proposed Sec.  512.520. We sought comment 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 EPM 
were met.
    We received no comments on the proposals for enforcement authority 
under the EPM.
    Final Decision: We are finalizing the proposals in Sec.  512.520 
for the enforcement authority for the EPM, without modification. The 
final provisions include--
     OIG authority is not limited or restricted by the 
provisions of the EPM, including the authority to audit, evaluate, 
investigate, or inspect the EPM participant, EPM collaborators, or any 
other person or entity or their records, data, or information, without 
limitation; and
     None of the provisions of the EPM limits or restricts the 
authority of any other government agency permitted by law to audit, 
evaluate, investigate, or inspect the EPM participant, EPM 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
9. Beneficiary Engagement Incentives under the EPM
a. General
    Similar to our reasoning for the CJR model (80 FR 73433 through 
73437), in the proposed rule, we discussed our belief that the EPM 
would incentivize EPM participants to furnish directly and otherwise 
coordinate items and services throughout the EPM episodes that lead to 
higher quality care for EPM beneficiaries and lower EPM episode 
spending. We believed that one mechanism that might be useful to EPM 
participants in achieving these goals would be the provision of certain 
items and services as in-kind patient engagement incentives to the EPM 
beneficiary during the EPM episode. Under such an approach, the costs 
of the patient engagement incentives

[[Page 479]]

would be borne by the EPM participant. However, we believed that 
certain conditions on these incentives were necessary to ensure that 
their provision was solely for the purpose of achieving the EPM goals 
of improving episode quality and efficiency.
    We proposed that the incentive must be provided directly by the EPM 
participant or by an agent of the EPM participant under the EPM 
participant's direction and control to the EPM beneficiary during an 
EPM episode. We considered whether this policy on beneficiary 
incentives should extend to providers and suppliers other than the EPM 
participant that furnish services during the EPM episode, or to other 
entities altogether, such as ACOs that were EPM collaborators. However, 
as discussed in section III.B.3. of the proposed rule (81 FR 50813 
through 50814), given our belief that the EPM participant was best 
positioned to coordinate the care of beneficiaries in the EPM, we 
believed that EPM participants would also be better suited than other 
individuals and entities to provide beneficiary incentives.
    We proposed that the item or service provided as an incentive must 
be reasonably connected to medical care provided to an EPM beneficiary 
during an EPM episode. For example, EPM participants could provide 
incentives such as post-surgical or cardiac monitoring equipment to 
track patient weight and vital signs for post-surgical or post-AMI 
patients discharged directly to home, but could not provide theater 
tickets, which would bear no reasonable connection to the patient's 
medical care. Similarly, EPM participants might provide cardiac or 
post-surgical monitoring equipment, but not broadly used technology 
that was more valuable to the beneficiary than equipment that was 
reasonably necessary for the patient's post-hospital discharge care, 
such as a smartphone. In such circumstances, a reasonable inference 
would arise that the technology would not be reasonably connected to 
the medical care of the patient. Among other things, this safeguard 
precluded incentives that might serve to inappropriately induce 
beneficiaries to receive other medical care that was not included in 
the episode. We also proposed that the incentive must be a preventive 
care item or service or an item or service that advanced a clinical 
goal, as described later in this section, for a beneficiary in an EPM 
episode by engaging the beneficiary in better managing his or her own 
health.
    We further proposed that the item or service provided as an 
incentive must not be tied to the receipt of items or services outside 
the EPM episode and that the item or service must not be tied to the 
receipt of items or services from a particular provider or supplier. 
These provisions would provide safeguards against the provision of in-
kind patient engagement incentives to steer beneficiaries toward 
certain providers or suppliers for care.
    We proposed that the availability of the items or services provided 
as incentives must not be advertised or promoted except that a 
beneficiary may be made aware of the availability of the items or 
services at the time the beneficiary could reasonably benefit from 
them. This condition would provide a safeguard against the 
advertisement of in-kind patient engagement incentives to certain 
beneficiaries that could increase an EPM participant's number of EPM 
episodes and shift the patient severity for an EPM participant compared 
to historical EPM episodes by encouraging more beneficiaries with less 
severe clinical conditions in the EPM to seek care at the EPM 
participant. Such changes could produce financial gain for the EPM 
participant that would not be related to improvements in EPM quality 
and efficiency by resulting in the EPM participant's quality-adjusted 
target prices for EPM episodes being higher than would be appropriate 
based on the lower average patient severity during the EPM performance 
years. We did not intend for any of the financial arrangements proposed 
for the EPM, including beneficiary incentives, to alter an EPM 
participant's market share of care for a clinical condition in the EPM, 
nor did we intend for these arrangements to shift the patient severity 
for an EPM participant or cause access problems for Medicare 
beneficiaries. Finally, we proposed that the cost of the items or 
services must not be shifted to another federal health care program, as 
defined at section 1128B(f) of the Act.
    Our proposals for the general provisions for beneficiary incentives 
were included in proposed Sec.  512.525(a). We sought comment on our 
proposed general provisions for beneficiary incentives and welcomed 
comment on additional or alternative program integrity safeguards. We 
summarize the comments and provide our responses in section III.I.9.d. 
of this final rule.
b. Technology Provided to an EPM Beneficiary
    In some cases, items or services involving technology might be 
useful as beneficiary engagement incentives that could advance a 
clinical goal of the EPM by engaging a beneficiary in managing his or 
health during the 90 days following discharge from the anchor or 
chained anchor hospitalization. However, in the proposed rule we 
discussed our belief that specific enhanced safeguards were necessary 
for these items and services to prevent abuse, and our proposals were 
consistent with the CJR model policies (80 FR 73437). Specifically, we 
proposed that items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one EPM episode, and that items or services 
involving technology provided to a beneficiary must be the minimum 
necessary to advance a clinical goal as discussed in this section for a 
beneficiary in an EPM episode.
    We proposed additional enhanced requirements for items of 
technology exceeding $100 in retail value as an additional safeguard 
against misuse of these items as beneficiary engagement incentives. 
Specifically, we proposed that these items of technology remain the 
property of the EPM participant and be retrieved from the beneficiary 
at the end of the EPM episode. The EPM participant must document all 
retrieval attempts, including the ultimate date of retrieval. However, 
because we understood that EPM participants may not always be able to 
retrieve these items after the EPM episode ends, such as when a 
beneficiary died or moved to another geographic area, documented, 
diligent, good faith attempts to retrieve items of technology would be 
deemed to meet the retrieval requirement.
    Our proposals for enhanced requirements for technology provided to 
EPM beneficiaries as beneficiary engagement incentives under the EPM 
were included in proposed Sec.  512.525(b). We sought comment on our 
proposed requirements for beneficiary engagement incentives that 
involve technology and welcomed comment on additional or alternative 
program integrity safeguards for this type of beneficiary engagement 
incentive, including whether the financial thresholds proposed in this 
section were reasonable, necessary, and appropriate. We summarize the 
comments and provide our responses in section III.I.9.d. of this final 
rule.
c. Clinical Goals of the EPM
    As discussed in section III.C.3. of the proposed rule (81 FR 50829 
through 50834), the proposed EPMs were broadly defined to include most 
Part A and Part B items and services furnished during EPM episodes that 
would extend 90 days following discharge from the anchor or chained 
anchor

[[Page 480]]

hospitalization that began the episode, excluding only those Part A and 
Part B services that were unrelated to the EPM episode based on 
hospital readmissions or diagnoses for which care was unrelated to the 
EPM episode diagnosis and procedures based on clinical rationale. 
Therefore, in the proposed rule we discussed our belief that in-kind 
patient engagement incentives might appropriately be provided for 
managing acute conditions arising from EPM episodes, as well as chronic 
conditions if the condition was likely to have been affected by care 
during the EPM episode or when substantial services were likely to be 
provided for the chronic condition during the EPM episode.
    We proposed that the following were the clinical goals of the EPM, 
which might be advanced through beneficiary incentives:
     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment for the EPM clinical condition.
     Management of chronic diseases and conditions that may be 
affected by treatment for the EPM clinical condition.
    Our proposals for the clinical goals of the EPM that a beneficiary 
engagement incentive that was not a preventive care item or service 
must be intended to advance were included in proposed Sec.  512.525(c). 
We sought comment on our proposed clinical goals of the EPM, as well as 
whether the advancement of additional or different clinical goals 
through beneficiary engagement incentives might better advance the 
overarching goals of the EPM while maintaining appropriate program 
integrity safeguards. We summarize the comments and provide our 
responses in section III.I.9.d. of this final rule.
d. Documentation of Beneficiary Engagement Incentives
    As a program safeguard against misuse of beneficiary engagement 
incentives under the EPM, we proposed that EPM participants must 
maintain documentation of items and services furnished as beneficiary 
engagement incentives that exceeded $25 in retail value. In addition, 
we proposed to require that the documentation established 
contemporaneously with the provision of the items and services must 
include at least the following:
     The date the incentive was provided.
     The identity of the beneficiary to whom the item or 
service was provided.
    We further proposed that the documentation regarding items of 
technology exceeding $100 in retail that were required to be retrieved 
from the beneficiary at the end of an EPM episode must also include 
contemporaneous documentation of any attempt to retrieve technology. We 
reiterated that documented, diligent, good faith attempts to retrieve 
items of technology would be deemed to meet the retrieval requirement. 
Finally, we proposed that the EPM participant must retain and provide 
access to the required documentation in accordance with proposed Sec.  
512.110.
    Our proposals for the documentation requirements for beneficiary 
engagement incentives under the EPM were included in proposed Sec.  
512.525(d). We sought comment on our proposed documentation 
requirements, including whether additional or different documentation 
requirements might provide better program integrity safeguards.
    The following is a summary of the comments received and our 
responses on all proposals for beneficiary engagement incentives under 
the EPM.
    Comment: Some commenters opposed the proposed requirements that EPM 
participant must maintain documentation of items and services furnished 
as beneficiary engagement incentives that exceed $25 in retail value. 
The commenters recommended that CMS increase the documentation 
threshold, for example to $50, in order to reduce record keeping for 
inexpensive beneficiary engagement incentives and to minimize 
unnecessary administrative requirements. One commenter also recommended 
that CMS allow beneficiary engagement incentives greater than $25.
    Response: We appreciate the perspectives of the commenter on our 
proposed requirements for documentation of all items and services 
provided as beneficiary engagement incentives whose value exceeds $25, 
including the date and the identity of the beneficiary to whom the item 
or service was provided. We proposed a $25 retail value threshold for 
documentation because we recognized that a beneficiary could receive 
many incentives that are each of low dollar value but in the aggregate 
constitute an excessively high value to the beneficiary. While we 
considered setting a cumulative threshold on the retail value of 
beneficiary engagement incentives received by an EPM beneficiary during 
an EPM episode above which documentation would be required, we believe 
such an approach would be even more burdensome than our proposal to 
require documentation beginning at $25 in retail value for each 
incentive that exceeds that value. A documentation requirement based on 
a cumulative threshold would require documentation of every expense for 
beneficiary engagement incentives (including those below $25) to ensure 
compliance with required documentation of the cumulative retail value 
of incentives that exceed the threshold. Therefore, we believe it is 
prudent to maintain a per-item/per-service documentation threshold and 
to not increase the documentation threshold, thereby keeping the 
threshold at a modest level for all beneficiary incentives in order to 
monitor compliance with the requirements for providing these items and 
services. We continue to believe that the $25 threshold represents an 
appropriate balance between the benefits of beneficiary incentives and 
burden of the documentation requirement.
    For clarification, we did not propose that EPM participant may only 
provide in-kind beneficiary engagement incentives less than $25. With 
the exception of beneficiary engagement incentives involving technology 
which we proposed may not exceed $1,000 in retail value for any one 
beneficiary in any one EPM episode, there is no limit on the retail 
value of a single item or service provided as an in-kind patient 
engagement incentive to a beneficiary in an EPM episode, or to the 
aggregate of such incentives provided to the beneficiary in the 
episode.
    We are finalizing in Sec.  512.515(d)(1) the requirement that an 
EPM participant must maintain documentation of items and services 
furnished as beneficiary engagement incentives that exceed $25 in 
retail value. Under Sec.  512.515(d)(4), we set forth the requirement 
that the EPM participant must retain and provide access to the required 
documentation in accordance with Sec.  512.110.
    Comment: In regards to beneficiary engagement incentives involving 
technology, one commenter requested that the items or services 
involving technology provided to an EPM beneficiary not be capped at 
$1,000 given that CMS' proposal would require the EPM participant to 
pick up the technology from the EPM beneficiary if its retail value is 
greater than $100. The same commenter recommended that CMS increase the 
proposed cap of $100 to $500 for items of technology that must remain 
the property of the EPM participant and be retrieved from the 
beneficiary at the end of the EPM episode because under the proposed 
threshold, the commenters believes it

[[Page 481]]

would cost the EPM participant more to pick up the item of technology 
from the EPM beneficiary than the item of technology is worth.
    Several commenters suggested that CMS eliminate altogether the 
proposed requirement that items of technology provided as beneficiary 
engagement incentives be retrieved from the beneficiary at the end of 
the EPM episode. One commenter claimed that there may be situations 
where the patient may continue to benefit from the use of items of 
technology that were originally provided as EPM beneficiary engagement 
incentives beyond the 90-day post-discharge episode duration. They 
speculated that continued use of the technology could reduce the future 
need for urgent or emergent care and impact the overall future cost to 
Medicare to care for the beneficiary. The commenter urged CMS to 
establish a process or criteria to evaluate whether a beneficiary 
should be able to keep the technology and continue using it after the 
EPM episode ends, ensuring that any new policies take into the account 
the need for flexibility at the local level to provide benefits to 
patients, the community, and the health system as a whole. Finally, the 
commenter requested that if CMS decides not to establish a process to 
allowed continued use of the technology after the EPM episode ends, 
then CMS should require that documentation of beneficiary engagement 
incentives include written acknowledgement by the beneficiary or their 
representative that the technology remains the property of the EPM 
participant and must be returned upon completion of the episode.
    Another commenter pointed out remote patient monitoring equipment 
that could be provided as a beneficiary engagement incentive under the 
EPM must be linked to particular a particular provider to be effective 
and sought clarification about how devices provided in conjunction with 
remote patient monitoring could avoid being tied to a particularly 
provider. They further explained the Medicare program does not provide 
any payment for remote patient monitoring or other items and services 
provided to patients for improved self-management and believes that EPM 
participants are likely to engage in these activities only if they 
believe that improved episode quality or cost savings will result. The 
commenter asserted that so long as the provision of technology to 
beneficiaries is reasonably related to the clinical goals of the EPM, 
EPM participants should be encouraged to explore the use of remote 
patient monitoring through efforts that are not constrained by 
limitations CMS proposed.
    Response: We appreciate the requests by the commenters for 
additional flexibility with respect to items and services involving 
technology provided as EPM beneficiary engagement incentives. We 
proposed that items or services involving technology provided to as a 
beneficiary engagement incentive may not exceed $1,000 in retail value 
for any one beneficiary in any one EPM episode. While one commenter 
requested that we raise this limit because any technology exceeding 
$100 in retail value would remain the property of the EPM participant, 
no commenters provided information about items and services involving 
technology that would exceed this amount and that EPM participants 
would specifically wish to provide to advance the goals of the EPM to 
improve the quality and reduce the cost of care. Therefore, we are 
maintaining the limit of $1,000 in retail value for items or service 
involving technology provided to any one beneficiary during any one EPM 
episode even though the beneficiary's use of the technology costing 
more than $100 in retail value would be limited to the EPM episode. We 
believe that providing beneficiaries with more expensive technology 
could pose a program integrity risk of patient steering and that a 
higher limit is not necessary under the EPM.
    We understand the administrative burden on EPM participants that 
tracking and retrieval requires, but believe that a higher retrieval 
threshold, such as $500, is not warranted. Similarly, we do not believe 
it would be appropriate to eliminate the retrieval threshold 
altogether, even for items of technology that may provide additional 
health benefits to beneficiaries after the EPM episode ends and/or lead 
to reduced expenditures on health care. It would be inappropriate for 
EPM participants to furnish items of technology with a retail value of 
over $100 for beneficiaries' permanent use because the high value of 
these items could unduly influence the beneficiary to receive services 
from the EPM participant, particularly services outside of the EPM 
episode. We do not believe the potential longer-term benefits of 
continued use or the administrative burden of retrieving items 
involving technology with a retail value in excess of $100 outweigh the 
program integrity benefits of retrieval.
    We propose documentation requirements for beneficiary engagement 
incentives that exceed $25 in retail value as a safeguard against 
abuse, including the date the incentive is provided, the identity of 
the beneficiary to whom the item or service is provided, and 
contemporaneous documentation of attempts to retrieve items of 
technology exceeding $100 in retail value. However, we believe that any 
additional documentation requirements such as the commenter's 
suggestion of written acknowledgement by the beneficiary or their 
representative that the technology remains the property of the EPM 
participant and must be returned upon completion of the episode would 
be unnecessarily prescriptive and burdensome for EPM participants. For 
items of technology with a retail value exceeding $100 that remain the 
property of the EPM participant, it is up to the EPM participant to 
determine how they can best ensure that EPM beneficiaries understand 
the ownership of the technology while minimizing the burden on the EPM 
participant needed for successful retrieval or the documentation of 
retrieval attempts.
    Finally, with respect to the clarification requested by the 
commenter about how items of technology for remote monitoring could 
meet the requirement for EPM beneficiary engagement incentives that the 
item or service must not be tied to the receipt of items or service 
from a particular provider or supplier, we note that the intent of this 
latter requirement is as a safeguard from the use of beneficiary 
engagement incentives as a way to steer beneficiaries toward a certain 
provider or type of services. We understand that remote monitoring 
information that is collected from EPM beneficiaries must be sent to a 
treating provider for review and interpretation in order for the 
remote-monitoring to guide clinical care. However, in this case the 
remote monitoring technology would be linked to a provider that is 
treating the beneficiary, rather than being provided to steer the 
beneficiary to a particular treating provider, so we believe that 
remote monitoring equipment may be provided as a beneficiary engagement 
incentive without violating the requirement that the item or service 
not be tied to the receipt of items or services from a particular 
provider or supplier.
    Comment: Some commenters requested that CMS allow other beneficiary 
engagement incentives in the EPM to be provided by EPM participants, 
such as forgiving primary care or all beneficiary copayments for items 
and services included in the episode and making available supportive 
services that are otherwise in short supply or of inadequate quality, 
rather than just those closely tied to the

[[Page 482]]

medical issues. The commenters provided examples of in-kind assistance 
they believe could be helpful to improve the quality and reduce the 
cost of EPM episode care, such as meal delivery or other food 
assistance for beneficiaries and the family caregiver; enhanced 
homemaker and personal care aide services; and housing assistance for 
homeless patients. One commenter noted that while this would be a more 
expansive view of beneficiary engagement incentives for the EPM than 
CMS proposed, such an approach would allow targeted services to address 
key social determinants of health that could improve the quality and 
reduce the cost of EPM episodes by improving beneficiary outcomes and 
reducing readmissions. Another commenter urged CMS to provide guidance 
on specific circumstances where these or other social support services 
would be permissible, including applicable patient screening protocols 
and expenditure caps. The commenters encouraged CMS to allow EPM 
participants, who would be required to take on financial risk for 
cardiac and orthopedic episodes of care under the EPM, to use a full 
suite of tools to provide economically challenged patients the social 
supports necessary to minimize the risk of readmissions.
    Other commenters requested clarification about whether examples of 
beneficiary engagement incentives more directly related to medical 
issues would meet CMS' proposed requirements, such paying for a 
beneficiary's medications for management of coronary artery disease 
(either copayment or entire prescription in the instance of a patient 
who lacks Part D) or paying for a beneficiary's medications for 
management of an exacerbating chronic disease (for example, diabetes) 
(either copayment or entire prescription in the instance of a patient 
who lacks Part D).
    Response: We appreciate the commenters' recommendations for 
additional beneficiary engagement incentives under the EPM, as well as 
their requests for clarification about certain items and services that 
EPM participants may wish to provide as beneficiary engagement 
incentives. Regarding requests for CMS to waive copayments for items 
and services included in EPM episodes, most beneficiaries in 
traditional Medicare have supplemental coverage, specifically employer-
sponsored, Medicaid, and Medigap in descending order of 
prevalence.\130\ In 2011, 81 percent of beneficiaries in traditional 
Medicare had supplemental coverage. While we recognize that without 
supplemental coverage the copayments associated with an EPM episode 
could be significant, most beneficiaries would not experience 
significant out-of-pocket costs for the items and services themselves 
because their supplemental coverage would help to cover those costs. 
For the subset of beneficiaries without supplemental coverage, we note 
that, under current law, hospitals and other providers and suppliers 
are permitted to waive copayments under certain limited conditions and 
that copayment waivers that comply with existing law continue to be 
permitted under the EPM. In light of these factors, we will not waive 
copayments for items and services covered by Medicare under the EPM.
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    \130\ The Henry J. Kaiser Family Foundation. An Overview of 
Medicare. April 1, 2016. http://kff.org/medicare/issue-brief/an-overview-of-medicare.
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    No commenters suggested that our specific proposal for the purpose 
of the items and services provided as beneficiary engagement 
incentives, specifically that they must be preventive care items or 
services or items and services that advance a clinical goal for a 
beneficiary in an EPM episode by engaging the beneficiary in better 
managing his or her own health, were not appropriate for the EPM. 
Several commenters who urged us to allow them the flexibility to 
provide support services as beneficiary engagement incentives presented 
specific arguments about how those items and services would reduce 
readmissions or enhance beneficiary adherence to the treatment plan, 
which are on the proposed list of clinical goals of the EPM. On the 
other hand, some commenters expressed concern that social support 
services that have the potential to advance EPM goals might not meet 
the proposed requirements because they are not closely tied to medical 
issues and, therefore, would not meet the requirement that the item or 
service must be reasonably connected to medical care provide to an EPM 
beneficiary during and EPM episode. While we appreciate that social 
issues have a significant influence on beneficiary health, we are 
testing the EPM as an innovative payment approach for Medicare 
beneficiaries, which focuses on improving care coordination following 
inpatient hospitalization for treatment of a clinical condition 
included in the EPM to improve the quality and reduce the cost of 
health care. The EPM is an APM that is being tested as an alternative 
to FFS Medicare. Therefore, we continue to believe that it is important 
to maintain the requirements of a reasonable connection between the 
item or service provided as a beneficiary engagement incentive and a 
beneficiary's medical care and that the item or service advance a 
meaningful clinical goal for the EPM beneficiary. These requirements 
both protect against EPM participants' incentives to influence the 
beneficiary's choice of providers and types of care in the EPM and 
ensure that the EPM as implemented with a standardized episode payment 
design in a large number and wide variety of EPM participants can be 
appropriately evaluated in comparison with FFS Medicare.
    We will not provide additional interpretation of the requirements 
for beneficiary engagement incentives that we are finalizing in this 
final rule, nor provide other guidance at this time. Instead, we 
encourage EPM participants considering offering items or services as 
beneficiary engagements incentives to EPM beneficiaries to closely 
consider those potential items and services and ensure that their 
provision would meet all the requirements of Sec.  512.525 before 
deciding to provide those items or services as beneficiary engagement 
incentives under the EPM.
    Comment: One commenter requested that CMS address a specific 
scenario where an EPM participant already has a program in place prior 
to implementation of the EPM to encourage beneficiaries to follow 
through on their plan of care after hospital discharge. The commenter 
requested that CMS clarify whether the incentives under the existing 
program become beneficiary engagement incentives under the EPM and, 
therefore, subject to the requirements of the EPM, or whether the 
existing incentives would only be considered beneficiary engagement 
incentives under the EPM if they are specifically being offered to 
encourage improvement of clinical goals based on the EPM care redesign 
for the EPM episode.
    Response: We appreciate the request for clarification about the 
relationship of a hospital's existing incentives provided to Medicare 
beneficiaries following hospital discharge to encourage adherence to 
the beneficiary's care plan to EPM beneficiary engagement incentives 
provided by an EPM participant that must meet the specific requirements 
proposed in Sec.  512.515 and all other applicable laws and 
regulations, including the applicable fraud and abuse laws. If an EPM 
participant has a program already in place to provide incentives to 
beneficiaries following hospital discharge, we expect that all such

[[Page 483]]

incentives offered would comply with all current laws and regulations, 
including the fraud and abuse laws. Therefore, if an EPM participant 
provides beneficiary engagement incentives to EPM beneficiaries during 
EPM episodes, those incentives must either comply with all current laws 
and regulations, including the fraud and abuse laws, or with the 
requirements for EPM beneficiary engagement incentives in Sec.  512.515 
and all other applicable laws and regulations, including the applicable 
fraud and abuse laws. We note that any waivers of fraud and abuse laws 
for the EPM or revisions to the existing CJR waivers are outside the 
scope of this rulemaking.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec. Sec.  512.525(a) 
through (d) for the EPM general provisions, technology provided to an 
EPM beneficiary, clinical goals of the EPM, and documentation of 
beneficiary incentives, without modification. Beneficiary engagement 
incentives under the EPM must meet the following conditions and 
requirements:
    EPM participants may choose to provide in-kind patient engagement 
incentives to beneficiaries in an EPM episode, subject to the following 
conditions:
     The incentive must be provided directly by the EPM 
participant or by an agent of the EPM participant under the EPM 
participant's direction and control to the EPM beneficiary during an 
EPM episode.
     The item or service provided must be reasonably connected 
to medical care provided to an EPM beneficiary during an EPM episode.
     The item or service must be a preventive care item or 
service or an item or service that advances a clinical goal, as listed 
in paragraph (c) of this section, for a beneficiary in an EPM episode 
by engaging the beneficiary in better managing his or her own health.
     The item or service must not be tied to the receipt of 
items or services outside the EPM episode.
     The item or service must not be tied to the receipt of 
items or services from a particular provider or supplier.
     The availability of the items or services must not be 
advertised or promoted except that a beneficiary may be made aware of 
the availability of the items or services at the time the beneficiary 
could reasonably benefit from them.
     The cost of the items or services must not be shifted to 
another federal health care program, as defined at section 1128B(f) of 
the Act.
    Beneficiary engagement incentives involving technology are subject 
to the following additional conditions:
     Items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one EPM episode.
     Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an EPM 
episode.
     Items of technology exceeding $100 in retail value must--
    ++ Remain the property of the EPM participant; and
    ++ Be retrieved from the beneficiary at the end of the EPM episode. 
The EPM participant must document all retrieval attempts, including the 
ultimate date of retrieval. Documented, diligent, good faith attempts 
to retrieve items of technology will be deemed to meet the retrieval 
requirement.
    The following are the clinical goals of the EPM, which may be 
advanced through beneficiary incentives:
     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment for the EPM clinical condition.
     Management of chronic diseases and conditions that may be 
affected by treatment for the EPM clinical condition.
    Documentation of beneficiary engagement incentives:
     EPM participants must maintain documentation of items and 
services furnished as beneficiary engagement incentives that exceed $25 
in retail value.
     The documentation established contemporaneously with the 
provision of the items and services must include at least the 
following:
    ++ The date the incentive is provided.
    ++ The identity of the beneficiary to whom the item or service was 
provided.
     The documentation regarding items of technology exceeding 
$100 in retail must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an EPM episode as 
described previously in this section.
     The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.
10. Compliance With Fraud and Abuse Laws
    Certain arrangements between and among EPM participants and third 
parties or beneficiaries may implicate civil monetary penalty (CMP) law 
(subsections 1128A(a)(5), (b)(1), and (b)(2) of the Act), the Federal 
Anti-kickback statute (subsections 1128B(b)(1) and (2) of the Act), or 
the physician self-referral law (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 EPM as such 
models develop. Such waivers, if any, will be promulgated separately 
from this final 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.
    As discussed in the proposed rule, requirements for the EPM will 
bear on the need for and scope of any fraud and abuse waivers that 
might be granted for the EPM. Because of the close nexus between the 
regulations governing the structure and operations of the EPM and the 
development of any fraud and abuse waivers necessary to carry out the 
provisions of the EPM, CMS and OIG may, when considering the need for 
or scope of any waivers, consider comments submitted in response to the 
proposed rule and provisions of this final rule.
J. Waivers of Medicare Program Requirements
1. Overview
    Under the CJR model, we stated that it may be necessary and 
appropriate to provide additional flexibilities to hospitals 
participating in the CJR model, as well as other providers that furnish 
services to beneficiaries in CJR episodes. The purpose of such 
flexibilities is to increase CJR-episode quality and decrease episode 
spending or internal costs or both of providers and suppliers

[[Page 484]]

that results in better, more coordinated care for beneficiaries and 
improved financial efficiencies for Medicare, providers, and 
beneficiaries. These additional flexibilities were implemented through 
our waiver authority under section 1115A of the Act, which affords 
broad authority for the Secretary to waive statutory Medicare program 
requirements as necessary to carry out the provisions of section 1115A.
    As discussed in the proposed rule, in testing EPMs, we believe that 
certain program waivers, similar to those adopted under the CJR model, 
will offer providers and suppliers more flexibility so that they may 
increase coordination of care and management of beneficiaries in EPM 
episodes. However, we stated in the proposed rule that before adopting 
the same waivers as we adopted in the CJR model for EPMs, we stated 
that further examination is necessary to determine if doing so 
increases financial vulnerability for the Medicare program or creates 
inappropriate clinical incentives that may reduce the quality of 
beneficiary care.
    Based on our analysis of data available from current models being 
tested and other available clinical data, specific program requirements 
for which we proposed waivers under the AMI, CABG, and SHFFT models and 
for which we invited comments are included in the sections that follow. 
In addition, for providers or suppliers of cardiac rehabilitation and 
intensive cardiac rehabilitation services furnished to EPM 
beneficiaries during an AMI and CABG episode, we proposed to waive the 
physician definition to allow a qualified nonphysician practitioner to 
perform specific physician functions.
    We proposed that these waivers of program requirements would apply 
to the care of beneficiaries who are in the proposed AMI, CABG, or 
SHFFT episodes at the time when such waivers would be used to bill for 
services furnished to the beneficiary, even if the episode is later 
cancelled as described in section III.C.4.b. of the proposed rule. 
Thus, it may have been appropriate for the hospital to have used a 
waiver if there was a reasonable expectation that the beneficiary was 
in the model at the time the waiver was used. However, if a service is 
found to have been billed and paid by Medicare under circumstances 
allowed only by a program requirement waiver for a beneficiary not in 
the proposed AMI, CABG, or SHFFT models 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 or supplier to 
repay the beneficiary for any coinsurance previously collected. We did 
not receive any comments on this policy therefore, we are adopting this 
policy in this final rule.
    We also generally sought comment on any additional Medicare program 
requirements that may be necessary to waive using our authority under 
section 1115A of the Act in order to effectively test the proposed EPMs 
that we could consider in the context of our early model implementation 
experience to inform any future proposals we may make. While we cannot 
finalize program requirement waivers that we have not specifically 
proposed, we will continually monitor the use of program waivers in 
each EPM to ensure that the appropriate outcomes in provider/supplier 
financial incentives and patient care are achieved.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters recommended the CMS include other program 
waivers in addition to the proposed EPM waivers. In general, these 
suggestions were similar to the suggestions received during the CJR 
rulemaking process. Specifically, one commenter recommended that CMS 
expand more innovation to the post-acute care provider community in 
models such as CJR, EPM, and BPCI by allowing them to participate more 
robustly in these models through waiving some of the provider-specific 
rules, such as the IRF 60-percent rule and 3-hour therapy guideline. 
Another commenter recommended that CMS include a waiver to allow 
advance practice registered nurses to certify hospitalized patients for 
home health care services for the CJR model and the EPMs. Some 
commenters urged CMS to waive discharge planning requirements that 
prohibit hospitals from specifying or otherwise limiting information 
about post-acute care services, waive the regulatory constraints on how 
therapy services are delivered to EPM-eligible beneficiaries, and 
promote parity across Medicare programs by ensuring similar 
flexibilities are available to Medicare Advantage Organizations so that 
all Medicare beneficiaries can benefit from these services or removal 
of barriers. Another commenter urged CMS to waive audits of post-acute 
care and other collaborators participating in an EPM or CJR episode 
since the episode-managing entity is financially accountable for the 
provision of those services. Some commenters recommended that because 
certain arrangements may not meet the requirements of a ``sharing 
arrangement'' as outlined in the EPM proposed rule, CMS should waive 
fraud and abuse, beneficiary inducement, and physician self-referral 
liability for EPM entities.
    Response: In the CJR Final Rule (80 FR 73439), we responded to 
numerous comments to include additional waivers under the CJR model. 
The final regulations issued for the CJR model reflect our responses to 
those comments. We stated in the CJR Final Rule that while we were not 
making any changes to the proposed waivers, we would continually 
monitor the data from early testing of the CJR model. The CJR model was 
implemented on April 1, 2016 thus data is currently not available to 
evaluate if changes to the program waivers are warranted. We stated 
that if the early CJR model testing data supports changes to the 
program waivers then we would do so in future rulemaking.
    Our goal for implementing program waivers for EPMs was to replicate 
the general aspects of the waivers that were issued in the CJR final 
regulations. However, we stated in the EPM proposed rule that adopting 
the CJR waivers for the proposed EPMs required further examination to 
determine if such adoption would increase financial vulnerability to 
the Medicare program or would create inappropriate incentives to reduce 
the quality of beneficiary care. Thus, for the EPMs we proposed the 
following waivers that are similar to the adopted CJR waivers;
     Adopt waivers of the telehealth originating site and 
geographic site requirement and to allow in-home telehealth visits for 
all three proposed EPMs, as well as the general waiver to allow post-
discharge home visits and;
     Provide waivers on the number of post-discharge home 
visits and for the SNF 3-day stay, made on an EPM episode basis.
    We anticipate that if the CJR model testing data supports additions 
or changes to the CJR program waivers, then we would consider extending 
those revisions to CJR waivers in future rulemaking to the EPMs if 
those waivers would be clinically appropriate for the clinical 
conditions that are the focus of the EPM. Hence, our responses to the 
EPM waiver comments in this section reflect this common relationship 
with the final CJR model waivers.
    Final Decision: We address the specific Medicare program waivers we 
proposed in the EPM proposed rule in the following sections. We decline 
at this time to waive any additional Medicare program requirements. We 
will review the information provided by the commenters and our early 
CJR model and EPM experience and may

[[Page 485]]

consider waiving additional requirements during the course of the CJR 
model and EPM test.
2. Summary of Waivers Adopted Under the CJR Model
    As part of the CJR model implemented in 2016, we issued regulatory 
waivers of the following Medicare program requirements:
     Section 510.600 of the regulations waives the direct 
supervision requirement to allow clinical staff to furnish certain 
post-discharge home visits under the general, rather than direct, 
supervision of a physician or nonphysician practitioners. This waiver 
allows a CJR beneficiary who does not qualify for home health benefits 
to receive up to 9 post-discharge visits in his or her home or place of 
residence any time during the episode. All other Medicare rules for 
coverage and payment of services incident to a physician's service 
continue to apply.
     Section 510.615 waives current Medicare billing rules to 
allow the separate billing of these post-discharge home visits for CJR 
beneficiaries during a 90-day post-operative global surgical period. 
All other Medicare rules for global-surgery billing during the 90-day 
post-operative period continue to apply
     Section 510.605 of the regulations allows a Medicare-
approved telehealth service to be furnished to a CJR beneficiary 
regardless of the beneficiary's geographic location, and in his or her 
home or place of residence. CMS also waives certain telehealth payment 
provisions. Specifically, Medicare will not pay the originating site 
facility fee if the service originates in the beneficiary's home or 
place or residence, and the telehealth home visits will be paid using 
unique HCPCS codes with payment based on comparable office visits, less 
the practice expense portion of the payment paid for these comparable 
visits when furnished in-person. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply.
     Section 510.610 of the regulations waives the 3-day 
hospital stay requirement before a beneficiary may be discharged from a 
hospital to a qualified SNF, which CMS define as SNFs that are rated an 
overall of 3 stars or better for 7 of the last 12 months on the Nursing 
Home Compare Web site. This waiver applies to episodes being tested 
under the CJR model for specific performance years. For example, under 
CJR, the waiver applies beginning in performance year 2 (as hospitals 
are not bearing risk in their first year). All other Medicare rules for 
coverage and payment of Part A-covered SNF services continue to apply.
     Section 510.620 of the regulations waives the deductible 
and coinsurance statutory requirements to the extent necessary to make 
reconciliation payments or receive repayments based on the episodic 
payment methodology under the final payment model for CJR participant 
hospitals. The reconciliation or repayments do not affect the 
beneficiary's cost sharing amounts for services furnished under the CJR 
model.
3. Analysis of Current Model Data
    As discussed in the proposed rule, we believe that before we adopt 
the same regulatory waivers offered under the CJR model, we must 
determine if doing so would: (1) Be clinically-appropriate; (2) not 
introduce financial vulnerabilities to the Medicare program; and, more 
importantly, (3) not decrease desired outcomes of patient care. To make 
this determination, we analyzed waiver usage data and post-acute care 
usage from Medicare claims data current being tested in other EPMs. In 
addition, we analyzed the latest arithmetic and geometric means for the 
MS-DRGs associated with the proposed AMI, CABG, and SHFFT models 
published as Table 5 in the IPPS FY 2016 Correction Notice to the Final 
Rule (CMS-1632-CN; 80 FR 60055). The following summarizes the available 
data.
a. Analysis of Waiver Usage
    As stated in the proposed rule, waiver usage data is currently not 
available from the CJR model, thus we reviewed waiver usage data from 
the BPCI model. Waivers were offered for all 48 episodes under the BPCI 
model. However, we note that such waivers were significantly different 
from those adopted under the CJR model. For example, many BPCI model 
awardees were concerned about the difficulties in accurately 
identifying beneficiaries in BPCI episodes, which we believe might have 
been a disincentive to using the waiver of the SNF 3-day hospital stay. 
For the CJR model, we attempted to address this by codifying that the 
SNF stay would be covered if the beneficiary was in the episode at the 
time that the SNF waiver was utilized. With respect to the home visit, 
the BPCI model only allows 3 visits in a 90-day period (less if the 
episode is shorter), and awardees might not consider it worth the 
effort to incorporate this limited number of visits into their care 
design for episode beneficiaries. For the CJR model, we increased this 
allowance to 9 post-discharge visits in a 90-day period to allow for 
one visit a week for the two thirds of the 90-days post-discharge when 
the beneficiary was not receiving post-acute care. Finally, in the BPCI 
model we waived the geographic restrictions for telehealth visits, 
whereas for the CJR model we allow telehealth visits originating in the 
home, regardless of geographic location.
    Given that the waivers offered under the BPCI model differ from the 
waivers in the CJR model, and presumably for the waivers that we are 
implementing in this final rule, the BPCI model data shows--
     The use of the home visit and telehealth waiver is 
minimal; and
     The waiver of the SNF 3-day rule may be getting the most 
use.
b. Analysis of Discharge Destination--Post-Acute Care Usage
    As discussed in the proposed rule, the following Table 47 shows the 
discharge destination and post-acute care usage for the cardiac related 
episodes (CABG, PCI, and AMI) in the BPCI model.

                                              Table 47--Discharge Destination for BPCI Cardiac Diagnoses *
                                                             [Source: Medicare claims data]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Discharge destination (in rounded percentages)
                                                                                         ---------------------------------------------------------------
                  MS-DRG                                    MS-DRG title                   Home w/o home  Home with home
                                                                                              health          health            SNF            Other
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          CABG
--------------------------------------------------------------------------------------------------------------------------------------------------------
231.......................................  W PTCA W MCC................................              14              30              43              13
232.......................................  W PTCA W/O MCC..............................              28              49              15               8
233.......................................  W CARDIAC CATH W MCC........................              12              34              40              14

[[Page 486]]

 
234.......................................  W CARDIAC CATH W/O MCC......................              20              46              27               7
235.......................................  W/O CARDIAC CATH W MCC......................              13              34              36              17
236.......................................  W/O CARDIAC CATH W/O MCC....................              23              50              19               8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           PCI
--------------------------------------------------------------------------------------------------------------------------------------------------------
246.......................................  W DES W MCC OR 4+ VES/STENTS................              66              18              13               3
247.......................................  W DES STENT W/O MCC.........................              89               8               3               0
248.......................................  W NON DES W MCC OR 4+ VES/STENTS............              68              17              12               3
249.......................................  W NON-DES W/O MCC...........................              85              10               5               0
250.......................................  W/O CAS W MCC...............................              63              25               8               4
251.......................................  W/O CAS W/O MCC.............................              86              10               4               0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           AMI
--------------------------------------------------------------------------------------------------------------------------------------------------------
280.......................................  DISCHARGED ALIVE W MCC......................              42              22              34               2
281.......................................  DISCHARGED ALIVE W CC.......................              57              20              22               1
282.......................................  DISCHARGED ALIVE W/O CC/MCC.................              71              17              10               2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* ABBREVIATIONS:
PTCA--Percutaneous Transluminal Coronary Angioplasty
CC--Complications
MCC--Major Complications
DES--Drug-Eluting Stent
CAS--Coronary Artery Stent
VES--Vessels

    Analysis of the data in Table 47 shows--
     Patients with CABG have high post-acute care usage;
     Patients with PCI have very little post-acute care usage; 
and
     Patients with AMI have average post-acute care usage 
compared to patients with PCI and CABG.
    Analysis of the CJR model data shows post-acute care usage of about 
30 days for MS-DRGs associated with the CJR model.
c. Analysis of Hospital Mean Length of Stay Data
    As discussed in the proposed rule, Table 48 shows the geometric and 
arithmetic mean length of stay (LOS) for MS-DRGs associated with the 
proposed CABG, AMI (including PCI) and SHFFT models.

          Table 48--Geometric and Arithmetic Mean Length of Stay for BPCI Cardiac Diagnoses and SHFFT *
                               [Source: FY 2016 IPPS correction notice; Table 5] *
----------------------------------------------------------------------------------------------------------------
                                                                                  Geometric mean    Arithmetic
                MS-DRG                                MS-DRG title                      LOS          mean LOS
----------------------------------------------------------------------------------------------------------------
                                                      CABG
----------------------------------------------------------------------------------------------------------------
231...................................  W PTCA W MCC............................             9.9            11.7
232...................................  W PTCA W/O MCC..........................             7.9             8.6
233...................................  W CARDIAC CATH W MCC....................            11.6            13.0
234...................................  W CARDIAC CATH W/O MCC..................             8.0             8.6
235...................................  W/O CARDIAC CATH W MCC..................             8.9            10.3
236...................................  W/O CARDIAC CATH W/O MCC................             6.0             6.5
----------------------------------------------------------------------------------------------------------------
                                                       PCI
----------------------------------------------------------------------------------------------------------------
246...................................  W DES W MCC OR 4+ VES/STENTS............             4.1             5.5
247...................................  W DES STENT W/O MCC.....................             2.2             2.7
248...................................  W NON DES W MCC OR 4+ VES/STENTS........             4.8             6.3
249...................................  W NON-DES W/O MCC.......................             2.5             3.1
250...................................  W/O CAS W MCC...........................             4.2             5.7
251...................................  W/O CAS W/O MCC.........................             2.4             2.9
----------------------------------------------------------------------------------------------------------------
                                                       AMI
----------------------------------------------------------------------------------------------------------------
280...................................  DISCHARGED ALIVE W MCC..................             4.5             5.8
281...................................  DISCHARGED ALIVE W CC...................             2.9             3.6
282...................................  DISCHARGED ALIVE W/O CC/MCC.............             2.0             2.4
----------------------------------------------------------------------------------------------------------------

[[Page 487]]

 
                                                      SHFFT
----------------------------------------------------------------------------------------------------------------
480...................................  HIP & FEMUR PROCEDURES EXCEPT MAJOR                  6.7             7.9
                                         JOINT W MCC.
481...................................  HIP & FEMUR PROCEDURES EXCEPT MAJOR                  4.6             5.0
                                         JOINT W CC.
482...................................  HIP & FEMUR PROCEDURES EXCEPT MAJOR                  3.7             4.0
                                         JOINT W/O CC/MCC.
----------------------------------------------------------------------------------------------------------------
* ABBREVIATIONS:
PTCA--Percutaneous Transluminal Coronary Angioplasty
CC--Complications
MCC--Major Complications
DES--Drug-Eluting Stent
CAS--Coronary Artery Stent
VES--Vessels

    Analysis of data in Table 48 shows--
     Patients under all CABG MS-DRGs have a mean LOS of 6 days 
up to 11-13 days;
     Patients under all PCI MS-DRGs have a mean LOS of about 2 
days up to about 6 days;
     Patients under all AMI MS-DRGs have a mean LOS of about 2 
days up to about 6 days; and
     Patients under all SHFFT MS-DRGs have a mean LOS of about 
4 days up to about 8 days.
    Analysis of the CJR model data shows the mean LOS for MS-DRGs 
associated with the CJR model of about 3 days up to about 7 days.
    As discussed in the proposed rule, based on our analysis of the 
available data, we believe that minimal program and patient outcome 
vulnerabilities exist with adopting the same CJR regulatory waivers to 
the following program requirements for EPMs:
     The direct supervision requirement for certain post-
discharge home visits and the Medicare billing requirement that will 
allow the separate billing of these post-discharge home visits for EPM 
beneficiaries during a 90-day post-operative global surgical period.
     The telehealth geographic site requirement and the 
requirement that will allow in-home telehealth visits.
     The deductible and coinsurance statutory requirements to 
the extent necessary to make reconciliation payments or receive 
repayments based on the episodic payment methodology under the final 
payment model for EPM participants.
    Therefore, in conjunction with the comments received, we are 
adopting, as proposed, the waivers for these program requirements for 
EPMs as discussed in the sections that follow.
    In addition, as discussed in the proposed rule, based on our 
analysis of the available data, we believe some program and patient 
outcome vulnerabilities may exist with the adoption of the same CJR 
regulatory waivers for the following program requirements for some 
EPMs:
     The SNF 3-day rule.
     The number of post-discharge home visits allowed during 
the model episode.
    Therefore, in conjunction with the comments received, we are 
adopting, as proposed, model-specific limits to the number of post-
discharge home visits and to offer the waiver of the SNF 3-day rule on 
a model-specific basis as discussed in the sections that follow.
4. Post-Discharge Home Visits
    As with the LEJR episodes, we expect that the broadly-defined EPM 
episodes with a duration of 90 days following hospital discharge, as we 
discuss in section III.A.1. of this final rule, will result in EPM 
participants redesigning care by increasing care coordination and 
management of beneficiaries following surgeries. We believe that 
beneficiaries might have substantial mobility limitations during EPM 
episodes following discharge to their homes or places 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 
post-acute care setting will also be important to high-quality episode 
care. Scientific evidence exists to support the use of home nursing 
visits among Medicare beneficiaries in improving care coordination 
following hospital discharge.\131\ In addition, we believe the 
financial incentives in the EPMs will encourage hospitals to closely 
examine the most appropriate post-acute care 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 EPM 
beneficiaries in furnishing services to beneficiaries in their homes or 
places of residence. Such services could include visits by licensed 
clinical staff other than physicians and nonphysician practitioners.
---------------------------------------------------------------------------

    \131\ 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 ``homebound.'' 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.

[[Page 488]]

    Absent this condition, it would be expected that the beneficiary 
typically could 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 less-costly 
outpatient settings. 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 AMI, CABG and SHFFT models, 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 did not propose to waive the homebound requirement 
under the proposed EPMs for several reasons. Based on the typical 
clinical course of beneficiaries after procedures in the proposed EPMs, 
we believe that many beneficiaries would meet the homebound requirement 
for home health services immediately following discharge from the 
anchor hospitalizations or following discharge to their home or place 
of residence from a SNF that furnished post-acute care 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 are discharged during the episode. For those EPM 
beneficiaries who could benefit from home visits by licensed clinical 
staff for purposes of assessment and monitoring of their clinical 
conditions, 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 the BPCI initiative and the CJR model, we have not waived the 
homebound requirement for home health services.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters stated the CMS should waive the homebound 
requirement for the EPMs. One commenter stated that hospitals would not 
have an incentive to direct patients to home health when a less costly 
option, such as outpatient therapy, also would be clinically 
appropriate and that CMS should allow physicians, working together with 
participating hospitals, to determine the most clinically appropriate 
plan for a patient's post-acute care, unimpeded by regulatory barriers. 
Another commenter suggested the establishment of a homebound waiver to 
fit the circumstances described in the ``incident to'' waiver. Other 
commenters recommended that CMS incrementally test a waiver of the 
homebound requirement for the home health benefit by using a limited 
waiver. Other commenters recommended that CMS waive the home health 
homebound rule in accordance with the new Star Rating program for 
homecare providers
    Response: While we appreciate the commenters' requests that we 
waive the homebound requirement for home health services, we disagree 
that waiving the homebound requirement is necessary for the test of the 
EPMs. In the CJR model Final Rule (80 FR 73440 through 73441) we 
responded to similar comments regarding the home health homebound 
requirement. Under the EPMs, we continue to believe that waiving the 
homebound requirement is not appropriate for the same reasons stated in 
the CJR model Final Rule.
    As discussed in the EPM proposed rule, we proposed to waive the 
``incident to'' direct physician supervision requirement for post-
discharge home visits in order to allow clinical staff to furnish post-
discharge home visits to EPM beneficiaries who do not meet the 
requirements for home health services. We believe that this would allow 
the home visits by clinical staff for non-homebound EPM beneficiaries 
that we believe are necessary for testing the model. As we discussed in 
the EPM proposed rule, we believe many EPM beneficiaries should qualify 
for home health services under the existing program rules, especially 
immediately after discharge from the hospital or discharge from an 
institutional setting such as a SNF to their residence. Furthermore, as 
a retrospective payment model, all providers and suppliers are paid for 
services furnished to model beneficiaries at their usual rates, and 
program payments for home health services are set based on the needs of 
Medicare beneficiaries who are truly homebound. The resources required 
to care for homebound beneficiaries in the home are likely greater than 
those required for EPM beneficiaries who are not homebound. Therefore, 
waiving the homebound requirement would lead to inappropriate payment 
for post-discharge home visits to EPM beneficiaries and could result in 
increased EPM actual spending, which is counter to the goals of the 
EPM.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
maintain the existing Medicare requirements for home health services, 
including the requirement that the beneficiary be homebound, when home 
health services are furnished to EPM beneficiaries.
    For the EPMs, we proposed to adopt program requirement waivers 
similar to the post-discharge home visit waivers implemented for the 
CJR model. We proposed to waive the ``incident to'' rule set forth in 
Sec.  410.26(b)(5) to allow an EPM 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 to services furnished to beneficiaries who would 
qualify for home health services under the Medicare program, as set 
forth under Sec.  409.42. Therefore, these visits would not be billed 
for such beneficiaries. Under the proposed waiver, we would allow 
services furnished under the waiver to be billed under the PFS by the 
physician or nonphysician practitioner who is supervising the licensed 
clinical staff or by the hospital to which the supervising physician 
has reassigned his or her benefits if all other requirements are met. 
In the latter scenario, we note that the post-discharge home visit 
services will not be ``hospital services,'' even when furnished by 
licensed clinical staff of the hospital.

[[Page 489]]

    Under the CJR model, we allow up to 9 post-discharge home visits to 
be billed and paid during each 90-day post-anchor hospitalization CJR 
episode. This limit on the number of visits is based on the average 
post-acute care LOS of approximately 30 to 45 days for CJR episodes and 
the incentives under CJR to improve efficiency, which may shorten post-
acute care stays. Thus, 9 visits 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 post-acute care 
in an efficient episode.
    Since current model data shows that the average post-acute care LOS 
may vary or in some case post-acute care may not be used at all, for 
EPMs, we proposed to use model-specific limits on post-discharge home 
visits as follows:
a. AMI Model
    Current model data show that most beneficiaries with AMI diagnoses, 
regardless of AMI medical treatment or PCI treatment for AMI, are not 
discharged to post-acute care. Based on no post-acute care usage, we 
proposed that a beneficiary in the AMI model could receive up to 13 
home visits, which represents a home visit on average of once per week 
for the entire 90-day AMI episode.
b. CABG Model
    Current model data show that most beneficiaries with CABG diagnoses 
are discharged to SNFs or to home health. Assuming an average post-
acute care LOS of 30 days, we proposed that a beneficiary in the CABG 
model could receive up to 9 home visits, which represents a home visit 
on average of once per week for 60 days, or two-thirds of a 90-day CABG 
episode.
c. SHFFT Model
    Current model data show that most beneficiaries with SHFFT 
diagnoses are discharged to SNFs with average post-acute care LOSs of 
30 days. Thus, we proposed that a beneficiary in the SHFFT model could 
receive up to 9 home visits, which represents a home visit on average 
of once per week for 60 days, or two-thirds of a 90-day SHFFT episode.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters supported the ``incident to'' waiver to 
allow general supervision rather than direct supervision. A few 
commenters recommended that the post-discharge home visits be available 
to all EPM beneficiaries, including those who qualify for home health 
services. Some commenters requested that CMS issue a clarification that 
specifically permits a hospital or community physician or nonphysician 
practitioner to contract with an HHA for home nursing visits under the 
``incident to'' waiver and that this clarification should also provide 
that the Medicare home health agency Conditions of Participation do not 
apply to such visits.
    Response: In the CJR Final Rule, we responded to similar comments 
regarding the ``incident to'' direct supervision waiver (80 FR 73442 
through 73444). While we appreciate the commenters' suggestions that we 
provide maximal flexibility to participant hospitals to deliver the 
configuration of services the hospital believes to be most appropriate 
to manage a beneficiary's care, under the EPMs we continue to believe 
that home visits furnished under the ``incident to'' direct physician 
supervision waiver should be limited to model beneficiaries who 
otherwise would not qualify for home health services. We note that 
while home health episodes are 60 days in duration, payment adjustments 
are made for beneficiaries who require only a few visits during the 
episode or who are discharged during the home health episode. 
Therefore, EPM beneficiaries who qualify for home health services could 
receive home health services that would be appropriately paid even if 
they qualified for such services for less than 60 days. Those 
beneficiaries who qualify for home health services for any duration of 
time during the EPM episode would not need to receive post-discharge 
home visits under the ``incident to'' direct physician supervisions 
waiver. Furthermore, we expect that homebound EPM beneficiaries may 
typically need other types of services provided under the home health 
benefit than just post-discharge home visits by clinical staff, 
including skilled nursing services, therapy services, medical supplies, 
and medical social services. We would not expect that post-discharge 
home visits provided under the ``incident to'' direct physician 
supervision waiver would adequately substitute for home health services 
under the more comprehensive Medicare home health benefit. For those 
beneficiaries receiving home health care, paying additionally for post-
discharge home visits under the ``incident to'' direct physician 
supervision waiver would be duplicative of services that should be 
furnished under the home health episode and could lead to ineffective 
care coordination and management due to the involvement of multiple 
clinical staff working for different organizations or physician 
practices.
    Although we proposed to waive the direct physician supervision 
requirement in Sec.  410.26(b)(5) as previously discussed, licensed 
clinical staff providing post-discharge home visits as ``incident to'' 
services would still need to be considered ``auxiliary personnel'' 
(employed, contracted, or leased employee of the physician or same 
employing organization as physician) as required by Sec.  410.26(a)(1) 
and Sec.  410.26(b)(6). Therefore, it would not be permissible for 
HHAs, community-based organizations, hospitals, or others to provide 
post-discharge home visits under the proposed ``incident to'' direct 
physician supervision waiver as these entities would not meet the 
definition of ``auxiliary personnel'' as outlined in regulation. At 
this time, we are declining to waive any additional requirements of the 
``incident to'' rules that would be necessary for these other entities 
to furnish EPM post-discharge home visits because we continue to 
believe that the post-discharge home visits should always be ``incident 
to'' a physician's professional services, including that they are an 
integral, although incidental, part of the physician's professional 
services in the course of the diagnosis or treatment of an illness of 
injury, and that they are furnished by auxiliary personnel (if not by 
the physician or practitioner with an ``incident to'' benefit), who by 
definition are linked to the physician (or employing organization of 
the physician) by employment, contract, or lease. We believe the 
``incident to'' relationship of post-discharge home visits to a 
physician's professional services is critical due to the importance of 
robust care coordination and close care management to episode cost and 
quality performance, given the lengthy, broadly defined EPM episodes. 
We note that in the case where a post-discharge home visit is furnished 
by licensed clinical staff employed by the hospital, the hospital could 
bill under the PFS if the supervising physician who is an employee or a 
contractor of the hospital has reassigned his or her benefits to the 
hospital. As a result, we are not providing additional waivers for 
post-discharge home visits to EPM beneficiaries who otherwise do not 
qualify for Medicare home health services.
    Comment: Most commenters supported the additional allowance of 
visits for AMI model patients, but were not clear what the clinically 
appropriate number should be for any particular

[[Page 490]]

patient. Some commenters suggested that CMS not place any limits on the 
number of visits since in some cases this may result in readmissions 
during the episode that may be avoided with additional home monitoring. 
Other commenters were concerned that differential rules about the 
number of visits permitted for specific EPM episodes may be confusing 
for model participants. Some commenters supported CMS' proposal for 
differential post-discharge visit limits at this time, but urge the 
agency to monitor care patterns and consider refinements in the future 
with an eye toward consistency through future rulemaking.
    Response: In the CJR Final Rule, we responded to similar comments 
regarding the limit on the number of post-discharge home visits (80 FR 
73444). While we understand that some commenters would prefer no limit 
or a higher limit on the number of post-discharge home visits, as 
discussed previously these visits are restricted to model beneficiaries 
who do not quality for home health services. As discussed in the CJR 
Final Rule, we continue to believe it is appropriate to limit the 
number of post-discharge home visits that can be paid under an episode-
based payment model to mitigate the risk of overutilization, especially 
in the early years of the model where EPM participants have no, or 
limited, repayment responsibility for excess actual episode spending 
above the quality-adjusted target price. As with the CJR post-discharge 
home visits, we believe that a limit on the number of visits is 
appropriate for the EPMs. In addition, we believe that the average 
post-acute care length of stay data supports differences in post-acute 
care usage for each of the EPMs as discussed in the proposed rule. 
Thus, we continue to believe that it is clinically appropriate to 
account for these differences on an episode-specific basis when setting 
the limits on the number of visits covered under the waiver.
    As with the post-discharge home visit waiver for the CJR model, we 
are not prescribing the periodicity, pattern, or number of these visits 
for model beneficiaries. We will monitor utilization of these visits 
and may revisit the maximum number of visits over the course of the 
EPMs based on the implementation experience of EPM participants.
    Comment: Some commenters urged CMS to require more specific 
identification of all the clinicians who provide services that are 
billed incident to another practitioner.
    Response: While we believe this ``incident to'' waiver can be a 
significant tool to support a participant's success with the EPM, we 
believe that the administrative complexity of changing the billing 
requirements in order to collect this additional information outweighs 
the potential usefulness of this information in evaluating this aspect 
of the EPMs.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal, without modification, to 
waive the ``incident to'' direct physician supervision requirement set 
forth at Sec.  410.26(b)(5), to allow an EPM 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 EPM episode 
following discharge from an anchor hospitalization, limited to 13 
visits for the AMI model, 9 visits for the CABG model, and 9 visits for 
the SHFFT model. We will allow practitioners to bill for services 
provided by licensed clinical staff, such as nurses, who are considered 
``auxiliary personnel'' as defined in Sec.  410.26(a)(1), when provided 
under the general, rather than direct, supervision of a physician or 
nonphysician practitioner. In some situations the clinical staff 
providing these services may be employees of the participant hospital 
and, as long as these clinical staff are supervised by the billing 
physician or nonphysician practitioner and the appropriate relationship 
exists between the physician and the clinical staff, payment under the 
PFS can be made. We plan to monitor utilization patterns of post-
discharge home visits under the EPMs to monitor for overutilization and 
significant reductions in medical home health services.
    Similar to the CJR model, we proposed that the service be reported 
with HCPCS code GXXXX (EPM-AMI, CABG, or SHFFT model home visit for 
patient assessment performed by clinical staff 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 ensuring beneficiary connections to community and other services; 
for use only in the Medicare-approved EPM-AMI, CABG, or SHFFT model; 
may not be billed for a 30-day period covered by a transitional care 
management code) and estimated that it would be paid at approximately 
$50 under the PFS. The standard PFS rate setting methodologies 
establish relative value units (RVUs) based on the resources required 
to furnish the typical service. We proposed that final RVUs under the 
CY 2017 PFS for the proposed new HCPCS code for AMI, CABG, and SHFFT 
home visits will be included in this final rule. In addition, we 
proposed to update the values each year to correspond to final values 
established under the PFS.
    The waiver would not apply with respect to an AMI, CABG, or SHFFT 
beneficiary who has qualified, or would qualify, for home health 
services when the visit was furnished. We expect that the visits by 
licensed clinical staff 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 EPM 
participants.
    We also proposed 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, when there is a transfer of care, by the practitioner 
to whom care is transferred. The current construction of the global 
packages included in PFS payments reflects a narrow view of surgical 
follow-up care that does not encompass broader, more comprehensive 
models of post-operative care, such as an episode payment model like 
the proposed AMI, CABG, and SHFFT models. 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

[[Page 491]]

79 FR 67584). We do not believe that the AMI, CABG, and SHFFT 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 proposed 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.
    Comment: Several commenters supported the proposal to waive current 
Medicare billing rules for global surgeries to allow the separate 
billing of these post-discharge home visits by the physician or 
nonphysician practitioner who performed the EPM procedure.
    One commenter supported the proposal, but urged CMS to clarify how 
this policy will interact with the PFS proposal for CY 2017 to require 
billing HCPCS G-codes during the global period to collect information 
on post[hyphen]surgical visits.
    Response: We appreciate the support on these issues. In response to 
the request for clarification, we note that since the post-discharge 
home visits furnished to EPM beneficiaries are being paid for, they do 
not need to be separately reported under the global surgery data 
collection requirements under the PFS. (See the CY 2017 PFS Final Rule, 
81 FR 80170, for the finalized policies related to the global surgery 
data collection requirements under the PFS.)
    Final Decision: Services furnished under the waiver will be billed 
under the PFS by the physician or nonphysician practitioner or by the 
entity, including a hospital, to which the supervising physician or 
nonphysician practitioner has reassigned his or her benefits. We are 
also waiving current Medicare billing rules in order to allow the 
separate reporting by the physician who performed a procedure during 
the anchor hospitalization of the EPM episode of these post-discharge 
home visits during surgical global periods when he or she is providing 
the general supervision of the post-discharge home visit.
    The post-discharge home visit will be billed with the new HCPCS 
code G9863, displayed in Table 49. This code will be payable for EPM 
model beneficiaries beginning July 1, 2017, the start date of the first 
EPM performance year as discussed in section III.D.2. of this final 
rule. Rather than finalizing the specific RVUs for this new HCPCS code 
in this final rule, we are finalizing them through reference to the 
RVUs for another HCPCS G-code paid under the PFS. Specifically, the 
RVUs for this new code will be based upon the same inputs used to 
determine the payment rate for HCPCS code G9187 (BPCI initiative home 
visit for patient assessment performed by a qualified health care 
professional for individuals not considered homebound including, but 
not limited to, assessment of safety, falls, clinical status, fluid 
status, medication reconciliation/management, patient compliance with 
orders/plan of care, performance of activities of daily living, 
appropriateness of care setting; (for use only in the Medicare-approved 
BPCI initiative); may not be billed for a 30-day period covered by a 
transitional care management code), the specific HCPCS G-code currently 
used to report post-discharge home visits under BPCI. We are 
crosswalking the RVUs for new HCPCS code G9863 to the RVUs for the 
existing post-discharge home visit HCPCS G-code for the BPCI model 
because, given our view of the similarities between these two services 
in the two different models and the similar HCPCS G-code descriptors, 
we expect the resources required to be the same so the two codes are 
assigned the same inputs under the standard PFS ratesetting 
methodologies. In summary, we are finalizing the policy in this EPM 
final rule that the new HCPCS code G9863 for EPM post-discharge home 
visits will have the same RVUs as HCPCS code G9187 for BPCI model post-
discharge home visits.
    The CY 2017 RVUs, geographic practice cost indices and conversion 
factor that determine the PFS payment for HCPCS code G9187 are included 
in the CY 2017 PFS Final Rule. We will annually update the RVUs for 
HCPCS code G9863 for post-discharge home visits for EPM beneficiaries 
by crosswalking the RVUs for HCPCS code G9863 to HCPCS code G9187 as 
part of the annual PFS update, and information on the update will be 
included in the PFS Final Rule each year.

                    Table 49--HCPCS Code for Post-Discharge Home Visits for EPM Beneficiaries
----------------------------------------------------------------------------------------------------------------
                                                                                                   RVUs equal to
                                                                                                   those of this
                                                                                                  HCPCS code for
       HCPCS code number                  Long descriptor                 Short descriptor         same calendar
                                                                                                  year under the
                                                                                                        PFS
----------------------------------------------------------------------------------------------------------------
G9863..........................  Episode Payment Model (EPM)--AMI,  EPM in home visit...........           G9187
                                  CABG, or SHFFT model home visit
                                  for patient assessment performed
                                  by clinical staff 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 ensuring beneficiary
                                  connections to community and
                                  other services; for use only in
                                  the Medicare approved EPM--AMI,
                                  CABG, or SHFFT model; may not be
                                  billed for a 30-day period
                                  covered by a transitional care
                                  management code.
----------------------------------------------------------------------------------------------------------------

    The waiver of direct supervision requirements for certain post-
discharge home visits is set forth at Sec.  512.600. The waiver of 
certain post-operative billing restrictions under the PFS global 
surgery rules is set forth at Sec.  512.615.
5. Billing and Payment for Telehealth Services
    As discussed in the previous section, we expect that the EPMs' 
design features will lead to greater interest on

[[Page 492]]

the part of hospitals and other providers and suppliers caring for EPM 
beneficiaries in furnishing services to beneficiaries in their homes or 
places of residence, including physicians' professional services. While 
physicians may furnish and be paid by Medicare for home visits under 
the PFS, few visits actually are furnished to Medicare beneficiaries 
because of the significant physician resources required for such visits 
and the general structure of most office-based physician 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. EPMs 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 
EPM participants may want to engage physicians in furnishing timely 
visits to homebound or non-homebound EPM 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 clinical staff furnishing post-discharge home 
visits, while physicians committed to the proposed AMI, CABG, and SHFFT 
care redesign may not be able to revise their practice patterns to meet 
this home visit need for EPM 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 sections 
1834(m)(4)(C)(i)(I) through (III) of the Act. Generally, for Medicare 
payment to be made for telehealth services under the PFS several 
conditions must be met, as set forth under Sec.  410.78(b). 
Specifically, for a service to be eligible for payment, the individual 
receiving the services must be in an eligible originating site, and the 
service must be--
     On the Medicare list of telehealth services; \132\
---------------------------------------------------------------------------

    \132\ For the list of approved Medicare telehealth services, see 
the CMS Web site at http://www.cms.gov/Medicare/Medicare-General-information/telehealth/.
---------------------------------------------------------------------------

     Furnished via an interactive telecommunications system; 
and
     Furnished to a telehealth-eligible individual.
    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.
    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.\133\ 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.
---------------------------------------------------------------------------

    \133\ Telehealth in an Evolving Health Care Environment: 
Workshop Summary (2012). Available at http://www.ic4n.org/wp-content/uploads/2014/06/IoM-Telehealth-2012-Workshop-Summary.pdf. 
Accessed on June 7, 2015.
---------------------------------------------------------------------------

    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-based payment models, such as BPCI Models 2 
and 3 and the CJR model, we determined it was necessary to waive the 
geographic-site requirements of sections 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 the proposed EPMs--AMI, 
CABG, and SHFFT--we proposed a waiver of this same provision as well as 
waiver of the requirement that the eligible telehealth individual be in 
an originating site when an 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 EPM 
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 the proposed EPMs' episodes.
    Specifically, like the telehealth waiver for the BPCI and CJR 
models, we proposed to waive the geographic-site requirements of 
sections 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 EPMs episode 
definition (see section III.C. of this final rule) could be furnished 
to an EPM beneficiary, regardless of the beneficiary's geographic 
location. Under the proposed EPMs, this waiver would support care 
coordination and increasing timely access to high quality care for all 
EPM beneficiaries, regardless of geography. Additionally, we proposed, 
only for the purpose of testing the proposed EPMs, 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

[[Page 493]]

located at the time the service is furnished via a telecommunications 
system. Specifically, we proposed to waive the requirement only when 
telehealth services are being furnished in the EPM 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-10-CM principal diagnosis code that is not excluded from the 
applicable EPM's episode definition (see section III.C. of this final 
rule) could be furnished to an EPM 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 
EPMs, we proposed to create a specific set of HCPCS G-codes to describe 
the E/M services furnished to EPM 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 proposed 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 proposed to create a 
parallel structure and set of descriptors currently used to report 
office or other outpatient E/M services, (CPT codes 99201-99205 for new 
patient visits and CPT codes 99212-99215 for established patient 
visits). For example, the proposed G-code for a level 3 E/M visit for 
an established patient would be a remote in-home visit for the 
evaluation and management of an established patient, which requires at 
least two of the following three key components:
     An expanded problem focused history.
     An expanded problem focused examination.
     Medical decision making of low complexity, furnished in 
real time using interactive audio and video technology. 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 needs of the patient or the family 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 did not propose 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 proposed 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 proposed 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 proposed 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.
    We proposed to include final RVUs under the CY 2016 PFS when we 
finalize the rules for EPMs. Additionally, we proposed 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 
proposed EPMs. 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 1-3 for new visits and 
levels 2 and 3 for established visits), we stated that we do not 
believe that visits necessarily would require auxiliary medical staff 
to be available in patients' homes. We anticipate these lower-level 
visits would be the most-commonly furnished and would serve as 
mechanisms for patients to consult quickly with practitioners for 
concerns that patients can easily describe and explain. We did not 
proposed to include PE RVUs for these services, since we do not believe 
that virtual visits envisioned for EPMs 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 for 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 beneficiaries in the proposed EPMs' episodes without licensed 
clinical staff support in the home.
    However, we also note that the proposed EPMs already include 
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 final rule. Therefore, although we consider support by 
auxiliary clinical staff to be typical for levels 4 or 5 E/M visits 
furnished to EPM beneficiaries in the home via telehealth, we did not 
propose to incorporate these costs through PE RVUs. Given the 
anticipated complexity of these visits, we would expect to observe 
levels 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 proposed 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-

[[Page 494]]

level visit would not require such personnel.
    We 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 the proposed EPMs, we believe that 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 EPM 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(m) 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 EPM 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 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 post-acute care setting (from which the 
patient was directly admitted to home health) or an allowed 
nonphysician practitioner working in collaboration with or under the 
supervision of the acute or post-acute care 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 did not propose that 
the waiver of the telehealth geographic site requirement for telehealth 
services and the originating site requirement for telehealth services 
furnished in the EPM 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 EPM beneficiaries' access to medically-necessary home health 
services because beneficiaries receiving home health services during a 
proposed EPM episode will have had a face-to-face encounter with either 
the physician or an allowed nonphysician practitioner during their 
anchor hospitalization or a physician or allowed nonphysician 
practitioner 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 EPM 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 proposed EPM episode.
    We plan to monitor patterns of utilization of telehealth services 
under the proposed EPMs to monitor for overutilization or reductions in 
medically-necessary care, and significant reductions in face-to-face 
visits with physicians and nonphysician practitioners. We plan to 
specifically monitor the distribution of new telehealth home visits 
that we did propose, 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.
    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 payments 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, in the 
proposed rule, we stated that we did 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 at another location. Therefore, in order to create a 
mechanism to report E/M services accurately under the EPMs, we proposed 
to create a specific set of HCPCS G-codes to describe the E/M services 
furnished to EPM beneficiaries in their homes via telehealth when the 
physician or practitioner is in another location.
    Among the existing E/M visit services, we stated that we envision 
these services would be most similar to those described by the office 
and other outpatient E/M codes. Therefore, we proposed 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 proposed 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, in the proposed rule we 
discussed a HCPCS 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

[[Page 495]]

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. The 
preceding text would be included in the code descriptor for the 
proposed level 3 established patient telehealth E/M visit HCPCS G-code, 
just as this information is currently included in the code descriptor 
for the corresponding level 3 established patient office/outpatient E/M 
CPT code.
    In the proposed rule, we noted that we were not proposing a HCPCS 
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 practitioner. We stated our belief that this 
would duplicate the home visits for non-homebound beneficiaries 
previously discussed in this section.
    We proposed 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 proposed 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, in the proposed 
rule we stated our belief that the efficiencies of virtual presentation 
generally limit resource costs other than those related to the 
professional time, intensity, and MP risk to marginal levels. 
Therefore, we proposed to adopt work and MP RVUs associated with the 
corresponding level of office/outpatient codes as the typical service 
because the practitioner's time and intensity and MP liabilities when 
conducting a visit via telehealth are comparable to the office visit. 
We stated that final RVUs under the CY 2016 PFS would be included in 
the EPM final rule. Additionally, we proposed 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 
EPMs. 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 visits and 2 and 
3 for established visits, we did not believe that the visit would 
necessarily require auxiliary clinical staff to be available in the 
patient's home. We anticipated 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 did not propose to include 
PE RVUs for these services, since we did 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 the complete service to be 
furnished. We stated our belief that 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 EPM beneficiaries in the EPM 
episodes without licensed clinical staff support in the home.
    However, we also noted that the 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 
final rule. Therefore, although we considered support by auxiliary 
clinical staff to be typical for level 4 or 5 E/M visits furnished to 
EPM beneficiaries in the home via telehealth, we did not propose to 
incorporate these costs through PE RVUs. Given the anticipated 
complexity of these visits, we noted that 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 proposed 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 noted that because the services described by the HCPCS G-codes 
for the proposed model, 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 noted 
that because these home telehealth services would be E/M services, all 
other coverage and payment rules regarding E/M services would continue 
to apply.
    We additionally noted that under the EPMs, 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.
    We sought comments on the proposed waivers with respect to 
telehealth services, and the proposed creation of the home visit 
telehealth codes.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported the waiver of originating site 
and geographic site requirements and allowing telehealth visits for the 
EPMs. One commenter urged CMS to clarify that EPM participants can 
provide telehealth services that are not covered by Medicare or not 
paid for when provided free of charge if that supports the goal of 
improving quality while reducing costs. Another commenter suggested 
that CMS waive the requirement that services furnished under this 
waiver be performed by physicians or nonphysician practitioners and to 
permit the provision of telehealth services by HHAs through licensed 
clinicians to individuals who are not receiving Medicare-covered home 
health services. Another commenter cautioned CMS against the use of 
wasteful telehealth services that increase costs without improving 
health care access or quality. One commenter recommended that CMS allow 
even greater flexibility for EPM episode services and proceed further 
by allowing a waiver for technological restrictions and to offer up-
front payment for investment in telehealth services beyond those 
currently covered under the telehealth benefit. One commenter requested 
that this waiver, if implemented, be authorized for any provider types 
that are allowed to provide telehealth services per state laws. Another 
commenter urged CMS to engage with

[[Page 496]]

patients and providers to determine the most effective ways to test 
telehealth in populations that need it most.
    Response: We appreciate the information from commenters on 
alternative approaches to providing care other than in-person. In the 
CJR Final Rule, we responded to similar comments regarding the 
telehealth waivers (80 FR 73448). As with the CJR model, the EPM is not 
testing a telehealth model and, therefore, we do not intend to 
fundamentally change the scope of telehealth requirements for payment 
under Medicare. Rather, we proposed to waive certain existing 
telehealth requirements to provide participant hospitals with 
additional tools to improve episode quality and efficiency given the 
constraints on physician time for in-person visits at distant locations 
or in the beneficiary's home. The proposed waivers would allow greater 
physician engagement via telehealth in EPM beneficiary care 
coordination and management following an EPM anchor hospitalization, 
regardless of the beneficiary's geographic location or home location. 
We believe that under the EPM it is important for beneficiaries to 
receive telehealth services in a way that permits them to interact with 
treating health care professionals in real-time, including being able 
to both see and interact with those providers, and the treating health 
care professionals being able to see and listen to the beneficiaries. 
Beneficiaries recovering at home following an EPM anchor 
hospitalization benefit from meaningful engagement in care that is 
patient-centered in order to improve their understanding and adherence 
to treatment regimens. Therefore, we do not believe it would be 
appropriate to allow telehealth services to be furnished to EPM model 
beneficiaries that do not meet the existing Medicare telehealth 
requirements for communications technology.
    As with CJR model, we continue to believe that it would not be 
appropriate to allow telehealth services to be furnished to EPM 
beneficiaries that do not meet the existing Medicare telehealth 
requirements for communications technology. Finally, in response to the 
commenter requesting that we clarify that EPM participants can provide 
telehealth services free-of-charge, when they are not covered and paid 
by Medicare, we refer to section III.I.9. of this final rule for 
discussion of the requirements for in-kind beneficiary engagement 
incentives that may be provided by EPM participants under the EPMs.
    Comment: One commenter strongly objected to the proliferation of 
new telehealth-specific HCPCS G-codes when there is a suitable CPT code 
to describe the service and urged CMS to allow for telehealth coverage 
of any related CPT/HCPCS procedure codes for physical medicine and 
rehabilitation. Another commenter was concerned that new codes are 
without clinical merit or distinction and undermine parity of clinical 
standards of care between services provided by telehealth means and 
service provided in-person.
    Response: As discussed in the CJR Final Rule (80 FR 73450), we 
continue to believe that specific HCPCS G-codes are the most 
appropriate way for telehealth visits furnished in a model 
beneficiary's home or place of residence to be reported and paid. The 
work and MP RVUs for these new HCPCS G-codes will be the same as those 
for the comparable office and other outpatient E/M visit codes under 
the CY 2017 PFS. The HCPCS G-codes, their descriptors, and the CPT 
codes upon which their RVUs are based are displayed in Table 50. While 
we acknowledge that telehealth services are likely to incur practice 
expenses, as discussed in the proposed rule, 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; we believe that these are 
merely a subset of the expenses incurred for in-person visits. And 
while we would be interested in examining any publicly available data 
regarding these costs relative to the costs included in the RVUs for 
other PFS services, we are finalizing our proposal not to include PE 
RVUs in the payment rate for these unique EPM services. Accordingly, we 
are waiving section 1834(m)(4)(2)(B) to allow this deviation from the 
payment of office/outpatient visits for purposes of the EPM telehealth 
in-home visit services. Finally, we will consider new CPT codes as they 
are released according to our usual processes, and will specifically 
evaluate whether they may be used in the future to report home 
telehealth visits for CJR model and EPM beneficiaries.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal, without modification, 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. Any service on the list of Medicare-approved 
telehealth services and reported on a claim with an ICD-10-CM principal 
diagnosis code that is not excluded from the EPM episode definition 
(see section III.C.3.b. of this final rule) can be furnished to an EPM 
beneficiary, regardless of the beneficiary's geographic location. We 
also are finalizing our proposal to waive the originating site 
requirements of section 1834(m)(4)(C)(ii)(I) through (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 only when telehealth services are being 
furnished in the EPM 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-10-CM principal diagnosis 
code that is not excluded from the EPM episode definition (see section 
III.C.3.b. of this final rule) can be furnished to a EPM 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. We will continue to require that telehealth services 
furnished under the EPM telehealth waiver be furnished using an 
interactive telecommunications system, consistent with the current 
requirement for payment of telehealth services under the PFS. The 
waiver of certain telehealth requirements is set forth at Sec.  
512.605.
    We are finalizing the proposal, without modification, to create 9 
HCPCS G-codes to report home telehealth E/M visits furnished under the 
EPM waiver as displayed in Table 50. These codes will be payable for 
EPM beneficiaries beginning July 1, 2017, the start date of the EPM 
performance year as discussed in section III.D.2. of this final rule. 
Rather than finalizing the RVUs for the new HCPCS codes in this final 
rule, we are finalizing them through reference to the RVUs for other 
CPT codes paid under the PFS as equal to the work and MP RVUs 
established for the comparable office/outpatient visits.
    The final CY 2017 RVUs, geographic practice cost indices and 
conversion factor that determine the payment rates for the CPT codes 
are included in the CY 2017 PFS Final Rule.
    We will update the RVUs for the EPM HCPCS telehealth G-codes 
annually by crosswalking them to the corresponding CPT codes as part of 
the annual PFS update, and information on the updates will be included 
in the PFS final rule each year.

[[Page 497]]



         Table 50--HCPCS Codes for Telehealth Visits for EPM Beneficiaries in Home or Place of Residence
----------------------------------------------------------------------------------------------------------------
                                                                                                Work and MP RVUs
                                                                                                 equal to those
                                                                                                     of the
                                                                                                  corresponding
                                                                                                     office/
      Code number                  Long descriptor                    Short descriptor           outpatient E/M
                                                                                                 visit CPT code
                                                                                                    for same
                                                                                                  calendar year
                                                                                                  under the PFS
----------------------------------------------------------------------------------------------------------------
G9864.................  Remote in-home visit for the          In home E/M new pt 10 mins......             99201
                         evaluation and management of a new
                         patient for use only in the
                         Medicare-approved Episode Payment
                         Model--AMI, CABG, or SHFFT model,
                         which requires these 3 key
                         components:
                         A problem focused history;.
                         A problem focused
                         examination; and.
                         Straightforward medical
                         decision making, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are self
                         limited or minor. Typically, 10
                         minutes are spent with the patient
                         or family or both via real time,
                         audio and video intercommunications
                         technology.
G9865.................  Remote in-home visit for the          In home E/M new pt 20 mins......             99202
                         evaluation and management of a new
                         patient for use only in the
                         Medicare-approved Episode Payment
                         Model--AMI, CABG, or SHFFT model,
                         which requires these 3 key
                         components:
                         An expanded problem focused
                         history;.
                         An expanded problem focused
                         examination;.
                         Straightforward medical
                         decision making, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of low to
                         moderate severity. Typically, 20
                         minutes are spent with the patient
                         or family or both via real time,
                         audio and video intercommunications
                         technology.
G9866.................  Remote in-home visit for the          In home E/M new pt 30 mins......             99203
                         evaluation and management of a new
                         patient for use only in the
                         Medicare-approved Episode Payment
                         Model--AMI, CABG, or SHFFT model,
                         which requires these 3 key
                         components:
                         A detailed history;........
                         A detailed examination;....
                         Medical decision making of
                         low complexity, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of
                         moderate severity. Typically, 30
                         minutes are spent with the patient
                         or family or both via real time,
                         audio and video intercommunications
                         technology.
G9867.................  Remote in-home visit for the          In home E/M new pt 45 mins......             99204
                         evaluation and management of a new
                         patient for use only in the
                         Medicare-approved Episode Payment
                         Model--AMI, CABG, or SHFFT model,
                         which requires these 3 key
                         components:
                         A comprehensive history;...
                         A comprehensive
                         examination;.
                         Medical decision making of
                         moderate complexity, furnished in
                         real time using interactive audio
                         and video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of
                         moderate to high severity.
                         Typically, 45 minutes are spent
                         with the patient or family or both
                         via real time, audio and video
                         intercommunications technology.

[[Page 498]]

 
G9868.................  Remote in-home visit for the          In home E/M new pt 60 mins......             99205
                         evaluation and management of a new
                         patient for use only in the
                         Medicare-approved Episode Payment
                         Model--AMI, CABG, or SHFFT model,
                         which requires these 3 key
                         components:
                         A comprehensive history;...
                         A comprehensive
                         examination;.
                         Medical decision making of
                         high complexity, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of
                         moderate to high severity.
                         Typically, 60 minutes are spent
                         with the patient or family or both
                         via real time, audio and video
                         intercommunications technology.
G9869.................  Remote in-home visit for the          In home E/M est. pt 10 mins.....             99212
                         evaluation and management of an
                         established patient for use only in
                         the Medicare-approved Episode
                         Payment Model--AMI, CABG, or SHFFT
                         model, which requires at least 2 of
                         the following 3 key components:
                         A problem focused history;.
                         A problem focused
                         examination;.
                         Straightforward medical
                         decision making, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are self
                         limited or minor. Typically, 10
                         minutes are spent with the patient
                         or family or both via real time,
                         audio and video intercommunications
                         technology.
G9870.................  Remote in-home visit for the          In home E/M est. pt 15 mins.....             99213
                         evaluation and management of an
                         established patient for use only in
                         the Medicare-approved Episode
                         Payment Model--AMI, CABG, or SHFFT
                         model, 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, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family 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.
G9871.................  Remote in-home visit for the          In home E/M est. pt 25 mins.....             99214
                         evaluation and management of an
                         established patient for use only in
                         the Medicare-approved Episode
                         Payment Model--AMI, CABG, or SHFFT
                         model, which requires at least 2 of
                         the following 3 key components:
                         A detailed history;........
                         A detailed examination;....
                         Medical decision making of
                         moderate complexity, furnished in
                         real time using interactive audio
                         and video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of
                         moderate to high severity.
                         Typically, 25 minutes are spent
                         with the patient or family or both
                         via real time, audio and video
                         intercommunications technology.

[[Page 499]]

 
G9872.................  Remote in-home visit for the          In home E/M est. pt 40 mins.....             99215
                         evaluation and management of an
                         established patient for use only in
                         the Medicare-approved Episode
                         Payment Model--AMI, CABG, or SHFFT
                         model, which requires at least 2 of
                         the following 3 key components:
                         A comprehensive history;...
                         A comprehensive
                         examination;.
                         Medical decision making of
                         high complexity, furnished in real
                         time using interactive audio and
                         video technology..
                        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 needs of the patient or the
                         family or both. Usually, the
                         presenting problem(s) are of
                         moderate to high severity.
                         Typically, 40 minutes are spent
                         with the patient or family or both
                         via real time, audio and video
                         intercommunications technology.
----------------------------------------------------------------------------------------------------------------

6. SNF 3-Day Rule
a. Waiver of SNF 3-Day Rule
    Pursuant to section 1861(i) of the Act, a beneficiary must have a 
prior inpatient hospital stays of no fewer than 3 consecutive days, 
within a short period of time (generally 30 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 
for Medicare SNF coverage under other episode payment models, including 
BPCI Model 2 and the CJR model. BPCI Model 2 awardees that request and 
are approved for the waiver can discharge Model 2 beneficiaries in 
fewer 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. Under the CJR model, we 
adopted a waiver of the SNF 3-day rule that applies beginning in 
performance year 2 as hospitals are not bearing risk in their first 
year. As discussed in section V.N. of this final rule, we are revising 
the effective date of the waiver of the SNF 3-day rule for the CJR 
model, and we are stating that participant hospitals may begin using 
the waiver for episodes that begin on or after January 1, 2017.
    We proposed EPM payment policies, similar to CJR payment policies 
which would require participating EPM hospitals to repay Medicare for 
excess episode spending beginning in performance year 2. Episode 
payment models like BPCI, CJR, and those being finalized in this final 
rule 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 EPM lays the 
groundwork for offering EPM participants 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 episode-based payment models such as BPCI, the 
CJR model, or the EPMs in this final rule.
    Because of the potential benefits we see for participating EPM 
hospitals, their provider partners, and beneficiaries, we proposed to 
waive in certain instances, where it is clinically-appropriate, the SNF 
3-day rule for coverage of a SNF stay following the anchor 
hospitalization under EPM for episodes that begin on or after April 1, 
2018. While our intent is to align the effective date of the 
availability of this program waiver with performance year 2 of the 
model, when repayment responsibility for actual episode spending that 
exceeds the target price begins, we believe that an effective date 
based on the start of the episode will be clearer to participant 
hospitals, SNFs, and others in determining whether the waiver is 
available for an EPM beneficiary. We believe that clarity regarding 
whether a waiver applies to SNF services furnished to a particular 
beneficiary is important to help ensure compliance with the conditions 
of the waiver and also improve our ability to monitor waivers for 
misuse. We proposed 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 EPM episode. We 
believe this waiver is necessary to the model test so that EPM 
participants 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 did not propose to 
waive this requirement in performance year 1, when EPM participants are 
not responsible for excess actual episode spending. We believe that 
there is some potential for early hospital discharge

[[Page 500]]

followed by a SNF stay to increase actual episode spending over 
historical patterns unless EPM participants are particularly mindful of 
this potential unintended consequence. Without participant 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. For EPM episodes beginning on or after April 1, 
2018, we proposed to waive the SNF 3-day rule, where clinically-
appropriate, because participants will bear partial or full 
responsibility (capped at the proposed stop-loss limit described in 
section III.D.7.b. of this final rule) for excess episode actual 
spending, thereby providing a strong incentive in those years for 
participants 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 EPM 
beneficiaries in all performance years of the model.
    In addition, for the EPMs being finalized in this final rule and 
for future EPMs where this waiver is clinically-appropriate and the 
average LOS for Medicare beneficiaries hospitalized for certain EPM 
procedures without major complications or comorbidities may be already 
relatively short at 3 days we believe that we should protect immediate 
EPM beneficiary safety and optimizing health outcomes. Therefore, we 
proposed to require that participants may only discharge an EPM 
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 gives each SNF an overall rating of between 1 and 
5 stars.\134\ Those SNFs with 5 stars are considered to have much above 
average quality, and SNFs with 1 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 an EPM 
episode, especially if that discharge occurs after fewer than 3 days in 
the hospital. Because of the potential greater risks following early 
inpatient hospital discharge, we believe it is appropriate that all EPM 
beneficiaries discharged from the EPM participant to a SNF in fewer 
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.
---------------------------------------------------------------------------

    \134\ www.medicare.gov/NursingHomeCompare/
---------------------------------------------------------------------------

    As discussed in the CJR Final Rule (80 FR 73457 through 73459), 
commenters expressed concern about the variation in the number of SNFs 
across the participating MSAs rated an overall 3 stars or better that 
would qualify for the SNF 3-day rule waiver under CJR. While we 
appreciate the variation in qualifying SNFs across the participating 
MSAs, we continue to believe that we need to balance the goal of 
improved efficiency under an episode payment model through additional 
access to a covered SNF stay after an anchor hospitalization of less 
than 3 days with protecting beneficiaries from the risks of care 
stinting and premature discharge from the hospital that may result from 
the financial incentives of episode payment. We note that all 294 MSAs 
that we proposed as eligible for selection for the AMI and CABG models 
in the proposed rule have at least one SNF that passed the 3 star 
requirement from June 2015 to May 2016 and would therefore qualify for 
the waiver under our proposal. Therefore, all EPM beneficiaries would 
have access to at least one SNF in the MSA of the participant hospital 
that meets the SNF overall star rating requirement for the proposed EPM 
waiver.
    Thus, the participating hospital must discharge the beneficiary to 
a SNF that is qualified under the SNF 3-day rule waiver. We proposed 
that to be qualified under the SNF 3-day rule waiver a SNF must be 
included in the most recent calendar year quarter Five-Star Quality 
Rating System listing for SNFs on the Nursing Home Compare Web site for 
the date of the beneficiary's admission to the SNF. The qualified SNF 
must be rated an overall 3 stars or better for at least 7 of the 12 
months based on a review of the most recent rolling 12 months of 
overall star ratings. We proposed to post on the CMS Web site the list 
of qualified SNFs in advance of the calendar quarter.
    For the CJR model, we justified the waiver of the SNF 3-day rule by 
reviewing data specific to the characteristics of CJR beneficiaries, 
such as, the geometric mean hospital LOS for the MS-DRGs associated 
with lower extremity joint replacement (3 to 7 days) and the frequency 
and length of SNF usage (typically 30 days) for CJR beneficiaries. We 
stated in the CJR Final Rule that we believe this waiver is necessary 
to the model test so that CJR participant hospitals could 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, the waiver does not apply in performance year 
1, when CJR participant hospitals are not responsible for excess actual 
episode spending.
    Based on our analysis of data discussed in section III.J.3. of this 
final rule, we believe some program and patient outcome vulnerabilities 
may exist with adopting the waiver of the SNF 3-day rule for the 
proposed AMI, CABG, and SHFFT models or under future EPMs. To mitigate 
these possible vulnerabilities, we believe it will be necessary to 
determine if this waiver applies to EPMs on a model-specific basis as 
follows:
     AMI Model--AMI beneficiaries have geometric mean hospital 
LOSs that are similar to CJR beneficiaries, 2.0-4.5 days (see Table 
47). Most AMI beneficiaries, regardless of AMI medical treatment or PCI 
treatment for AMI, are not discharged to post-acute care. There is no 
research that shows increased mortality associated with the hospital 
LOS. Therefore, we believe that is may be clinically-appropriate to 
proposed to waive the SNF 3-day rule for the AMI model for episodes 
beginning on or after April 1, 2018, as participant hospitals are not 
bearing risk in their first performance year or performance year 2 
(NDR).
    We proposed that the waiver be available for the AMI 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 
AMI model participant, as the SNF would need to be in close

[[Page 501]]

communication with the EPM participant to ensure that the beneficiary 
is in the model at the time the waiver is used. We proposed that where 
the beneficiary would be eligible for inclusion in an AMI 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. A beneficiary 
would be eligible to receive services furnished under the 3-day rule 
waiver only during the AMI episode.
     CABG Model--CABG beneficiaries have a geometric mean 
hospital LOS of 6.0 to 11.6 days (see Table 47), much longer than the 
CJR model's mean LOS. While most CABG beneficiaries are discharged to 
SNFs, a mean hospital LOS well above 3 days indicates that it would not 
be clinically-appropriate for early discharges provided with this 
waiver. Therefore, we did not propose to waive the SNF 3-day rule for 
the CABG model.
     SHFFT Model--SHFFT beneficiaries have a geometric mean 
hospital LOS of 3.7-6.7 days (see Table 47), somewhat close to the CJR 
model's mean LOS. However, studies show that shorter than average 
hospital LOSs for hip fracture are associated with higher 
mortality.\135\ While most SHFFT beneficiaries are discharged to SNFs, 
a mean hospital LOS above 3 days along with a higher mortality rates 
associated with shorter than average hospital LOSs indicates that it 
would not be clinically-appropriate for early discharges provided with 
this waiver. Therefore, we proposed not to waive the SNF 3-day rule for 
the SHFFT model.
---------------------------------------------------------------------------

    \135\ http://www.ncbi.nlm.nih.gov/pubmed/19817664.
---------------------------------------------------------------------------

    We plan to monitor patterns of SNF utilization under the EPM, 
particularly with respect to hospital discharge in fewer 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 sought comment on our proposal to 
waive the SNF 3-day stay rule for stays in SNFs rated overall as 3 
stars or better following discharge from the anchor hospitalization in 
EPM episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters generally supported the proposal to allow EPM 
beneficiaries to be discharged to a SNF after less than a 3-day 
inpatient hospital stay, though one commenter recommended CMS not adopt 
its proposal to permit EPM participants under any condition to waive 
the SNF 3-Day Stay Rule when referring EPM beneficiaries to a SNF.
    Commenters urged CMS to implement the waiver on July 1, 2017, 
rather than delaying until April 1, 2018 so that providers have an 
opportunity to use the waiver and redesign care pathways in ways that 
streamline and improve the quality of care before the measurement 
period begins for cost reconciliations.
    One commenter was concerned that limiting the 3-day SNF waiver to 
discharges from the anchor hospitalization would be problematic if a 
patient is readmitted to a hospital during the 90-day post-discharge 
episode duration and subsequently needs SNF care. One commenter 
strongly suggested a broader waiver of the 3-day Rule for small and 
rural hospitals than CMS proposed.
    A few commenters requested that CMS make the SNF waiver available 
regardless of the star rating of the admitting SNF. Some of these 
commenters acknowledged the rationale for a quality requirement for the 
admitting SNF but asserted that the proposed use of the star rating 
would not be appropriate for determining the quality requirement. A 
couple of commenters asserted that the overall star rating would not 
directly correlate to an AMI episode and would therefore not be 
predictive of which SNFs would be most capable of caring for AMI 
beneficiaries under the waiver. A few commenters recommended that CMS 
modify the proposed criteria of ``at least 3 stars'' to ``at least 3 
stars overall OR at least 3 stars on both the staffing and quality 
measure components.'' Another commenter suggested the waiver apply only 
if the facility has a star-rating of four stars or above, while another 
commenter suggested the waiver apply to any SNF with a star rating of 
two stars or above. One commenter recommended that some allowance/
methodology be developed to allow new SNFs that have not received a 
Star Rating to participate in the Waiver. Another commenter was 
concerned that the demand on SNFs with three or more stars will create 
capacity issues and limit the ability to discharge patients to those 
facilities, and a few commenters were concerned that the quality 
requirement would constrain beneficiary freedom of choice.
    Response: In the CJR Final Rule, we responded to similar comments 
regarding the SNF waiver (80 FR 73456). As we discussed in the EPM 
proposed rule and the CJR Final Rule, an episode payment model like the 
CJR model or the EPM has 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 reduction 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. As discussed in the CJR Final Rule, we 
understand from many current BPCI Model 2 participants engaged in LEJR 
episodes that this waiver plays an important role in their care 
redesign efforts to streamline and improve the quality of care, as they 
work closely with their SNF partners.
    Regarding the delay in availability of the 3-day rule waiver, we 
linked the proposed availability of the 3-day rule waiver to the 
downside risk of the EPM participant. Specifically, we stated in the 
proposed rule that since EPM participants had no downside risk during 
PY 1 (for discharges prior to April 1, 2018), we were concerned that 
participants may be more likely to discharge beneficiaries to SNFs 
early leading to increased episode spending for which the participant 
would bear no responsibility. Accordingly, we proposed to delay the 
availability of the 3-day rule waiver until PY 2 for discharges on or 
after April 1, 2018 and beyond.
    In section III.D.2.c. of this final rule, based on comments 
requesting phased-in downside risk beginning later than we proposed for 
the EPM, we agreed that delaying the date by which participants would 
be required to assume downside risk would improve participants' ability 
to successfully achieve the goals of the models. Accordingly, we are 
finalizing the policy that EPM participants will not be required to 
assume downside risk until PY 3--that is, episodes ending on or after 
January 1, 2019, with anchor hospital discharges that occur on or after 
October 4, 2018 (90 days prior to January 1, 2019).
    Consistent with linking the availability of the 3-day rule waiver 
to the participant's downside risk, for this final rule, we believe it 
is appropriate to delay the availability of the 3-day rule waiver until 
PY 3. For the purposes of implementing this waiver, we will allow the 
3-day rule waiver for anchor hospital discharges that occur on or after 
October 4, 2018. We believe that implementing this waiver with an 
effective date for discharges that occur on or after October 4, 2018, 
rather than implementing this waiver with an effective date for 
episodes ending on or

[[Page 502]]

after January 1, 2019, provides clarity to the anchor hospital and the 
recipient SNF whether the waiver applies to SNF services furnished to a 
particular beneficiary. We believe this clarity is important to help 
ensure compliance with the conditions of the waiver and also improves 
our ability to operationally monitor waivers for misuse.
    Also, we are allowing participants to voluntarily elect downside 
risk for episodes ending on or after January 1, 2018 (PY 2). However, 
we will not provide the waiver for those participants who elect 
voluntary early downside risk in PY 2. It is operationally infeasible 
for us to first allow use of the waiver in different years for 
different EPM participants. We expect that most participants will not 
elect early downside risk, because we do not expect to have more robust 
risk-adjustment in place until performance year 3. Regarding responses 
to other 3-day rule comments, we believe that limiting the 3-day SNF 
waiver to discharges from the anchor hospitalization at an EPM 
participant is appropriate as the care redesign needed to support a 
clinically appropriate early discharge from an AMI anchor 
hospitalization would not necessarily support other types of hospital 
discharges that might occur during the course of an episode. We note 
that limiting use of the waiver to discharges from the anchor 
hospitalization does not preclude a beneficiary from receiving SNF care 
at other points during the 90-day episode. Medicare will continue to 
cover SNF stays for EPM beneficiaries who require SNF care and remain 
in the hospital 3 days or longer under all existing rules for Medicare 
coverage and payment of Part A-covered SNF services.
    With respect to the use of the star rating as a quality requirement 
for the admitting SNF, we believe that our proposal to limit use of the 
SNF 3-day stay rule waiver to discharges of beneficiaries to SNFs with 
an overall rating of three stars or better provides sufficient and 
appropriate protection against premature hospital discharge, especially 
in the context of the financial and quality incentives under the model 
itself. As discussed in the CJR Final Rule (80 FR 73458) we believe it 
is appropriate to restrict access to the waiver in order to ensure SNF 
quality and, therefore, protect the beneficiary from potential harm 
that could arise from the financial incentives of an episode payment 
model. We continue to believe that SNF overall ratings reflect 
important differences in quality among SNFs that are applicable to care 
of EPM beneficiaries. With respect to beneficiary choice, we note that 
imposing conditions upon a waiver to limit its use is not the same as 
restricting access to certain SNFs that would continue to be available 
to beneficiaries after a qualifying 3-day inpatient stay. Medicare will 
continue to cover SNF stays for EPM beneficiaries who require SNF care 
and remain in the hospital 3 days or longer under all existing rules 
for Medicare coverage and payment of Part A-covered SNF services, and 
these rules do not include a star rating requirement. In this way, the 
EPM waiver of the SNF 3-day stay rule is an extension of existing 
coverage for a Part A-covered SNF stay, and is not a limit to it.
    Comment: Some commenters believed that 3-day rule waiver should 
apply to the CABG and SHFFT models in addition to the AMI model. Some 
of these commenters asserted that the waiver should be available for 
all clinical episodes under the EPMs, with participant hospitals given 
the flexibility to evaluate on a case-by-cases basis when early 
discharge to a SNF is clinically appropriate and the SNF services are 
medically necessary, with some recommending that CMS also implement the 
SNF 3-day rule waiver for Medicare Advantage Organizations and all 
Shared Savings Program ACOs.
    Response: As discussed in the proposed rule, to mitigate program 
and patient outcome vulnerabilities that may exist with adopting the 
waiver of the SNF 3-day rule, we believe it will be necessary to 
determine if this waiver applies to EPMs on a model-specific basis. 
Based on our analysis of data discussed in section III.J.3. of this 
final rule, we continue to believe the 3-day rule waiver should not be 
applied to CABG and SHFFT model beneficiaries, given the typical 
severity of their clinical conditions treated with surgery that is 
followed by relatively lengthy inpatient hospital care. We will 
continue to monitor this waiver during the EPM testing to determine if 
modification of this limited waiver is warranted. We note that 
recommendations regarding the waivers under Medicare programs other 
than the EPM or CJR model are out of scope of this rule.
    Comment: One commenter recommended that instead of requiring SNF to 
insert a Treatment Authorization Code on the claim for a beneficiary in 
the model where the SNF seeks to the use the waiver, CMS should provide 
SNFs with reference numbers for EPM beneficiaries that are eligible to 
receive services under the waiver, similar to the list that CMS 
provides to ACOs under the Shared Savings Program.
    Response: Under the Shared Savings Program, beneficiaries are 
attributed to an ACO and CMS can compile and provide ACOs with a 
beneficiary assignment list for the performance year. In contrast, EPM 
episodes are triggered by admission to an EPM participant that results 
in discharge from an anchor hospitalization for a specified surgery or 
clinical condition, and it would not be practical or timely for CMS to 
compile and disseminate a prospective list of EPM beneficiaries that 
would be available to SNFs upon SNF admission.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification to waive 
the SNF 3-day rule for AMI episodes for discharges from anchor 
hospitalizations that occur on or after October 4, 2018, without 
modification of the SNF quality requirements. We will waive the SNF 3-
day rule for a beneficiary who is an AMI model beneficiary on the date 
of discharge from the anchor hospitalization only if the SNF is 
qualified at the time of the AMI model beneficiary's SNF admission. We 
define a qualified SNF as one that has an overall rating of three stars 
or better in the Five-Star Quality Rating System for SNFs on the 
Nursing Home Compare Web site for at least 7 of the 12 preceding 
months, as determined by CMS based on the most recent rolling 12 months 
of SNF star rating data available for the calendar quarter that 
includes the date of the beneficiary's admission to the SNF. We will 
post the list of qualified SNFs quarterly to the CMS Web site. If a SNF 
is on this list, the other requirements for the waiver as listed 
previously are met, and other existing Medicare coverage requirements 
are met, the SNF stay for the AMI model beneficiary will be covered 
under Part A under the AMI model SNF 3-day rule waiver.
    The SNF would insert a Treatment Authorization Code on the claim 
for a beneficiary in the AMI model where the SNF seeks to the use the 
waiver. This process would promote coordination between the SNF and the 
AMI model participant, as the SNF would need to be in close 
communication with the AMI model participant to ensure that the 
beneficiary is in the model at the time the waiver is used. Where the 
beneficiary is an AMI model beneficiary on the date of discharge from 
an anchor hospitalization, use of the waiver would be permitted where 
it is medically necessary and appropriate to discharge

[[Page 503]]

the beneficiary to a SNF prior to a 3-day inpatient stay.
    All other Medicare rules for coverage and payment of Part A-covered 
SNF services continue to apply. The waiver of the SNF 3-day rule is set 
forth at Sec.  512.610.
b. Additional Beneficiary Protections Under the SNF 3-Day Stay Rule 
Waiver
    For those specific proposed EPMs, where we proposed to allow the 
SNF 3-day rule waiver, we proposed beneficiary protections against 
financial liability in addition to the beneficiary protections 
discussed elsewhere in this final rule. In proposing additional 
beneficiary protections that may be necessary to ensure proper use of 
the SNF 3-day rule waiver under the proposed EPMs, we noted that there 
are existing, well-established payment and coverage policies for SNF 
services based on sections 1861(i), 1862(a)(1), and 1879 of the Act 
that include protections for beneficiaries from liability for certain 
non-covered SNF charges. These existing payment and coverage policies 
for SNF services continue to apply under the EPMs, including SNF 
services furnished pursuant to the SNF 3-day waiver. (For example, see 
section 70 in the Medicare Claims Processing Manual, Chapter 30--
Financial Liability Protections on the CMS Web site at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c30.pdf; and Medicare Coverage of Skilled Nursing Facility Care 
at https://www.medicare.gov/Pubs/pdf/10153.pdf; Medicare Benefit Policy 
Manual, Chapter 8--Coverage of Extended Care (SNF) Services Under 
Hospital Insurance at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.odf). In general, CMS requires that 
the SNF inform a beneficiary in writing about services and fees before 
the beneficiary is discharged to the SNF (Sec.  483.10(b)(6)); a 
beneficiary cannot be required to request extra services as a condition 
of continued stay (Sec.  483.10(c)(8)(iii)(B)); and the SNF must inform 
a beneficiary that requests an item or service for which a charge will 
be made that there will be a charge for the item or service and what 
the charge will be (Sec.  483.10(c)(8)(iii)(C)). (See also Chapter 6 of 
Medicare Coverage of Skills Nursing Facility Care at https://www.medicare.gov/Pubs/pdf/10153.pdf.)
    As discussed in the CJR Final Rule, commenters expressed concern 
regarding the lag between a CJR beneficiary's Medicare eligibility 
status change and a participant hospital's awareness of that change. 
There may be cases in which a SNF waiver is used by a participant 
hospital because the participant hospital believes that the beneficiary 
meets the criteria, based on the information available to the hospital 
and SNF at the time of the beneficiary's admission to the SNF, but in 
fact the beneficiary's Medicare eligibility status has changed and the 
hospital was unaware of it based on available information. We recognize 
that despite good faith efforts by participant hospitals and SNFs to 
determine a beneficiary's Medicare status for the model, it may occur 
that a beneficiary is not eligible to be included in the CJR model at 
the time the SNF waiver is used.
    As discussed in section V.N. of this final rule, for the CJR model 
we proposed to cover services furnished under the SNF waiver at Sec.  
510.610 when the information available to the provider at the time the 
services under the SNF waiver were furnished indicated that the 
beneficiary was included in the CJR model (see 81 FR 50968 through 
50971). Similarly for EPM, we proposed to cover services furnished 
under the SNF waiver at proposed Sec.  512.61 when the information 
available to the provider at the time the services furnished under the 
SNF waiver were furnished indicated that the beneficiary was included 
in the CJR model (see 81 FR 50941 through 50943).
    In addition, as discussed in the CJR Final Rule, we noted that we 
would continue to evaluate the waiver of the SNF 3-day rule, including 
further lessons learned from Innovation Center models in which a waiver 
of the SNF 3-day rule is being tested. We indicated that in the event 
we determine that additional safeguards or protections for 
beneficiaries or other changes were necessary, such as to incorporate 
additional protections for beneficiaries, we would propose the 
necessary changes through future rulemaking.
    We have continued to learn from implementation of the SNF 3-day 
rule waiver in the CJR model, other models, and the Shared Savings 
Program. Based on these experiences, we believe there are situations 
where it would be appropriate to require additional beneficiary 
financial protections under the SNF 3-day rule waiver for the 
applicable proposed EPMs. Specifically, we are concerned about 
potential beneficiary financial liability for non-covered Part A SNF 
services that might be directly related to use of the SNF 3-day waiver 
under the applicable EPMs. For instance, we are concerned that a 
beneficiary could be charged for non-covered SNF services if an EPM 
participant discharges a beneficiary to a SNF that does not meet the 
quality requirement (3 stars or higher in 7 of the last 12 months), and 
the beneficiary is not provided a discharge planning notice, as 
described in proposed Sec.  512.450(b). Another scenario would be where 
the EPM participant applies the SNF 3-day rule waiver for episodes that 
begin prior to April 1, 2018, when this waiver is not applicable (as 
proposed), and payment to the qualified SNF for furnishing Medicare 
covered SNF services is denied. A third scenario would be if an EPM 
participant applies the SNF 3-day rule waiver for a specific proposed 
EPM where the waiver is not allowed, such as under the CABG and SHFFT 
episodes in this final rule. In any of these circumstances, we assume 
the EPM participant's intent was to rely upon the SNF 3-day rule 
waiver, but the waiver requirements were not met. When this occurs, we 
are concerned that once the claim is rejected, the beneficiary may not 
be protected from financial liability under existing Medicare rules 
because the waiver would not be available, and the beneficiary would 
not have had a qualifying inpatient hospital stay. Thus, the EPM 
beneficiary could be charged by the SNF for non-covered SNF services 
that were a result of an inappropriate attempt to use the waiver. In 
these cases, Medicare would deny payment of the SNF claim, and the 
beneficiary could potentially be charged by the SNF for these non-
covered SNF services, potentially subjecting such beneficiaries to 
significant financial liability. We believe that the rejection of the 
claim, in these cases, could easily have been avoided if the hospital 
had confirmed that the requirements for applying of the SNF 3-day 
waiver were satisfied.
    Other models have addressed similar issues in which the beneficiary 
may be subject to financial liability for non-covered SNF services 
related to the waiver. The Next Generation ACO Model generally places 
the risk on the SNF, where the SNF did not qualify under the waiver or 
otherwise knew or reasonably could be expected to have known that 
payment would not be made for the non-covered SNF services. In such 
cases, CMS makes no payment for the services, and the SNF may not 
charge the beneficiary for the services and must return any monies 
collected from the beneficiary. Additionally, under the Next Generation 
ACO Model, the ACO must indemnify and hold the beneficiary harmless for 
the services. In the proposed rule, we stated our belief that it is 
appropriate to adopt a similar

[[Page 504]]

policy under the EPMs. In contrast to the Next Generation ACO Model, 
however, we stated our belief that it was most appropriate to hold the 
EPM participants financially responsible for misusing the waiver in 
situations where waiver requirements are not met, because EPM 
participants are required to be aware of the 3-day waiver requirements. 
EPM participants are the entities financially responsible for episode 
spending under the proposed EPMs and will make the decision as to 
whether it is appropriate to discharge a beneficiary without a 3-day 
stay.
    We proposed that EPM participants may begin using this waiver only 
for specific episodes beginning on or after April 1, 2018, and may only 
utilize the waiver to discharge a beneficiary to a SNF that meets the 
quality requirements. We proposed that EPM participants are required to 
ensure the waiver requirements of proposed Sec.  512.610 (a) and (b) 
are met. Therefore, in the proposed rule we stated our belief that it 
is reasonable that the ultimate responsibility and liability for a non-
covered SNF stay should rest with the EPM participant. We considered 
holding the SNF responsible but decided that since hospitals, not SNFs, 
are the EPM participants, they therefore should be held responsible for 
complying with the SNF 3-day rule waiver conditions for the reasons 
stated previously.
    To protect EPM beneficiaries from being charged for non-covered SNF 
charges in instances when the waiver was used inappropriately, we 
proposed to add certain beneficiary protection requirements in proposed 
Sec.  512.610. These requirements would apply for SNF services that 
would otherwise have been covered except for lack of a qualifying 3-day 
hospital stay. Specifically, we proposed if, subsequent to an EPM 
participant applying the SNF 3-day rule waiver, we determine that the 
following waiver requirements were not met then the EPM participant 
will be financially liable for the SNF stay:
     The EPM participant discharges a beneficiary that is in a 
specific EPM where the SNF 3-day rule waiver does not apply.
     The EPM participant discharges a beneficiary prior to 
April 1, 2018 (as proposed), where the SNF 3-day rule waiver does not 
apply.
     The EPM participant discharges a beneficiary to a SNF that 
does not meet the quality requirement (3 stars or higher in 7 of the 
last 12 months) and does not provide a discharge planning notice, as 
described in proposed Sec.  512.450(b), to the beneficiary alerting 
them of potential financial liability.
    In these preceding instances, we proposed to apply the following 
rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services, and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the non-
covered SNF services furnished during the SNF stay.
    In addition, if the EPM participant discharges an EPM beneficiary 
to a SNF that does not meet the quality requirement (3 stars or higher 
in 7 of the last 12 months) and a discharge planning notice, as 
described in proposed Sec.  512.450(b), is provided to the EPM 
beneficiary alerting them of potential financial liability then the 
hospital will not be financially liable for the cost of the SNF stay 
and the normal Medicare FFS rules for coverage of SNF services will 
apply.
    The discharge notice absolves the EPM participant of liability. 
However, we are requiring EPM participants to keep a record of 
discharge planning notice distribution to EPM beneficiaries. We will 
monitor EPM participants' use of discharge notification letters to 
protect EPM beneficiaries from potential abuse of the waiver. 
Nevertheless, we recognize there are some situations in which a 
beneficiary may wish to be discharged before a qualifying 3-day stay 
and may accept financial liability for a non-qualifying stay, in which 
case the participant hospital will not be held financially liable for 
the SNF stay. Therefore, when the EPM participant has discharged a 
beneficiary to a SNF that does not qualify under the conditions of the 
waiver, we believe it is reasonable that the ultimate responsibility 
and financial liability for a non-covered SNF stay should rest with the 
EPM participant. We will communicate with hospitals and SNFs about how 
a hospital would pay SNFs for non-qualifying services provided.
    We sought comment on these proposals. Specifically, we sought 
comment on whether it is reasonable to: (a) Cover services furnished 
under the SNF waiver based on the EPM participant's knowledge of 
beneficiary eligibility for the applicable proposed EPMs, as determined 
by Medicare status, at the time the services under the waiver were 
furnished; and (b) to hold the EPM participant financially responsible 
for rejected SNF claims as a result of lack of a qualifying inpatient 
hospital stay in cases where the EPM participant discharges a 
beneficiary to a SNF that did not qualify for waiver use and did not 
provide the beneficiary with a discharge planning notice. We sought 
comment on whether SNFs instead of, or in addition to, the EPM 
participant should be held liable for such claims and under what 
circumstances. Finally, we sought comment on any other related issues 
that we should consider in connection with these proposals to protect 
beneficiaries from significant financial liability for non-covered SNF 
services related to the waiver of the SNF 3-day rule under the proposed 
EPMs. We may address those issues through future notice and comment 
rulemaking.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed support for CMS' proposal to 
cover services furnished under the SNF waiver based on an EPM 
participant's knowledge of beneficiary eligibility for the EPM at the 
time the services under the waiver were furnished. A few commenters 
sought clarification whether CMS was proposing this policy for both the 
CJR model and the EPM, though these same commenters expressed their 
support and asserted that the same protection should be extended to 
both CJR and EPM beneficiaries.
    Response: We appreciate commenters' support for this proposed 
policy. We will finalize our proposal to cover services furnished under 
the SNF waiver based on the EPM participant's knowledge of beneficiary 
eligibility for the applicable proposed EPMs, as determined by Medicare 
status, at the time the services under the waiver were furnished. We 
refer readers to section V.N. of this final rule for a discussion of 
the additional beneficiary protections under the SNF 3-day stay rule 
waiver for CJR beneficiaries.
    Comment: Commenters agreed that beneficiaries should not be charged 
for non-covered SNF charges in instances where the EPM participant 
discharges a beneficiary to a SNF that did not qualify for waiver use 
and did not provide the beneficiary with a discharge planning notice. 
Some commenters asserted that hospitals should not be solely 
responsible for non-covered SNF services resulting from discharging a 
beneficiary to a SNF that does not meet the quality requirement as it 
is challenging for hospitals to keep track of changes in SNF ratings or 
to identify EPM beneficiaries in a timely manner. A few of these 
commenters recommended that CMS provide EPM participants with a list of 
eligible SNFs on a quarterly or periodic basis.
    A couple of commenters expressed concern that independent 
physicians could refer and admit a beneficiary to a SNF that does not 
meet the quality

[[Page 505]]

requirement without including the hospital, yet the hospital would be 
financially liable for the non-covered SNF stay under the proposed 
policy. Some commenters suggested that the SNF should share in 
financial liability for non-covered SNF services related to misuse of 
the waiver as the SNF is providing and billing for these non-covered 
services, and CMS should consider ways in which it could ensure the 
SNFs take steps to ensure that patients discharged to the SNF with less 
than a 3-day inpatient stay qualify to receive services under the 
waiver.
    Response: We appreciate commenters' support for our proposal that 
beneficiaries should not be charged for non-covered SNF charges in 
instances where the EPM participant discharges a beneficiary to a SNF 
that did not qualify for waiver use and did not provide the beneficiary 
with a discharge planning notice.
    As discussed in the previous section, we proposed that to be 
qualified under the SNF 3-day rule waiver a SNF must be rated an 
overall 3 stars or better for at least 7 of the 12 months based on a 
review of the most recent rolling 12 months of overall star ratings, 
and we proposed to post on the CMS Web site the list of qualified SNFs 
in advance of the calendar quarter.
    As discussed in the previous section, the waiver of the SNF 3-day 
rule only applies to circumstances where the beneficiary is medically 
appropriate for discharge and requires a SNF stay after less than a 3-
day inpatient hospital stay. Medicare will continue to cover SNF stays 
for EPM beneficiaries who require SNF care and remain in the hospital 3 
days or longer under all existing rules for Medicare coverage and 
payment of Part A-covered SNF services, and these rules do not include 
a star rating requirement. In this way, the EPM waiver of the SNF 3-day 
stay rule is an extension of existing coverage for a Part A-covered SNF 
stay, and is not a limit to it. An EPM participant that believes it is 
incapable of identifying qualifying SNFs or EPM beneficiaries is not 
required to use the waiver.
    As discussed in the previous section, the waiver provides EPM 
participants with additional flexibilities to redesign care in order to 
maximize quality and efficiency, as well as reduce episode spending and 
generate hospital internal cost savings. Therefore, we believe that it 
is appropriate to hold the EPM participants financially responsible for 
misusing the waiver in situations where waiver requirements are not 
met.
    We acknowledge that an independent physician might refer a 
beneficiary to a SNF that does not qualify under the waiver. However, 
we believe that the established process for discharge planning would 
typically involve the hospital. EPM participants are required to be 
aware of the 3-day waiver requirements, and the EPM participants will 
make the decision as to whether it is appropriate to discharge a 
beneficiary without a 3-day stay. We note that if the beneficiary 
chooses a SNF that does not qualify under the waiver based on a 
physician's recommendation and the hospital provides proper 
notification of non-coverage, the beneficiary would be financially 
liable for the SNF stay, while the EPM participant would not be 
financially liable for the SNF stay.
    We considered the suggestions of commenters that SNFs share in 
financial liability for non-covered SNF services related to the waiver 
of the SNF 3-day rule under the proposed EPMs. EPM participants are 
required to be aware of the 3-day waiver requirements. SNFs are not EPM 
participants, and we believe that SNFs will rely upon the hospital, as 
the EPM participant, to determine whether use of the waiver is 
appropriate. As we gain experience with the EPM, we may revisit this 
issue in future rulemaking.
    Comment: One commenter suggested that CMS assume responsibility for 
providing the beneficiary notice as an objective, informed and trusted 
voice in this process. Another commenter requested that CMS provide 
clarification as to what an EPM participant needs to maintain as 
documentation showing the hospital has provided the proper discharge 
notice to the patient prior to discharge, which would absolve the EPM 
participant of financial liability if the SNF waiver is not 
appropriate. One commenter recommended that CMS require EPM participant 
to inform beneficiaries of their options, including (1) waiving the 3-
day hospital stay and going to a 3-star or higher rated SNF with no 
additional financial consequences for the beneficiary; (2) beneficiary 
can opt to stay in the hospital the full 3 days and then select a SNF 
of their choosing regardless of star status; or (3) beneficiary can 
accept the 3-day stay waiver and choose any SNF understanding that they 
are liable for the full cost of that care, as it would not be a 
Medicare eligible expense. One commenter urged CMS to modify its 
proposal so that beneficiaries are held harmless for non[hyphen]covered 
SNF services for which they are referred by the originating hospital, 
regardless of whether a discharge planning notice is provided.
    Response: As discussed in section III.G. of this final rule, 
hospitals are required to provide beneficiaries with written 
notification of their post-acute care options upon discharge. Given the 
existing relationship between the hospital and the patient, and the 
hospital's established role in discharge planning, we believe that it 
is appropriate to require the EPM participant to provide beneficiaries 
with written notification if the EPM participant makes any referrals 
for non-covered services as part of the discharge planning process. We 
do not believe that it would be practical or consistent with existing 
Medicare policy for CMS to provide the beneficiary with notice at time 
of discharge if the SNF waiver is not appropriate and the services 
would not be covered. With respect to the commenter's suggested 
approach for notifying the beneficiary of the range of options 
available post-discharge, we refer to section III.G. of this final rule 
for discussion of discharge planning requirements for EPM participants 
and the essential elements that are required for proper beneficiary 
notification.
    Comment: One commenter was concerned that the proposal does not 
address cases in which Medicare accepts a beneficiary's appeal of 
Medicare Provider Non-Coverage after the discharging physician 
determined not to certify that patient for Skilled Nursing Facility 
(``SNF'') care. The commenter believes that CMS should not penalize EPM 
participant for cases where Medicare allowed an appeal.
    Response: Under this proposal, if the EPM participant provides the 
beneficiary with proper notification that the SNF stay would not be 
covered, the hospital would not be financially liable for the non-
covered SNF stay regardless of the results of a beneficiary's appeal of 
Medicare Provider Non-Coverage.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
cover services furnished under the SNF waiver based on the EPM 
participant's knowledge of beneficiary eligibility for the applicable 
proposed EPMs, as determined by Medicare status at the time the 
services under the waiver were furnished. We are also finalizing the 
proposal, without modification, to hold the EPM participant financially 
responsible for rejected SNF claims if an EPM beneficiary is discharged 
to a SNF without a qualifying 3-day inpatient stay, but the SNF is not 
on the qualified list as of the date of admission to the SNF, and the 
EPM participant has failed to provide a discharge planning notice as 
specified in Sec.  512.450(b)(3). Specifically, if subsequent to an EPM 
participant applying the SNF 3-day rule waiver, we determine that the 
following

[[Page 506]]

waiver requirements were not met then the EPM participant will be 
financially liable for the SNF stay:
     The EPM participant discharges a beneficiary that is in a 
specific EPM where the SNF 3-day rule waiver does not apply.
     The EPM anchor hospital discharges a beneficiary prior to 
October 4, 2018 (as finalized in section III.J.6.a. of this final 
rule), where the SNF 3-day rule waiver does not apply.
     The EPM participant discharges a beneficiary to a SNF that 
does not meet the quality requirement (3 stars or higher in 7 of the 
last 12 months) and does not provide a discharge planning notice, as 
described in proposed Sec.  512.450(b)(3), to the beneficiary alerting 
them of potential financial liability.
    In these preceding instances, we proposed to apply the following 
rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services, and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the non-
covered SNF services furnished during the SNF stay.
    The final policies for financial liability for non-covered SNF 
services provided due to incorrect application of the SNF 3-day rule 
waiver are set forth in Sec.  512.610(c).
7. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount
    In order to make a reconciliation payment to or carry out 
recoupment from a participant that results from the NPRA calculation 
for each performance year as discussed in section III.D.5. of this 
final rule, we believe we would need to waive certain Medicare program 
rules. Therefore, in accordance with the authority in section 
1115A(d)(1) of the Act, we proposed to 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 EPM participants selected in accordance with 
CMS's proposed selection methodology. In addition, our proposals on 
reconciliation payments or repayments would not change beneficiary 
cost-sharing from the regular Medicare program cost-sharing for the 
related Part A and Part B services that were paid for CJR 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 an EPM participant. We 
sought comment on our proposed waivers related to repayment and 
recoupment actions as a result of the NPRA calculated.
    We did not receive any comments suggesting changes to this waiver 
thus, we are finalizing the proposal, without modification, to 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 EPM participants 
selected in accordance with CMS's proposed selection methodology. In 
addition, reconciliation payments or repayments would not change 
beneficiary cost-sharing from the regular Medicare program cost-sharing 
for the related Part A and Part B services that were paid for EPM 
beneficiaries and aggregated to determine actual episode spending in 
the calculation of the NPRA. We therefore are waiving 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 an EPM 
participant. The waiver of deductible and coinsurance that otherwise 
apply to reconciliation payments or repayments is set forth at Sec.  
512.620.
8. New Waiver for Providers and Suppliers of Cardiac Rehabilitation and 
Intensive Cardiac Rehabilitation Services Furnished to EPM 
Beneficiaries During an AMI or CABG Episode
    A cardiac rehabilitation (CR) program, as defined in Sec.  
410.49(a) of the regulations, means a physician-supervised program that 
furnishes physician prescribed exercise, cardiac risk factor 
modification, psychosocial assessment, and outcomes assessment. An 
intensive cardiac rehabilitation (ICR) program, as defined in Sec.  
410.49(a) of the regulations, means a physician-supervised program that 
furnishes cardiac rehabilitation and has shown, in peer-reviewed 
published research, that it improves patients' cardiovascular disease 
through specific outcome measurements described in Sec.  410.49(c).
    Services provided under CR and ICR programs may be furnished to EPM 
beneficiaries during the proposed AMI and CABG episodes. We note that 
all EPM beneficiaries in an AMI or CABG episode would meet CMS's 
coverage criteria for CR and ICR services.
    Section 410.49(f) describes the limitations of coverage of cardiac 
rehabilitation programs. The coverage requirements of CR limits the 
number of cardiac rehabilitation program sessions to a maximum of 2 
one-hour sessions per day for up to 36 sessions over a period up to 36 
weeks with the option for an additional 36 sessions over an extended 
period of time if approved by the MAC under section 1862(a)(1)(A) of 
the Act. Intensive cardiac rehabilitation program sessions are limited 
to 72 one-hour sessions (as defined in section 1848(b)(5) of the Act), 
up to 6 sessions per day, over a period of up to 18 weeks. In section 
VI. of this final rule, we are making a payment adjustment under the 
AMI and CABG models to account for and possibly incentivize the 
provision of CR and ICR services beyond what has historically been 
provided during AMI and CABG episodes. In addition, we believe that 
waiving certain CR/ICR program requirements may also increase the use 
of these beneficial services under the AMI and CABG models.
    We reviewed the following physician functions required under Sec.  
410.49 in furnishing CR/ICR services:
     Medical director--defined at Sec.  410.49(a) as a 
physician that oversees or supervises the cardiac rehabilitation or 
intensive rehabilitation program at a particular site.
     Supervising physician--defined at Sec.  410.49(a) as a 
physician that is immediately available and accessible for medical 
consultations and medical emergencies at all times items and services 
are being furnished to individuals under cardiac rehabilitation and 
intensive cardiac rehabilitation programs.
     Physician-prescribed exercise--defined at Sec.  410.49(a) 
as aerobic exercise combined with other types of exercise (that is, 
strengthening, stretching) as determined to be appropriate for 
individual patients by a physician.
     Individualized treatment plan--defined at Sec.  410.49(a) 
as a written plan tailored to each individual patient that, under Sec.  
410.49(b)(2)(v), must be established, reviewed, and signed by a 
physician every 30 days.
    Under Sec.  410.49(a), and Sec.  1861(r)(1) of the Act, a physician 
is defined as a doctor of medicine or osteopathy. Section 410.49(b)(3) 
states that Medicare Part B pays for CR/ICR in a physician's office or 
in a hospital outpatient setting. All settings must have a physician 
immediately available and accessible for medical consultations and 
emergencies at all times when items and services are being furnished 
under the program. This

[[Page 507]]

provision is satisfied if the physician meets the requirements for 
direct supervision for physician office services, at Sec.  410.26 of 
this subpart; and for hospital outpatient services at Sec.  410.27 of 
this subpart.
    To provide greater program flexibility that might increase the 
availability of CR and ICR services furnished to EPM beneficiaries in 
AMI and CABG episodes, we proposed to provide a waiver to the 
definition of a physician to include a nonphysician practitioner 
(defined for the purposes of this waiver as a physician assistant, 
nurse practitioner, or clinical nurse specialist as authorized under 
sections 1861(s)(2)(K)(i) and (ii) of the Act and defined in section 
1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 410.75, and 410.76 of 
the regulations). Thus, this waiver will allow, in addition to a 
physician, a nonphysician practitioner to perform the functions of 
supervisory physician, prescribing exercise, and establishing, 
reviewing, and signing an individualized treatment plan for a provider 
or supplier of CR and ICR services furnished to an EPM beneficiary 
during an AMI or CABG episode. We do not believe a nonphysician 
practitioner is qualified to act in the capacity of a medical director. 
Thus, we proposed to specifically exclude the medical director function 
from this waiver. In addition, we proposed that all other definitions 
and requirements related to a physician or supervising physician under 
Sec.  410.49 continue to apply. We proposed to codify this waiver at 
Sec.  512.630.
    For an EPM beneficiary in an AMI or CABG episode, we proposed that 
this waiver will apply to any provider or supplier that furnishes CR 
and ICR services to that beneficiary. We anticipate monitoring outcomes 
of care for EPM beneficiaries that receive CR and ICR services under 
this waiver during an AMI or CABG episode. The monitoring may involve 
an analysis of all or a sample of claims, medical records, or other 
clinical data for AMI and CABG model beneficiaries and providers or 
suppliers of CR and ICR services. We solicited comments on approaches 
we may take to monitor this waiver to ensure this program flexibility 
does not have a negative effect on how beneficiaries receive CR and ICR 
services which then may affect the outcome of the EPM beneficiary's 
care.
    We also reviewed other program requirements, such as waiving 
beneficiary cost-sharing, allowing home nursing visits/home monitoring, 
and allowing telehealth visits in the home under the AMI and CABG 
models. We did not find clinical data and literature that we believed 
sufficient to support propose any additional waivers to the CR/ICR 
program requirements in this final rule. We solicited comments on the 
proposed CR/ICR waiver to allow nonphysician practitioners to perform 
the aforementioned physician functions specified for the provision of 
CR/ICR services, as well as comments on possible other CR/ICR program 
requirement waivers.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed appreciation and support for the 
proposed waiver, though a number of commenters stated that implementing 
this kind of regulatory flexibility for only a subset of CR/ICR 
patients that are AMI and CABG beneficiaries in the CR/ICR program 
would have limited impact on increasing the availability of CR/ICR 
services. The commenters observed that providers and suppliers of CR/
ICR services still would have to comply with physician supervision 
requirements for patients other than AMI and CABG beneficiaries. As a 
result, the added flexibility will not occur in practice, limiting its 
intended effect. Thus, the commenters recommend implementation of a 
site-specific rather than a condition-specific physician supervision 
waiver which should be extended to all Medicare beneficiaries receiving 
CR/ICR services at designated institutions.
    Some commenters recommended that CMS consider applying this waiver 
to all CR and ICR programs, including those in the control groups, as 
it would benefit the entire Medicare patient population. Some of these 
commenters asserted that the effects of the waiver and the incentive 
payment will be confounded in the EPMs and CR incentive payment model 
as proposed, while extending the waiver to all CR/ICR programs would 
allow CMS to isolate the impact of the EPMs and CR incentive payment on 
model participants.
    Response: We appreciate the commenters' interest in ensuring the 
availability of CR/ICR services for AMI and CABG model beneficiaries, 
including those beneficiaries who would also be in the CR incentive 
payment model. We proposed a waiver that would allow, in addition to a 
physician, a nonphysician practitioner to perform the functions of 
supervisory physician, prescribing exercise, and establishing, 
reviewing, and signing an individualized treatment plan for a provider 
or supplier of CR and ICR services furnished to an AMI or CABG 
beneficiary during an AMI or CABG episode. We appreciate that as 
proposed for AMI and CABG beneficiaries alone, the physician functions 
of prescribing exercise and establishing, reviewing, and signing an 
individualized treatment plan for a provider or supplier of CR and ICR 
services are individual beneficiary-specific actions. In other words, a 
nonphysician practitioner can prescribe the exercise and sign an 
individualized CR/ICR treatment plan for an AMI or CABG beneficiary as 
part of that beneficiary's care, with no relationship to the other 
Medicare beneficiaries not in the AMI or CABG model but receiving CR/
ICR services for whom these two individual activities would continue to 
be required to be performed by a physician. Therefore, the waiver to 
allow a nonphysician practitioner to perform these two physician 
functions should be useful for AMI and CABG beneficiaries to facilitate 
timely referral and initiation of CR/ICR services.
    We acknowledge that the third physician function that we proposed 
to waive, specifically that of physician supervision for CR/ICR 
services, to allow a nonphysician practitioner to supervise CR/ICR 
services for AMI and CABG beneficiaries is a different circumstance. 
Our understanding is that most CR/ICR programs operate during hours 
where multiple patients receive treatment in the CR/ICR program during 
the same period of time, all supervised by one physician while the 
beneficiaries' care is being furnished by clinical staff of the 
program. Therefore, it may be challenging for providers and suppliers 
of CR/ICR services to actually make meaningful use of the waiver of the 
physician supervision requirement for CR/ICR services furnished to AMI 
and CABG beneficiaries during operating hours of a CR/ICR program where 
other patients are also being seen who still require physician 
supervision.
    As the commenters pointed out, we also appreciate that providing a 
site-specific waiver of physician supervision for CR/ICR services to 
allow a nonphysician practitioner to supervise these services in a CR/
ICR program at that site could provide more meaningful flexibilities 
that could expand the availability of CR/ICR services for AMI and CABG 
beneficiaries, consistent with our rationale for proposing this waiver. 
However, while some commenters arguing in favor of CR/ICR site-specific 
waivers of the physician supervision function, rather than the proposed 
limitation of the waiver only to AMI and CABG beneficiaries, 
recommended that we provide the waiver for CR/ICR services at specific 
institutions, AMI and CABG beneficiaries have complete freedom of 
choice to obtain care from

[[Page 508]]

any provider or supplier throughout AMI and CABG episodes, as discussed 
in section III.G.2. of this final rule. Therefore, we are not confident 
that we could identify specific institutions for a site-specific CR/ICR 
physician supervision waiver and still preserve AMI and CABG 
beneficiary freedom of choice of providers and suppliers, if certain 
institutions were afforded the opportunity under the AMI and CABG 
models to furnish CR/ICR services with more flexibility to AMI and CABG 
beneficiaries and others were not.
    The other possibility we considered in response to commenters' 
concerns was providing the waiver of physician supervision to any CR/
ICR site where an AMI or CABG beneficiary was being treated, an 
approach that would provide the same flexibilities regarding CR/ICR 
services to any CR/ICR provider or supplier chosen by the AMI or CABG 
beneficiary, thereby not interfering with beneficiary freedom of 
choice. However, this latter scenario would greatly expand the CR/ICR 
physician supervision waiver by potentially applying it to the CR/ICR 
services furnished to a large number of Medicare beneficiaries who are 
not in the AMI or CABG model just because they are being treated in the 
same CR/ICR program as even a single AMI or CABG beneficiary. While 
some commenters urged us to apply the proposed CR/ICR physician 
supervision waiver to all CR/ICR programs, including those in the AMI 
and CABG model control groups, based on their rationale that it would 
benefit the entire Medicare patient population, we may only provide 
waivers that are necessary to test the AMI and CABG models with regard 
to the cost and quality of care for AMI and CABG beneficiaries, not 
those that we believe would benefit all Medicare beneficiaries. 
Therefore, we do not believe such an expansion is necessary to test the 
AMI and CABG models.
    We continue to believe that the proposed waiver that would allow, 
in addition to a physician, a nonphysician practitioner to perform the 
functions of supervisory physician, prescribing exercise, and 
establishing, reviewing, and signing an individualized treatment plan 
for a provider or supplier of CR and ICR services furnished to an AMI 
or CABG beneficiary during an AMI or CABG episode is a waiver that is 
necessary to test the AMI and CABG models. At this time, we will not 
modify the proposed waiver to expand the waiver of the CR/ICR physician 
supervision requirement to any beneficiaries that are not in AMI or 
CABG episodes. We will continue to seek input from AMI and CABG model 
participants, including those who are also EPM-CR participants, 
throughout implementation of the models and may consider making future 
proposals if we observe that limited availability of CR/ICR services is 
affecting beneficiaries' access to CR/ICR services under the models.
    Comment: Some commenters expressed their support for a current 
legislative bill that would expand access to cardiac rehabilitation by 
allowing physicians assistants, nurse practitioners and clinical nurse 
specialists to supervise cardiac, intensive cardiac and pulmonary 
rehabilitation programs. The commenters requested that CMS provide 
Congress with data from the AMI and CABG models that support the value 
of cardiac rehabilitation.
    Response: Upon receiving a specific request from Congress, the 
Secretary will provide the necessary technical assistance.
    Comment: Some commenters sought clarification whether the proposed 
waiver would allow nonphysician practitioners to independently refer, 
that is, sign the order for CR/ICR services, per state scope of 
practice laws, therefore directly addressing the delay between hospital 
discharge, referral, and enrollment into CR/ICR services.
    Response: The waiver of physician definition for prescribing 
exercise would allow nonphysician practitioners to independently sign 
the order for CR/ICR services, subject to state scope of practice laws.
    Comment: A few commenters recommended that CMS extend the waiver to 
allow qualified nonphysician practitioners to perform the functions of 
a Medical Director for a provider or supplier of CR or ICR services.
    Response: We do not believe that extending the waiver to cover the 
functions of the Medical Director is medically appropriate for testing 
the AMI and CABG models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
provide a waiver to the definition of a physician to include a 
nonphysician practitioner (defined for the purposes of this waiver as a 
physician assistant, nurse practitioner, or clinical nurse specialist 
as authorized under sections 1861(s)(2)(K)(i) and (ii) of the Act and 
defined in section 1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 
410.75, and 410.76 of the regulations). Thus, this waiver will allow, 
in addition to a physician, a nonphysician practitioner to perform the 
functions of supervisory physician, prescribing exercise, and 
establishing, reviewing, and signing an individualized treatment plan 
for a provider or supplier of CR and ICR services furnished to an EPM 
beneficiary during an AMI or CABG episode. The waiver of physician 
definition for furnishing cardiac rehabilitation and intensive cardiac 
rehabilitation services to an EPM beneficiary is set forth at Sec.  
512.630.
K. Data Sharing
1. Overview
    In section III.D.2. (81 FR 50843 through 50845) of the proposed 
rule, we proposed models similar to the CJR model, to financially 
incentivize EPM participants to engage in care redesign efforts to 
improve quality of care and reduce spending for the aggregate Part A 
and B FFS spending for beneficiaries included in the models during the 
inpatient hospitalization and 90 days post-discharge. Consistent with 
the CJR model, we proposed retrospective bundled payment models that 
would provide financial incentives for EPM participants to work with 
other health care providers and suppliers to improve the quality and 
efficiency of care for Medicare beneficiaries by paying EPM 
participants or holding them responsible for repaying Medicare based on 
EPM participants' performance with respect to the quality and spending 
for AMI, CABG, and SHFFT episodes.
    In addition to the CJR model, we have experience with a range of 
efforts designed to improve care coordination for Medicare 
beneficiaries through financial incentives similar to those proposed, 
including the Shared Savings Program, the Pioneer ACO model and the 
BPCI initiative, all of which make certain data available to 
participants to better enable them to achieve their goals. For example, 
participants in the Shared Savings Program initially receive aggregate 
information on their historical financial performance as well as 
quarterly data throughout their tenure in the program. In addition, 
Shared Savings ACOs receive certain beneficiary-identifiable claims 
information in accordance with our regulations. As noted in the June 9, 
2015 Medicare Shared Savings Program final rule (80 FR 32733), ACOs 
participating in the Shared Savings Program have reported that the 
beneficiary-identifiable claims data that they receive from CMS are 
being used effectively to better understand the FFS beneficiaries that 
are receiving services from their providers. As stated in that rule, 
these data give ACOs valuable insight into patterns of care for their 
beneficiary population and enable them to improve

[[Page 509]]

care coordination among and across providers and suppliers and sites of 
care. Similarly, participants in the Pioneer ACO model were given the 
ability to request historical claims data of beneficiaries aligned with 
the particular Pioneer ACO entity. (For more information see the CMS 
Web site 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 claims data regarding their own patients, both for 
the historical period 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 making 
certain data available to EPM participants can have a salutary effect 
on their performance and is necessary for them to, among other things, 
adequately structure their care pathways, coordinate care for 
beneficiaries, make practice changes supported under the models, 
identify services furnished to beneficiaries receiving services under 
the models, and estimate spending across provider types within EPM 
episodes. Further, we believe that providing EPM participants with 
certain claims and summary information on beneficiaries in accordance 
with applicable privacy and security laws and established privacy and 
security protections would improve their ability to monitor their 
performance and understand the totality of care provided during an 
episode of care. With this greater awareness and understanding, we 
anticipate that EPM participants would be better equipped to evaluate 
and modify their practice patterns and actively manage care delivery so 
that care for beneficiaries is better coordinated, quality and 
efficiency are improved, and payments are aligned more appropriately to 
the medically necessary services beneficiaries have a right to receive.
    Accordingly, in the proposed rule, we proposed to provide EPM 
participants in the proposed AMI, CABG, and SHFFT models with 
beneficiary-level claims data for the historical period used to 
calculate their episode benchmark and quality-adjusted target prices as 
well as with ongoing quarterly beneficiary-identifiable claims data in 
response to their request for such data in accordance with our 
regulations (81 FR 50944 through 50946). Given that we also proposed to 
incorporate regional pricing in the calculation of benchmark and 
quality-adjusted target prices, we also proposed to provide EPM 
participants with aggregate regional data (81 FR 50945). Our proposal 
to make these data available to EPM participants was included in Sec.  
512.350. We note that, consistent with CJR, the EPM participant with 
which we would share data is the acute care hospital that is held 
accountable for spending during the episode of care. We believe our 
proposal to share data as we do under the CJR model would be the most 
effective approach under the proposed AMI, CABG, and SHFFT models, and 
that proposing different processes for these models would increase 
administrative complexity for CMS and model participants as well as 
create confusion, especially given that we proposed in section III.B.1. 
of the proposed rule (81 FR 50813) that some of the hospitals 
participating in CJR would also participate in the proposed EPMs. We 
requested comments on these proposals, particularly regarding possible 
ways, if any, to further align our proposed policies with those 
finalized under the CJR model, as well as any appropriate bases for 
treating these models differently.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters requested that CMS explicitly encourage 
the use of health IT to allow clinicians to communicate across settings 
of care. A commenter further suggested that CMS encourage post-acute 
care adoption of health information technology through incentives. The 
commenter stated that to date, there has not been a focus on post-acute 
care health information technology adoption or any standardization of 
data sharing platforms for clinical, financial or patient experience 
data between acute and post-acute care providers.
    Response: While we do not explicitly require the use of health 
information exchange mechanisms in this final rule for all proposed EPM 
tracks, we do encourage EPM participants to collaborate with their 
post-acute care providers in their care redesign and to the extent that 
health information technology (health IT) is useful to that end we 
would encourage its use. Providing incentives for such use is beyond 
the scope of this final rule but in the evaluation of the EPMs we will 
certainly look to see the impact that health IT has on care 
coordination to the extent that participants use health IT to 
communicate with their preferred post-acute care providers.
2. Beneficiary Claims Data
    As we stated in the proposed rule, based on our experience with 
BPCI and CJR participants, we recognize that EPM participants could 
vary with respect to the kinds of beneficiary claims information that 
would be most helpful. For example, we believe that while many EPM 
participants might have the ability to analyze raw claims data, other 
EPM participants could find it more useful to have a summary of these 
data. Given this, we proposed to make beneficiary claims information 
for AMI, CABG, and SHFFT episodes available through two formats both 
for the baseline period and on an ongoing basis during their 
participation in the model as we do for CJR (81 FR 50944-50945).
    First, for EPM participants that lack the capacity to analyze raw 
claims data, we proposed to provide summary beneficiary claims data 
reports on beneficiaries' use of health care services during the 
baseline and performance periods upon request and in accordance with 
applicable privacy and security laws and established privacy and 
security protections. Such summary reports would 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 EPM participant reflected that, relative to their peers, a 
certain provider was associated with significantly higher rates of 
inpatient readmissions than the rates experienced by other 
beneficiaries with similar care needs, that may be evidence that the 
EPM participant could consider, among other things, the appropriateness 
of 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.
    Such reports would allow EPM participants to assess summary data on 
their relevant beneficiary population without requiring a more 
complicated analysis of raw claims data.
    Therefore, for both the baseline period and on a quarterly basis 
during an EPM participant's performance period, we proposed to provide 
EPM participants with an opportunity to request summary claims data 
that would encompass the total expenditures and claims for episodes 
under the proposed AMI, CABG, and SHFFT models in which they are 
participating, including the procedure, inpatient stay, and all related

[[Page 510]]

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 EPM participant's beneficiaries with an anchor 
diagnosis at discharge that is included under one of the proposed AMI, 
CABG, or SHFFT models.
    We also proposed that these summary claims data reports, at a 
minimum, would also contain payment information, based upon the 
following categories for each episode initiated under the models:
     Inpatient.
     Outpatient.
     Skilled Nursing Facility.
     Home Health.
     Hospice.
     Carrier/Part-B.
     Durable Medical Equipment.
    These files would provide summary spending data such as episode 
counts, total average spending for each episode, and a breakdown of the 
episode counts and spending averages by each of the most common 
categories listed previously (for example, Inpatient, Outpatient, 
etc.). These reports should allow participants to assess summary data 
on their relevant beneficiary population without requiring analysis of 
raw claims data.
    Alternatively, for EPM participants with the capacity to analyze 
raw claims data, we proposed to make more detailed beneficiary-level 
information available upon request and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. These files would be much more detailed and include all 
beneficiary-level raw claims for all of the categories listed for each 
episode payment model episode. In addition, they would include episode 
summaries, indicators for excluded episodes, diagnosis and procedure 
codes, and enrollment and dual eligibility information for 
beneficiaries that initiate AMI, CABG, and SHFFT episodes. Through 
analysis, these detailed claims data would provide EPM participants 
with information to improve their ability to coordinate and target care 
strategies, as well as information to monitor, understand, and manage 
utilization and expenditure patterns. Such data would also aid them in 
developing, targeting, and implementing quality improvement programs 
and initiatives. We proposed that the data files would be packaged and 
sent to a data portal (to which the EPM participants must request and 
be granted access) in a ``flat'' or binary format for the EPM 
participant to retrieve. We would also note that, for both the summary 
and more detailed claims data, information that is subject to the 
regulations governing the confidentiality of alcohol and drug abuse 
patient records (42 CFR part 2) would be excluded from the data shared 
with an EPM participant. Our proposal to make available to EPM 
participants, through the most appropriate means, data that CMS 
determines may be useful to EPM participants to determine appropriate 
ways to increase the coordination of care, improve quality, enhance 
efficiencies in the delivery system, and otherwise achieve the goals of 
the proposed episode payment models was included in Sec.  512.350. 
Further, CMS would make beneficiary-identifiable data available to an 
EPM participant in accordance with applicable privacy and security laws 
and only in response to the EPM participant's request for such data for 
a beneficiary who has been furnished a billable service by the 
participant corresponding to the episode definitions for AMI, CABG, and 
SHFFT episodes.
    We requested comments on this proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters overwhelmingly supported our proposal to make 
data, in the form of raw claims and summary format, available upon 
request. Multiple commenters stated that meaningful and accurate data 
is a necessity for success under the CJR model and will be critical to 
success under the proposed EPMs. However, some commenters had 
suggestions on how to improve the data that we proposed to provide 
based on their experiences with other CMS models such as CJR and BPCI. 
These commenters stated that they have heard from multiple BPCI and CJR 
participants that there is a need for more sophisticated data in order 
to better understand performance and opportunities for improvement. 
They also stated that the data shared to date in CJR is resource-
intensive to interpret and is not always actionable and that improved 
claims data quality would help EPM participants. Another commenter 
agreed that CMS should improve the quality of reports it provides 
hospitals. They noted that many hospitals do not have the capability to 
manipulate claims level data in house nor can they afford to purchase 
that capability. The commenters stated that CMS has clearly indicated 
it is moving toward longitudinal payment models and that CMS 
contractors therefore need to develop standardized reporting 
capabilities (and reports) that will fully support providers.
    Response: Based on our experience on other CMS models like BPCI and 
CJR and feedback we have received through learning events, affinity 
groups, and collaboration site discussion boards, we generally believe 
we have proposed to make available the relevant data needed to succeed 
in the EPMs. However, we will take these comments into consideration 
when creating the data feeds for the new models. We will also work with 
our contractors to standardize, refine, and improve the data we 
disseminate to better inform providers.
    Comment: Multiple commenters stressed the importance of data 
reliability and accuracy. A few commenters currently participating in 
CJR stated that the data files they receive are unwieldy to work with, 
contain errors, and are not delivered in a timely manner, further 
delaying analysis and results calculation. Another commenter stated 
that some of the files were difficult for some smaller hospitals to 
analyze and that the hospitals that could analyze the data found the 
data to be incomplete in many cases and inconsistent with the 
hospital's own data. A commenter further suggested that for the EPMs, 
CMS should institute and enforce service level agreements (SLA) with 
its contractors that dictate acceptable time frames in which to provide 
EPM participants with accurate, complete data files. In addition, they 
suggested that CMS needs to create an EPM ombudsman who will serve as 
the conduit for complaints from providers regarding data and that the 
ombudsman should be responsible for determining whether the contractor 
is in violation of the SLA and subject to penalty.
    Response: We appreciate the need for accurate, complete, and timely 
data and intend, to the extent feasible and appropriate, to build 
quality assurance tasks into the statement(s) of work for the payment 
contractor(s) we engage to perform the payment analysis, reporting and 
data file preparation. We will also work to enhance the underlying IT 
structure and systems to assist in resolving file load and transfer 
times. We will work with our contractors to ensure they are delivering 
accurate and complete data in a timely manner according to the terms of 
their contracts and to ensure that they have quality assurance 
protocols in place to run on the data in advance of the file releases. 
Likewise, consistent with the terms of their contracts, we will take 
appropriate corrective actions with contractors where performance falls 
short of expectations. While the models have not yet been implemented, 
we have no

[[Page 511]]

reason to expect that contractor performance should fall short of 
expectations and thus do not anticipate a need for a special ombudsman 
to address data complaints and assess penalties. We will establish an 
open communication system with EPM participants so that they can 
immediately bring any issues surrounding file or data quality to our 
attention so that we can investigate and resolve problems quickly 
should they arise.
    Comment: Another commenter encouraged CMS to use master data 
management technology to ensure correct patient-provider alignment 
across programs to ensure quality, timeliness, and proper assigning of 
data.
    Response: We appreciate this comment and will explore options for 
incorporating this technology with our contractors.
    Comment: A commenter requested that CMS consider adding 
hierarchical condition category (HCC) risk scores to the data files, 
citing that they may help EPM participants identify outliers and 
patients requiring more intense services.
    Response: At this time, we do not plan to add HCC risk scores to 
the data files we will provide because we do not believe they are 
necessary data elements for EPM participants to conduct day-to-day 
operations in the EPMs given the current structure of the EPM models 
and payment calculations. Therefore, those data elements would not meet 
the HIPAA Privacy Rule's ``minimum necessary'' standard, which applies 
to ``health care operations'' disclosures.
    Comment: A commenter, who stated that they are a current CJR 
participant, noted the difficulties in mining the data they received to 
exclude BPCI episodes and other cancelled episodes. They added that 
participants need to ensure they are identifying every patient whose 
care is included in the bundle and to confirm those patients were moved 
into cost-effective care coordination pathways.
    Response: We appreciate this comment and we plan to explore adding 
indicators to the beneficiary-identifiable claims data supplied to EPM 
participants that will provide information about circumstances that 
could result in EPM episode cancellation, such as admission of a 
beneficiary to a hospital that initiates episodes under BPCI for care 
that could potentially cancel an EPM episode. To the extent that adding 
such indicators to the claims data is feasible, providing this 
information through the claims data to EPM participants would ensure 
that EPM participants are informed as frequently as quarterly about 
circumstances that could result in EPM episode cancellation. We also 
note that at reconciliation, complete information would be provided to 
EPM participants about those episodes that were ultimately included in 
the participant's reconciliation report as discussed in section 
III.D.5. of this final rule. Additional discussion on this can be found 
in sections III.C.4. (EPM Episodes) and III.D.6. (Adjustments for 
Overlaps) of this final rule.
    Comment: We received some comments expressing concerns with the 
logistics of receiving EPM data from some participants with past 
experience in CJR. A few of these commenters recommended that CMS 
ensure appropriate processes are in place for the proposed EPMs to 
ensure that providers will actually be able to access data when needed. 
Another commenter also provided some specific examples of improvements 
that could be made to the data delivery process to improve efficiency 
for users that may work with multiple EPM hospitals and models. Some 
examples include a mechanism to download multiple sets of files 
simultaneously, delivering the data through a secure FTP site, and 
providing accurate file layouts before data is released. In addition, 
they requested specific points of contact for hospital systems 
participating in EPM for issues related to data dissemination.
    Response: We appreciate these comments and will take them into 
consideration when developing the data dissemination process and 
creating the data portal for the EPMs. We will provide EPM participants 
with specific points of contact for data issues at the time they 
register for their portal account access.
    Comment: Some commenters also expressed that they are sensitive to 
the increasing volume of requests that CMS is likely experiencing in 
parallel with expanding care and payment redesign models, and they 
encouraged CMS to carefully consider how potential backlogs and delays 
in data availability may impact the target implementation date.
    Response: We appreciate this comment and understand this concern. 
We realize that timely access to data prior to model implementation is 
important to model participants and will work with our contractors and 
other CMS components to disseminate data as soon as feasible once the 
final rule is published.
    Comment: A commenter cited CMS' interpretation of Section 105(b) of 
MACRA (Pub. L. 114-10--see 81 FR 44471 for CMS interpretation) and 
requested that CMS provide qualified clinical data registries (QCDRs) 
with access to Medicare data for purposes of linking such data with 
clinical outcomes data and performing scientifically valid analysis or 
research to support quality improvement or patient safety. In addition, 
they encouraged CMS to indicate ``fact of death'' by matching Medicare 
claims data with Social Security Death Masterfile (SSDMF) death data 
(or another source of vital statistics) before providing it to QCDRs.
    Response: We believe these comments are outside the scope of this 
final rule, but we would encourage QCDRs to contact ResDAC for more 
information on requesting the files they desire at: http://www.resdac.org/cms-data/request/cms-data-request-center.
    Comment: A few commenters also remarked on CMS' proposal to exclude 
individually identifiable data related to substance abuse from claims 
files as it currently does in other programs. Commenters noted that 
this information is key for hospitals to understand the full risk 
associated with patients and identify appropriate care management. Some 
comments suggested that CMS should provide cost and claim data for 
these services since hospitals will be forced to bear risk for these 
patients. A few commenters also requested that CMS provide the de-
identified cost and claims data for these services and stated that if 
this is not possible CMS should, at a minimum, provide the aggregate 
payment amount for these services. Another commenter encouraged the 
Innovation Center to use its waiver authority to make beneficiary-
specific claims-level substance abuse information available to 
hospitals. In addition, they recommended that CMS work with the 
Congress to create an exception to 42 CFR part 2 to provide 
beneficiary-specific claims level substance abuse information.
    Response: Section 1115A of the Act does not authorize the waiver of 
the requirements under 42 CFR part 2. Moreover, our proposal to exclude 
this information is consistent with our treatment of these data in 
other similar CMS programs and models where providers must take on risk 
in managing the care of their beneficiaries, such as the Shared Savings 
Program and the BPCI initiative. We would note that, based on our 
experience to date, we are unaware of this policy being a significant 
impediment to the operations of these efforts. We also appreciate the 
suggestions to make these data available in a de-identified manner. We 
have considered this option and are not currently aware of a means to 
make de-identified beneficiary-specific data

[[Page 512]]

available in a way that would provide useful information to 
participating hospitals without potentially making it possible to 
identify beneficiaries. Similarly, we have also not identified a way in 
which to make meaningful aggregate data available on a limited basis 
without potentially compromising beneficiary confidentiality. However, 
we will continue to consider these comments and the feasibility of 
making such data available in a way that is both meaningful to 
participating hospitals and in compliance with 42 CFR part 2.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposals at Sec.  512.350 (a) to make 
available to EPM participants, through the most appropriate means and 
in the manner described previously, summary and beneficiary-level 
claims data that CMS determines may be useful to EPM participants for 
purposes of the EPMs. We are also finalizing our proposal to exclude 
information that is subject to the regulations governing the 
confidentiality of alcohol and drug abuse patient records (42 CFR part 
2) from any summary or beneficiary-level claims data shared with an EPM 
participant. CMS will make beneficiary-identifiable data available to 
an EPM participant in accordance with applicable privacy and security 
laws and established privacy and security protections and only in 
response to the EPM participant's request for such data for a 
beneficiary who has been furnished a billable service by the 
participant corresponding to the episode definitions for AMI, CABG, and 
SHFFT episodes.
3. Aggregate Regional Data
    As discussed in section III.D.4.b.(6) (81 FR 50855 and 50856) of 
the proposed rule, we proposed to incorporate regional pricing data 
when establishing target prices for EPM participants as we do in the 
CJR model pricing methodology. As indicated in the CJR final rule (80 
FR 73510), we finalized our proposal to share regional pricing data 
with CJR participants because it was a factor affecting target prices. 
Given the similarities between the CJR model and the proposed EPMs, 
particularly our proposal to incorporate regional pricing data when 
establishing target prices under the model, we proposed to provide 
aggregate expenditure data available for all claims associated with 
AMI, CABG, and SHFFT episodes for the U.S. Census Division in which the 
EPM participant is located, as we similarly provide to hospitals 
participating in the CJR model.
    Specifically, we proposed to provide EPM participants with 
aggregate data on the total expenditures during an acute inpatient stay 
and 90-day post-discharge period for all Medicare FFS beneficiaries who 
would have initiated an episode under our proposed episode definitions 
in section III.C. of the proposed rule (81 FR 50829). This data would 
be provided at the regional level; that is, we proposed that an EPM 
participant would receive, if requested from CMS, aggregate regional 
data for potential episode payment model AMI, CABG, and/or SHFFT 
episodes initiated in the U.S. Census Division where the EPM 
participant is located.
    These regional data would be in a format similar to the proposed 
summary claims data reports and would provide summary information on 
the average episode spending for AMI, CABG, and SHFFT episodes in the 
U.S. Census Division in which the EPM participant is located. We sought 
comments on our proposal to provide these data to EPM participants.
    The following is a summary of the comments received and our 
responses.
    Coment: We received comments supporting our proposal to provide the 
opportunity to request aggregate regional data that includes 
information about average episode spending. However, commenters also 
included several suggestions for how this data could be improved. A 
commenter stated that they believe this data can be made more 
actionable by including key utilization metrics such as--
     Percent of episodes with at least one readmission
     Percent of episodes that include skilled nursing facility 
(SNF) care
     Percent of episodes that include home health care
     Percent of episodes that include an inpatient 
rehabilitation (IP rehab) stay
     Index hospitalization average length of stay (ALOS)
     SNF ALOS for episodes that include SNF
     IP rehab ALOS for episodes that include IP rehab
    They stated that these metrics would serve as benchmarks for EPM 
participants, and help identify opportunities for improvement and 
inform care intervention strategies.
    Response: We appreciate the comments supporting our proposal to 
provide the opportunity to request aggregate regional data. In 
addition, we will continually work to improve the data we provide to 
EPM participants and we will explore the feasibility of including the 
additional utilization metrics suggested by the commenter in the 
aggregate regional data files.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal to provide EPM participants 
with aggregate data on the total expenditures during an acute inpatient 
stay and 90-day post-discharge period for all Medicare FFS 
beneficiaries for potential episode payment model AMI, CABG, and/or 
SHFFT episodes initiated in the U.S. Census Division where the EPM 
participant is located.
4. Timing and Period of Baseline Data
    We recognize that providing the ability to request certain baseline 
data will be important for EPM participants to be able to estimate 
episode spending, coordinate care, and identify areas for practice 
transformation, and that early release of this data can facilitate 
their efforts to do so. Also, as discussed in section III.D.4.b.(3) of 
the proposed rule (81 FR 50854), episode benchmark prices would be 
calculated using an EPM participant's historical episode spending 
during their baseline period. Further, we believe that EPM participants 
will view the episode payment model effort as one involving continuous 
improvement. As a result, changes initially contemplated by an EPM 
participant could be subsequently revised based on updated information 
and experiences.
    Therefore, as with CJR and BPCI, we proposed to make 3 years of 
baseline data available to EPM participants and intend to make these 
data available upon request prior to the start of the first episode 
payment model performance year and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. We believed that 3 years of baseline data is sufficient to 
reflect both an EPM participant'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 in section III.D. of this final rule. As we stated in 
the proposed rule, we believe that if an EPM participant has access to 
baseline data for the 3-year period used to set its episode benchmark 
and quality-adjusted target prices, then it would be better able to 
assess its practice patterns, identify cost drivers, and ultimately 
redesign its care practices to improve efficiency and quality.
    Therefore, we proposed that the 3-year period utilized for the 
baseline period match the baseline data used to create EPM participants 
episode benchmark and quality-adjusted target prices, as discussed in 
section III.D. of this final rule. Specifically, we proposed that the 
baseline beneficiary-level and

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summary data (both EPM participant-level and regional summary data) 
would be available for episodes that began January 1, 2013 through 
December 31, 2015. We requested comments on these proposals.
    The following is a summary of the comments received and our 
responses.
    Comment: We received many comments about the importance of 
providing timely data prior to the start of the model. Many commenters 
requested that CMS make historical and program design data available to 
EPM participants as soon as CMS is able to do so after the publication 
of the final rule. The commenters stated that they would need the data 
as early as possible in order to allow for enough time to review the 
data, to understand the needs and utilization patterns of the 
population, and to tailor interventions based on findings. They also 
stated that the data would help identify the facilities and provider 
types most frequently used by patients after discharge. In addition, 
commenters pointed out that early data would be essential for EPM 
participants to understand how their episodes compare to others in the 
region and where they stand at the start of the EPMs. A commenter 
recommended that CMS provide historical claims data a minimum of 6 
months prior to the commencement of the models so as to allow providers 
the opportunity to analyze the data for care coordination 
opportunities, evaluate post-acute care providers for partnership 
opportunities, and negotiate risk-sharing arrangements. Another 
commenter further requested all the historical data used to set the 
target prices be provided to EPM participants by December 31, 2016 for 
a July 1, 2017 start date and that we also provide guidance and 
technical support to assist participants once this data is shared.
    Response: We appreciate comments and understand the usefulness of 
these data to EPM participants' ability to understand and adjust their 
performance and partner with collaborators. We will make every effort 
to make this data available for request as soon as possible after the 
final rule is published while complying with applicable privacy and 
security laws. Additionally, we will provide guidance and technical 
support during the process to request, retrieve, and evaluate the data 
received.
    Comment: A few commenters cited that data challenges, including the 
significant financial investment, time and complexities involved in 
developing and using the necessary infrastructure, along with 
substantial transaction fees for sharing health information necessitate 
a delay in the start of the EPMs. They went on to state that EPM 
participants should be provided data with at least as much preparatory 
time as BPCI participants.
    Response: We appreciate these comments and again acknowledge the 
importance of providing timely access to data. As previously noted, we 
will work to make this data available for request as soon as feasible 
while complying with applicable privacy and security laws. To the 
extent that it may be relevant, we note that we have revised our 
proposal to begin downside risk across the board as of April 1, 2018. 
As discussed in detail in section III.D.2.c. of this final rule, we are 
finalizing an option to allow the voluntary selection of downside risk 
for performance year 2 and to extend our proposed date for required 
downside risk to performance year 3, which should provide participants 
with more lead time to understand their data prior to taking on 2 sided 
risk under the EPMs.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal, without modification to make 
3 years of baseline data available to EPM participants and intend to 
make these data available to participants upon request prior to the 
start of the first episode payment model performance year (July 1, 
2017) and in accordance with applicable privacy and security laws and 
established privacy and security protections. The 3-year period 
utilized for the baseline period matches the baseline data used to 
create EPM participants' episode benchmark prices. Specifically, the 
baseline beneficiary-level and summary data (both EPM participant-level 
and regional summary data) will be available for episodes that began 
January 1, 2013 through December 31, 2015.
5. Frequency and Period of Claims Data Updates for Sharing Beneficiary-
Identifiable Claims Data During the Performance Period
    As we stated in the proposed rule (81 FR 50946), in addition to 
baseline data, we believe that the availability of periodically updated 
beneficiary-identifiable claims data (both summary and beneficiary-
level) will assist EPM participants in the proposed AMI, CABG, and 
SHFFT models 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 and frequency for making updated claims 
information available to EPM participants, while complying with the 
HIPAA Privacy Rule's ``minimum necessary'' standard.
    As stated in the proposed rule, we believe that, as is the case 
with CJR, making 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, would be 
representative of total spending and useful to hospitals as they 
consider long-term practice changes. We note that we intend for the 
data for this model to be consistent with our proposed performance year 
of January 1 through December 31 (July 1 through December 31 for 
performance year 1). To accomplish this for the first year of the 
models (2017), we proposed to provide, upon request and in accordance 
with the HIPAA Privacy Rule, claims data from July 1, 2017 to June 30, 
2018 on as frequently as a running quarterly basis, as claims were 
available (81 FR 50946). For each quarter and extending through June 
30, 2018, we proposed that participants during that first year would 
receive data for up to the current quarter and all of the previous 
quarters going back to July 1, 2017. These data sets would contain all 
claims for all potential episodes that were initiated on or after July 
1, 2017 and capture a sufficient amount of time for relevant claims to 
have been processed. We noted that we would 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.
    Accordingly, we proposed to make updated claims data available to 
EPM participants, representing up to 6 quarters of data, upon receipt 
of a request for such information that meets CMS' requirements to 
ensure the applicable HIPAA conditions for disclosure have been met. 
Also, consistent with our procedures for CJR, we proposed to make these 
data available as frequently as on a quarterly basis. Given that we 
have received requests in other initiatives to make data available on a 
more frequent basis, we also proposed to eventually make these data 
available on as frequently as a monthly basis if practicable. In 
addition, we proposed that for an EPM participant to receive data on 
episode spending, they would only need to make a single initial request 
rather than multiple periodic requests for data. CMS would make data 
available to the EPM participant for the duration of their 
participation or until they notify CMS

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that they no longer wish to receive these data.
    Our proposal to make the minimum data necessary for EPM 
participants to conduct quality assessment and improvement activities 
and effectively coordinate care of its patient population as frequently 
as on a quarterly basis throughout the EPM participant's participation 
or until they notify CMS that they no longer wish to receive these data 
is included at Sec.  512.350(b)(2). We sought comments on this 
proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters were supportive of CMS' proposal to make 
data available as frequently as monthly if practical, but strongly 
encouraged the monthly release of the data to the EPM participants as 
soon as the EPMs are implemented, as opposed to quarterly. A commenter 
stated that a quarterly timeline would significantly delay EPM 
participants in identifying inefficiencies arising with regard to 
beneficiary utilization and noted that issues could occur in the 
continuum of care delivery and coordination. Another commenter 
indicated that monthly data is essential, especially at the beginning 
of the EPMs, and that the quarterly data has a lag so the initial file 
will contain mostly incomplete episodes. Other commenters referenced 
the BPCI initiative which currently provides monthly data to its 
Awardees.
    Response: We appreciate these comments and realize that frequent 
data will assist many EPM participants that are selected for the EPMs. 
As proposed, we will work with our contractors to provide data monthly 
as opposed to quarterly as soon as it is feasible for us to do so.
    Comment: We received some comments on providing reconciliation data 
and results more frequently than annually. Commenters referenced the 
quarterly reconciliation timelines in BPCI and one commenter stated 
that the quarterly results would allow providers to assess their 
performance and understand if care interventions are working, or need 
to be altered. Another commenter strongly encouraged CMS to provide EPM 
participants with quarterly updates for completed episodes through a 
mechanism similar to other Innovation Center initiatives.
    Response: Based on our experience in BPCI, quarterly reconciliation 
can lead to large variation in NPRA and uncertainty for providers, in 
addition to being a very resource-intensive process for providers and 
CMS. While we understand that quarterly reconciliation results and data 
could be helpful for providers to assess their performance, we believe 
that the beneficiary claims data we plan to disseminate will allow 
providers to do this. Additionally we note that we will be working with 
our contractors to explore the feasibility of providing a high-level 
interim report on reconciliation status during the payment year which 
should help EPM participants assess how they are doing under the model. 
Therefore, as stated in section III.D.5. of this final rule, we plan to 
finalize our policy for annual reconciliation data and results in the 
same way we have done this for CJR. Additional discussion on this topic 
can be found in section III.D.5. of this final rule.
    Comment: Commenters requested that data be made available 
automatically without a specific request for the data. These commenters 
noted the potential for additional administrative burden associated 
with requesting the data. A commenter recommended that an EPM 
participant should only need to register to receive data and provide 
the appropriate contact.
    Response: We want to limit administrative burden for EPM 
participants participating in these models and wish to clarify that 
while we will make data available to EPM participants only upon 
request, participants would be able to make a single request for these 
data for each model prior to the start of the performance period and 
the data would be available to them for the duration of their 
participation or until they notify CMS that they no longer wish to 
receive these data. To be consistent with the HIPAA Privacy Rule's 
``minimum necessary'' standard, we will continue to make data available 
only in response to a request.
    Comment: Other commenters appreciated our proposal that EPM 
participants only need to make an initial single request rather than 
multiple periodic requests for data as this will impose less of an 
administrative burden on hospitals.
    Response: We appreciate these comments.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal at Sec.  512.350(b)(1) to 
provide up to 6 quarters of claims data (both summary and beneficiary-
level) to EPM participants upon request and in accordance with 
applicable privacy and security laws. We are also finalizing our 
proposal that for an EPM participant to receive data on episode 
spending, they need only make a single initial request rather than 
multiple periodic requests. Additionally, we are finalizing our 
proposal to make these data available on a quarterly basis and as 
frequently as a monthly basis if practicable. Consistent with our 
proposal to make these data available as frequently as monthly if 
practicable, we are updating our proposal at Sec.  512.350(b)(2) to 
provide that updated claims data will be made available not ``as 
frequently as on a quarterly basis throughout the EPM participant's 
participation,'' but instead ``no less frequently than on a quarterly 
basis.''
6. Legal Permission To Share Beneficiary-Identifiable Data
    As we have stated previously (80 FR 73513), 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 the disclosure. Here, the HIPAA Privacy 
Rule allows for the proposed disclosure of individually identifiable 
health information by CMS.
    In the proposed rule, we proposed to make EPM participants 
financially responsible for services that may have occurred outside of 
the hospital during the 90-day post-discharge period (81 FR 50946). 
Although we expect EPM participants to be actively engaged in post-
discharge planning and other care during the 90-day post-discharge 
period for beneficiaries receiving services under the proposed AMI, 
CABG, and SHFFT models, we believe that it is necessary for the 
purposes of these models to provide EPM participants with beneficiary-
level claims data, either in 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

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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 for episodes included under 
the proposed models 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, EPM participants would be using the data on 
their patients to evaluate the performance of the participant 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 an EPM participant 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 
to 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 EPM's 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 the final rule was collected and may be disclosed in 
accordance with the routine uses applicable to those records.
    We note that, as is the case with CJR, in the proposed rule, we 
proposed to disclose beneficiary-identifiable data to only the 
hospitals that are bearing risk for an AMI, CABG, or SHFFT episode and 
not with their collaborators (81 FR 50947). As stated in the final CJR 
rule (80 FR 73515), we believe that the hospitals that are specifically 
held financially responsible for an episode should make the 
determination as to which data are needed to manage care and care 
processes with their collaborators as well as which data they might 
want to re-disclose, if any, to their collaborators provided they are 
in compliance with the HIPAA Privacy Rule. We note that beneficiaries 
have the right to request restrictions on the use of their data in 
accordance with the HIPAA Privacy Rule, but covered entities are not 
required to agree to such requests. We believe our data sharing 
proposals are permitted by and are consistent with the authorities and 
protections available under the aforementioned statutes and 
regulations. We sought comments on our proposals regarding the 
authority to share beneficiary-identifiable data.
    The following is a summary of the comments received and our 
responses.
    Comment: Multiple commenters agreed with our proposals to provide 
EPM participants with the opportunity to request 3 years of historical 
or baseline data prior to the start of the first EPM performance year. 
However, some commenters requested that CMS make this data available to 
all hospitals regardless of whether they located in a randomly selected 
MSA or not. A commenter pointed out that because there is not a 
voluntary avenue for participation in these proposed models by 
hospitals that are not included in the selected MSAs, such hospitals 
could face a competitive disadvantage by not being provided the same 
kinds of financial and performance data as hospitals that are included 
in these EPMs. Other commenters requested that CMS begin providing data 
to all hospitals so that they may begin to understand their patients 
clinical care paths, episode spending, and compare themselves to their 
peers.
    Response: We appreciate the comments supporting our proposal to 
make 3 years of historical or baseline data available to EPM 
participants. For hospitals that are not in selected MSAs, we 
understand that this data would assist in identifying opportunities for 
improving efficiency and care coordination, but we do not have the 
authority to expand the availability of these data beyond what we 
proposed. We proposed to make EPM data available under the HIPAA 
Privacy Rule provision that permits the disclosure of this information 
for ``health care operations'' purposes and in accordance with the 
``minimum necessary'' standard.
    We thank commenters for their input on our proposals to provide 
beneficiary-level data to EPM participants, upon request, under the 
HIPAA Privacy Rule provisions that permit disclosures of PHI for 
``health care operations'' purposes. We are not modifying our proposals 
to provide hospitals that are not located in the randomly selected EPM 
MSAs with the opportunity to request EPM data.

[[Page 516]]

7. Data Considerations With Respect to EPM and CJR Collaborators
    As noted earlier in this section and as is the case with CJR (80 FR 
73515), we proposed to disclose beneficiary-identifiable data to only 
the EPM participants that are bearing risk for an AMI, CABG, or SHFFT 
episode and not with their collaborators because we believed that the 
EPM participants that are specifically held financially responsible for 
an episode should make the determination as to which data are needed to 
manage care and care processes with their collaborators as well as 
which data they might re-disclose in accordance with applicable privacy 
and security laws. Based on our experience in implementing CJR, 
however, we understood that some CJR collaborators under that model 
believed that not having comparable data poses challenges to their 
ability to assess their own performance in the context of the model and 
the region in which they operate. As such, these collaborators believed 
that it would be helpful to have additional data with which they could 
better assess their own performance, including information about care 
patterns within their region.
    We are considering ways in which to address the concerns raised by 
these CJR collaborators and potentially similar future concerns that 
could arise among EPM collaborators as well as what additional data 
might be helpful for these purposes and which could be disclosed in 
accordance with existing statutory and regulatory requirements. As 
previously discussed, EPM participants, like CJR participants, may 
share data with their EPM (or CJR) collaborators provided they are 
``business associates'' in compliance with the HIPAA Privacy Rule, and 
we encourage them to make data available to their EPM collaborators to 
the extent they deem it appropriate and in compliance with these 
strictures.
    In addition, given our view that the HIPAA Privacy Rule limits our 
ability to share beneficiary-identifiable data with non-EPM (or non-
CJR) participants, we are considering whether it would be feasible and 
appropriate to make additional non-beneficiary-identifiable aggregate 
data publicly available through some means. For example, we are 
exploring whether it would be helpful to make available aggregate 
summary data organized by anchor MS-DRG, provider type, and region for 
care that would be included in episodes that would meet the criteria 
for inclusion in the regional component of EPM (or CJR) episode 
benchmark prices as described in section III.D.4.b. of this final rule 
(or 80 FR 73337 with respect to CJR), assuming all IPPS hospitals 
nationally were EPM (or CJR) participants. We will refer to these 
episodes as simulated episodes later in this section. We were 
interested in whether information such as the following would be 
helpful to EPM (or CJR) collaborators:
     Number of simulated episodes and number of hospitals with 
each anchor MS-DRG at discharge in the simulated episodes.
     For AMI model anchor MS-DRGs, the number of simulated 
episodes with chained anchor admissions by the price MS-DRG that would 
have been assigned to the simulated episode.
     For AMI model anchor MS-DRGs, the number of simulated 
episodes with readmissions resulting in discharge under a CABG MS-DRG 
by the CABG MS-DRG.
     Average (mean and median) and standard deviation of total 
spending on those simulated episodes.
     Number of simulated episodes with and mean acute care 
payments for the anchor hospitalization and readmission.
     Number of simulated episodes with and mean Part B 
payments.
     Number of simulated episodes with and mean inpatient 
rehabilitation facility payments.
     Number of simulated episodes with and mean skilled nursing 
facility payments.
     Number of simulated episodes with and mean home health 
payments.
     Proportion of total simulated episode spending 
attributable to acute care payments for the anchor hospitalization and 
readmissions.
     Proportion of total simulated episode spending 
attributable to Part B payments.
     Proportion of total simulated episode spending 
attributable to inpatient rehabilitation facility payments.
     Proportion of total simulated episode spending 
attributable to skilled nursing facility payments.
     Proportion of total simulated episode spending 
attributable to home health payments.
    To assist us as we consider future options for potentially 
increasing the availability of data to collaborators under the EPMs or 
similar models such as CJR, we sought comments on what kinds of actions 
and data would be most helpful to EPM, or similar model (such as CJR) 
collaborators, and which could be disclosed in accordance with the 
existing statutory and regulatory requirements for sharing data. We 
note that the number of simulated episodes with chained anchor 
admissions by the price MS-DRG on which we solicited comments for AMI 
model anchor MS-DRGs is no longer relevant due to the fact that we are 
not finalizing the AMI transfer policy we proposed, as discussed in 
detail in section III.C. of this final rule.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters supported our consideration of options 
to potentially provide some publicly available data to assist EPM and 
CJR collaborators. However, commenters specified that claims data 
should be made available for all EPM collaborators and providers 
affected by the implementation of EPMs. In particular, they stated that 
post-acute care providers find it difficult to access the data needed 
(for example, claims data on readmissions) to support care coordination 
capabilities. Another commenter requested that any provider who treats 
an EPM beneficiary during the episode should also have access to the 
claims data so that providers would be able to analyze the data and 
develop approaches to care redesign, especially when the hospital has 
not expended the resources to do such analytics. They also commented 
that this analysis would allow post-acute care providers to demonstrate 
their value to a hospital and would also allow post-acute care 
providers to better position themselves when entering into gainsharing 
arrangements with a participating hospital. Other comments suggested 
that CMS should require that EPM data be shared equitably among the 
participating entities, regardless of which entity is charged with 
coordinating the fiscal arrangement according to CMS.
    Response: We appreciate the suggestions commenters offered. While 
we understand the commenters' desire for us to provide beneficiary-
identifiable claims data to collaborating post-acute care providers, we 
note that we are unable to do this as we do not have the authority to 
expand the availability of these data beyond what we proposed. As with 
CJR, and as indicated earlier, there are significant sensitivities and 
constraints on our ability to make beneficiary-identifiable data 
available. We proposed to make these data available to hospitals 
participating in the model in recognition of and in compliance with the 
HIPAA Privacy Rule provision that permits the disclosure of this 
information for ``health care operations'' purposes and in accordance 
with the minimum necessary standard. Requests for EPM data from 
entities that are not officially participating in the model would not 
meet the required standards to receive

[[Page 517]]

these data. Although providers and suppliers (physicians, post-acute 
care providers, etc.) that are collaborators with hospitals 
participating in the EPMs might be eligible to receive data under 
HIPAA, provided that they had a ``business associate'' relationship 
with the beneficiary, we do not believe it is appropriate for CMS to 
provide collaborators these data directly because hospitals are the 
entities designated under the model to assume risk and responsibility 
for a beneficiary's episode of care under the model. Accordingly, as 
the responsible entity (and as a covered entity under HIPAA), we 
believe that hospitals should decide what data they need to manage care 
and care processes with their collaborators and, in consultation with 
their own legal counsel, what data they may or may not wish to make 
available to those collaborators provided they are in compliance with 
the HIPAA Privacy Rule.
    Comment: Other commenters made suggestions regarding the types of 
data we considered to provide publicly to EPM collaborators. They 
stated that the data should include information included in the Quality 
and Resource Use Reports (QRUR) so that collaborators will be able to 
understand their own costs as well as those for downstream providers in 
order to effectively enter into these financial and clinical 
arrangements.
    Response: We appreciate the suggestions, but do not plan to provide 
QRUR data in our publicly available files. We note that information and 
instructions on obtaining QRURs can be found at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/Obtain-2013-QRUR.html.
    Comment: We received several comments supporting the sharing of 
beneficiary identifiable data by EPM participants with entities with 
which the hospital has a business associate agreement (BAA). Commenters 
noted that data sharing is an excellent strategy for engaging providers 
and that data can be a catalyst for change. Based on experience in 
BPCI, commenters pointed out that data sharing also inspires 
collaboration as hospitals and post-acute care providers are more 
likely to come together to conduct root cause analyses of adverse 
patient care events so that both entities learn from the bundled 
payment program data. A commenter added that the BPCI model recognized 
the need for a facilitator convener--an entity that serves an 
administrative and technical assistance function for one or more 
designated awardees/awardee conveners, and who would not have an 
agreement with CMS, bear financial risk, or receive any payment from 
CMS. Another commenter requested that CMS consider distributing the 
data to EPMs or their designees under a data use agreement (DUA) 
process similar to how beneficiary-identifiable claims data are 
currently distributed under the BPCI program. They stated that this 
would allow third-party entities to provide data analysis services to 
EPM participants who lack the capabilities and infrastructure to do so.
    Response: We appreciate the support offered by these commenters. In 
addition, we will require a data request and attestation form and will 
have a mechanism in place for business associates, as defined under 
HIPAA, to receive data directly from CMS on an EPM participant's behalf 
(if approved by that EPM participant). This form would also allow 
business associates of selected hospitals to provide administrative or 
technical assistance to multiple hospitals.

L. 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

    As stated in the proposed rule, the EPMs are intended to enable CMS 
to better understand the effects of episode payment approaches on a 
broader range of Medicare providers and suppliers than would choose to 
participate in a model such as is currently being tested under BPCI. 
Obtaining information that is representative of a wide and diverse 
group of episode initiators will best inform us on how such a payment 
model might function were it to be more fully integrated within the 
Medicare program. The CR incentive model is intended to enable CMS to 
assess whether the incentive improves patient quality and access to 
this covered benefit without increasing overall payments. All CMS 
models, which would include the EPMs and CR incentive 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 the following section are the proposed design and 
evaluation methods, the data collection methods, key evaluation 
research questions, and the evaluation period and anticipated reports 
for the EPMs as well as our response to comments received and our final 
decisions.

B. Design and Evaluation Methods

    As stated in the proposed rule, our evaluation methodology for the 
EPMs and CR incentive model is consistent with the standard Innovation 
Center evaluation approaches we have taken in other projects such as 
the BPCI initiative, the CJR model, the Acute Care Episode (ACE) 
Demonstration, the Pioneer ACO model, and other Innovation Center 
models. Specifically, the evaluation design and methodology we proposed 
is designed to allow for a comparison of historic patterns of care 
among the participants to any changes made in these patterns in 
response to the models. In addition, the overall design would include a 
comparison of participants in EPM or CR areas with a matched comparison 
group in areas not participating in a specific episode to help us 
discern simultaneous and competing provider and market level forces 
that could influence our findings. Comparison group members for the 
EPMs would be selected based on how well they match the EPM 
participants along a variety of measurable dimensions, such as size, 
expenditures, and other provider characteristics and market 
characteristics. The random method of selection for participating MSAs 
will allow the evaluation to observe the operation of the model in a 
variety of circumstances and among providers and suppliers who may not 
otherwise choose to participate in an alternative payment model.
    As stated in the proposed rule, we plan to use a range of analytic 
methods, including regression and other multivariate methods, and 
difference-in-differences methods 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. With these methodologies, we would be able to examine the 
experience over time relative to those in the comparison groups 
controlling for as many of the relevant confounding factors as is 
possible. The evaluation would also include rigorous qualitative 
analyses in order to capture the evolving nature of the care model 
interventions.
    In our design, as we stated in the proposed rule, we plan to take 
into account the impact of the models at the geographic unit level, the 
hospital level, and at the patient level. We will also

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consider 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 models while also taking into account the effects of other ongoing 
interventions such as BPCI and the Shared Savings Program. For example, 
we will consider additional regression techniques to help identify and 
evaluate the incremental effects of adding the EPMs 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 will consider multiple sources of data to evaluate the effects 
of the EPMs and CR Incentive models. We expect to base much of our 
analysis on secondary data sources such as Medicare FFS claims. The 
beneficiary claims data will provide information such as use of CR, 
expenditures in total and by type of provider and service as well as 
whether or not there was an inpatient hospital readmission or a 
subsequent AMI. In conjunction with the secondary data sources 
mentioned previously, we will consider a CMS-administered survey of 
beneficiaries who received a qualifying procedure during the 
performance period in the EPMs' evaluation. This survey would be 
administered to beneficiaries who were in the EPMs qualifying episode 
or similar patients selected as part of a control group. The primary 
focus of this survey would be to obtain information on the 
beneficiary's experience in EPMs' episodes relative to usual care. The 
administration of this beneficiary survey would be coordinated with 
administration of the HCAHPS survey so as to not conflict with or 
compromise HCAHPS efforts. For the evaluation of both the EPMs and the 
CR incentive model, we will consider a survey administered by CMS and 
guided interviews conducted by CMS with providers and suppliers 
including, but not limited to, initiating and transfer hospitals, 
physicians, and post-acute care providers participating in the models. 
These surveys would provide insight on providers' experience under the 
model and further information on the care redesign strategies 
undertaken.
    In addition, we will consider CMS evaluation contractor 
administered site visits and focus groups with selected hospitals, 
physicians, and post-acute care providers in EPMs and CR evaluation 
efforts. We believe that these qualitative methods will provide 
contextual information that would help us better understand the 
dynamics and interactions occurring among participants. 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, such as simultaneous ACO and bundled payment participation.
    We anticipated that secondary data sources will be the source of 
most if not all data collection for the FFS-non CR control group; 
however, we may initiate some data collection from primary data sources 
for this group if warranted.

D. Key Evaluation Research Questions

    Our evaluation would assess the impact of the models 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, quality, and access. Our 
key evaluation questions would include, but would not be limited to, 
the following:
     PAYMENT. Is there a reduction in Medicare expenditures in 
absolute terms? By subcategories? Do the participants reduce or 
eliminate variations in utilization and/or expenditures 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 and for specific types of services? How do these 
patterns compare to matched comparators, 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? For 
example, in the AMI and CABG episodes, what changes to hospital 
transfer patterns, if any, could be seen under the models? Has there 
been any changes to utilization of cardiac rehabilitation services and 
does this appear to be associated with access to the cardiac 
rehabilitation incentive payment, participation in the cardiac EPMs or 
a combination of the two?
     REFERRAL PATTERNS AND MARKET IMPACT. How has the behavior 
in the selected MSAs changed under the models? Have the referral 
patterns of type and specific providers changed?
     OUTCOMES/QUALITY. Is there either a negative or positive 
impact on quality of care and/or better patient experiences of care? 
Did the incidence of relevant clinical outcomes including but not 
limited to complications, mortality, readmissions and other subsequent 
clinically relevant events, and beneficiary pain, functioning, and 
independence experiences remain constant or decrease? Were there 
changes in beneficiary outcomes under the models compared to 
appropriate comparison groups? Was there an impact on quality during 
the episode/CR care period or in the period immediately preceding or 
following the episode/CR care period? Was there an impact on measures 
of relevant long term quality such as mortality at one year after the 
initiating event?
     UNINTENDED CONSEQUENCES. Did the models result in any 
unintended consequences, including adverse selection of patients, 
access problems, cost shifting beyond the episode/CR care period, 
evidence of delay or stinting of appropriate care, anti-competitive 
effects on local health care markets, or 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 and how did this compare to regional and 
national patient populations? What were the characteristics of impacted 
markets, providers, and patients and to what extent were they 
reflective of the national sample? Were EPMs and/or the CR incentive 
model more successful in reducing payments and improving quality in 
certain types of markets, providers, or patients? To what extent would 
the results be able to be extrapolated to similar markets and/or 
nationally?
     EXPLANATIONS FOR VARIATIONS IN IMPACT. What factors are 
associated with the pattern of results stated previously? Specifically, 
are they related to--
    ++ Characteristics of the administrative features of the models

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including variations by year and factors such as presence of downside 
risk;
    ++ The EPM or CR participant's specific features and structure, 
including such factors as the number of relevant cases, whether they 
have ability to handle complex cases, profit status, proportion of 
dually eligibility patients served, and other considerations;
    ++ The EPM or CR participant's care redesign or other interventions 
and their ability to carry out their planned interventions;
    ++ The characteristics of the providers and suppliers serving 
patients during the entirety of the episode or CR care period and the 
nature of the interaction of these providers and suppliers with the EPM 
or CR participants;
    ++ The characteristics of the markets and MSAs, and
    ++ The clinical and socio-demographic characteristics associated 
with the patient populations served.

E. Evaluation Period and Anticipated Reports

    The models have a 5-year performance period and the evaluation 
periods would encompass the entire 5-year period and up to 2 years 
after. We plan to evaluate the EPMs on an annual basis. However, we 
recognize, 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 sought comments on our design, evaluation, data collection 
methods, and research questions.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concerns with the manner in 
which quality is examined under the EPMs. Specifically, there was 
concern that the understanding of the impact on quality for these 
models should include a more comprehensive approach beyond just those 
quality measures used in the reconciliation methodology. Commenters 
expressed the belief that the quality measures used in reconciliation 
were not adequate for the purpose of determining if access and clinical 
quality were adversely affected. A commenter suggested that CMS examine 
quality related to the performance of providers aside from the model 
participant hospitals and that CMS should incorporate measures that 
reflect the totality of care received in the episode.
    Response: We thank the commenters for their thoughts and 
acknowledge the importance of examining the impact of the EPMs on 
measures of quality of care beyond what is used in the reconciliation 
methodology. Our intention in the evaluation is to conduct a 
multifaceted and multi-pronged examination of issues of quality, 
access, and unintended consequences. The final evaluation design plan 
for the evaluation of the EPMs will be developed at a future date and 
will include quality as a key area of research focus. CMS intends to 
examine issues of quality of care using a variety of metrics and for a 
variety of patient and provider subgroups.
    Comment: A few commenters expressed concern with the possible 
impact of the EPMs on reducing access to new or to more expensive but 
higher quality technology and devices. A commenter requested that CMS 
conduct a formal evaluation of the impact of the EPMs on patient access 
to newer technology and that CMS make adjustments to care if patient 
access is compromised. Similarly, another commenter expressed concern 
that the focus of the model on short-term costs might cause a shift 
away from new technologies such as angiography with use of Fractional 
Flow Reserve (FFR). The commenter encouraged CMS to use incentives for 
newer technologies shown to improve patient outcomes. In addition, a 
commenter expressed concern that the EPMs would induce undue pressure 
to use device choices based on considerations other than quality in the 
treatment of SHFFT.
    Response: We appreciate the commenters' concerns and will be 
evaluating treatment patterns and shifts in the evaluation of this 
mode. We address the issue of new technology and payment in section 
III.C.3.(b). of this final rule. We note that we do not anticipate data 
collection related to device use or new technology beyond what is 
currently available in claims data. The issue of physician or other 
providers' perception of stinting of care or unintended consequences is 
an issue that may arise in qualitative data collection efforts such as 
interviews and focus groups. As with all evaluation topics, CMS will 
strive to balance the amount of burden placed on the sites with regards 
to primary data collection in choosing its areas of focus.
    Comment: Two commenters recommended that CMS increase the frequency 
with which monitoring and evaluation reports are made public. Quarterly 
reporting was suggested as commenters believed quarterly public reports 
would be useful to both the public and the provider community and would 
help to provide feedback to providers as to what is occurring under the 
model with respect to unintended consequences so as to allow for 
adjustments as needed.
    Response: We appreciate the need for frequent data updates for 
these models and strive to provide at least quarterly data feeds to 
model participants. We refer readers to section III.K. of this final 
rule for a detailed discussion on the provision of data and claims to 
participants under the EPMs. One of the purposes for the distribution 
of this quarterly claims information is to allow for participants to 
conduct self-assessments of their performance under the model. CMS will 
be conducting regular interim assessments of the results between the 
annual reports which will be made publically available. These interim 
reports examine key metrics which are subject to issues such as sample 
size and random fluctuations in practice patterns that may be more 
confusing than illuminative to distribute. Their primary purpose is to 
highlight possible trends to examine and explore in the annual reports. 
CMS will consider public release of interim data points on a case by 
case basis depending on the nature of the findings and the degree of 
certainty in the results but cannot commit to providing publically 
available reports on a quarterly basis.
    Comment: A variety of commenters expressed interest in the 
evaluation of the impact of the EPMs on quality and outcomes. 
Commenters suggested that the CMS evaluation should incorporate an 
assessment of whether EPMs had an impact on issues such as:
     Overall procedure volume,
     Shifting of care beyond the 90-day episode,
     Stinting of care and reduction in the quality of devices 
used in SHFFT procedures,
     Patient shared-decision making related to device 
selection,
     Hospital to hospital transfers in the Cardiac EPMs. The 
commenter was particularly interested in the extent to which transfers 
patterns between participating and non-participating hospitals were 
altered under the model,
     Process measures of quality such as statin use or cardiac 
rehab referrals, and
     Over or inappropriate use of home health services.
    Response: The topic areas mentioned by commenters are in alignment 
with CMS' intended research questions in the evaluation. We appreciate 
the contribution and insight behind these comments and the focus they 
offer towards refining the evaluation's areas

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of emphasis in understanding the impact of the EPM on the delivery of 
care.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification.

V. Comprehensive Care for Joint Replacement Model

A. Participant Hospitals in the CJR Model

    In the CJR proposed rule (80 FR 41207), we proposed to require that 
almost all hospitals paid under the IPPS that are physically located in 
a county in an MSA selected for participation in the CJR model would be 
required to participate. In the final rule (80 FR 73288), we finalized 
this proposal, noting that we would use the primary physical address 
associated with a hospital's CCN to identify whether or not a given 
hospital was physically located in an MSA selected for participation. 
In response to a commenter's inquiry as to whether all hospitals under 
a CCN would be required to participate in CJR if a CCN included 
multiple hospital campuses and some of these campuses were physically 
located in the MSA while others were not, we stated that since CMS 
tracks and identifies hospitals using the CCN, all hospital locations 
associated with that CCN would be required to participate in the model. 
In order to identify hospitals located in the MSAs selected to 
participate in the CJR model, we will utilize the primary physical 
address associated with the CCN. In cases where a CCN is associated 
with multiple hospital campuses, if the primary CCN address is located 
in a selected MSAs, all hospital campuses associated with that CCN 
would be required to participate in CJR unless otherwise excluded. We 
also noted that our initial analysis of the acute care hospitals in the 
MSAs selected to participate in CJR indicated that none of the CCNs in 
the MSAs selected for CJR included multiple campuses crossing MSA 
boundaries. That is, none of the CCNs with a primary physical address 
in one of the selected MSAs had multiple campuses physically located in 
different MSAs that would result in inclusion of a hospital campus not 
physically located in a selected MSA.
    We are not aware of any participant hospitals currently in the CJR 
model that are not physically located in one of the 67 MSAs chosen to 
participate in CJR. However, given the comments we received from the 
public on the CJR proposed rule (80 FR 41207) and questions from 
stakeholders during our implementation of the CJR model, we noted that 
if a hospital that is not physically located in one of the 67 MSAs 
participating in CJR bills under a CCN with a primary address in one of 
the 67 CJR MSAs, whether through a merger or other organizational 
change, that hospital will be considered a CJR participant as of the 
date in which the hospital began to bill under the CCN address located 
within the 67 MSAs. This policy has been in effect since the start of 
the CJR model on April 1, 2016 and is laid out at Sec.  510.2 
(definition of participant hospital).

B. Inclusion of Reconciliation and Repayment Amounts When Updating Data 
for Quality-Adjusted Target Prices

    In response to the CJR proposed rule, commenters encouraged us to 
include reconciliation payments in updated historical episode spending 
totals when calculating quality-adjusted target prices for performance 
years 3 and 4 (based on spending for episodes beginning in years 2014 
through 2016) and performance year 5 (based on spending for episodes 
beginning in 2016 through 2018). (Note that we proposed to replace the 
term ``target price'' with the term ``quality-adjusted target price,'' 
as described further in section V.C. of this final rule.) Commenters 
were concerned that if we excluded those payments, we would not account 
for care coordination services that are not paid for under Medicare 
FFS, but that participant hospitals paid for using reconciliation 
payments. As a result, we would underestimate hospital costs and prices 
by not accounting for care coordination services paid for with 
reconciliation payments. We finalized our proposal to exclude 
reconciliation payments from expenditure data, noting our view that 
including reconciliation payments would result in Medicare paying 
participant hospitals their quality-adjusted target price, regardless 
of whether the participant hospital's expenditures were above or below 
that price. We also noted that we had not proposed an alternative in 
our proposed rule, and that we might consider including reconciliation 
payments in updating the set of historical years used to calculate 
quality-adjusted target prices through future rulemaking (80 FR 73332).
    Based upon our further consideration, we proposed to include both 
reconciliation payments and repayments in our calculations when 
updating quality-adjusted target prices for performance years 3 and 4 
and performance year 5. We want to encourage hospitals to invest in 
novel ways of coordinating care and improving quality, and we recognize 
that such activities are not directly reimbursed by Medicare. We agree 
that including reconciliation payments would more fully recognize the 
total costs of care under an episode payment model than would excluding 
those payments. The number of comments we previously received on this 
topic indicates that excluding reconciliation payments could discourage 
such investment, due to concerns that quality-adjusted target prices 
would underestimate the true cost of care. Although including the 
entire reconciliation payment in our updated quality-adjusted target 
price calculations could result in overpaying for care coordination 
services, the impact of including these payments on quality-adjusted 
target prices will decrease as we move to regional pricing. In 
addition, we stated our belief that our proposal to also include 
repayment amounts when updating historical data used to calculate 
quality-adjusted target prices would mitigate any potential overpayment 
for care coordination services.
    In addition, we proposed to include in regional historical episode 
payments any reconciliation payments and repayment amounts from 
historical BPCI LEJR episodes initiated at regional hospitals in order 
to most fully capture the total costs of care under episode payment 
models. We stated that, if we included reconciliation payments and 
repayment amounts for CJR episodes but not BPCI LEJR episodes, we would 
likely underestimate the regional total costs of care to hospitals, 
which would result in artificially lowered quality-adjusted target 
prices for participant hospitals, in effect penalizing participant 
hospitals. By including these amounts from both initiatives we will 
avoid distorting the regional component of historical LEJR episode 
spending, which will be especially important once we move to setting 
prices based on 100 percent regional episode data in performance year 4 
of the model. This policy mirrors our proposal to include these 
reconciliation payments and repayment amounts when updating the 
historical periods used for EPM quality-adjusted target prices; we 
refer readers to section III.D.3.e. of this final rule for further 
discussion of our rationale for this approach.
    We proposed to amend our regulations to add a new subsection Sec.  
510.300(b)(8) to reflect this proposal. We sought comment on our 
proposal. The following is a summary of the comments received and our 
responses.
    Comment: A few commenters expressed support for our proposal to

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include reconciliation payment and repayment amounts in our 
calculations for updating quality adjusted target prices. One commenter 
stated that we should apply this policy for calculating quality 
adjusted target prices earlier than performance year 3.
    Response: We appreciate the commenters' support for our proposal. 
We disagree with the comment suggesting that we implement this change 
prior to performance year 3. We note that, because reconciliation takes 
place 2 months after the completion of a performance year, we will not 
have calculated reconciliation and repayment amount totals from 
performance year 1 in adequate time to incorporate them into baseline 
spending totals used to construct quality-adjusted target prices for 
performance year 2, even if we were to shift the historical baseline 
period forward. Since we will not be re-calculating historical baseline 
episode spending until we set quality-adjusted target prices for 
performance year 3 based on data from 2014 through 2016, we will not 
implement this change prior to performance year 3.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
include CJR reconciliation payment and repayment amounts, as well as 
BPCI LEJR reconciliation payment and repayment amounts from regional 
hospitals, in the historical episode spending amounts used to calculate 
quality adjusted target prices for Performance Years 3, 4, and 5 for 
CJR model participants.

C. Quality-Adjusted Target Price

    We proposed to change the term we use to refer to a CJR participant 
hospital's episode benchmark price incorporating the effective discount 
factor based on the participant hospital's quality category to 
``quality-adjusted target price.'' This term will replace our prior 
term, ``episode target price,'' which referred to the episode benchmark 
price with a 3 percent discount applied. The term quality-adjusted 
target price would represent the price used at reconciliation to 
determine whether a CJR participant hospital is eligible for a 
reconciliation payment or repayment, and the amount of the 
reconciliation payment or repayment. To clarify, this change would be a 
change of terminology to more accurately reflect the impact of quality 
scores on the reconciliation process, and would not change the actual 
data that hospitals receive. In addition, our proposal to replace the 
term ``episode target price'' with ``quality-adjusted target price'' 
mirrors the terminology for the proposed EPMs and will reduce confusion 
for hospitals participating in more than one model.
    In accordance with 42 CFR 510.300(b)(7), CMS provides prospective 
prices to CJR participant hospitals prior to the performance period in 
which they apply, incorporating the 3 percent discount that would apply 
if the hospital is eligible for a reconciliation payment and achieves 
an ``Acceptable'' composite quality score category. As discussed in the 
CJR final rule, a hospital's effective discount percentage may be 
reduced at reconciliation to account for quality performance (80 FR 
73378). At the conclusion of a performance year, CMS will calculate a 
composite quality score for each hospital, which determines the 
effective discount percentage at reconciliation. The CJR final rule 
outlines the relationship between the composite quality score and the 
effective discount percentage (80 FR 73365). That is, a participant 
hospital may be eligible to earn a greater reconciliation payment or 
have a lower repayment amount as a result of its quality performance 
under the model (80 FR 73378). Hospitals are therefore aware that a 
different effective discount factor, and thus different quality-
adjusted target price, may be utilized at reconciliation to reflect 
their quality performance under the model, and they could easily 
estimate the range of potential quality-adjusted target prices that 
could apply at reconciliation.
    We also clarified the terminology we use to describe the discount 
factor included in the quality-adjusted target price. The discount 
factor included in the quality-adjusted target price based on the 
quality score is referred to as the ``effective discount factor.'' In 
contrast, the discount factor used to determine repayment amounts in 
performance years 2 and 3, during which repayment responsibility is 
being phased in and a lower discount factor applies for purposes of 
calculating repayment amounts will be referred to as the ``applicable 
discount factor.'' In performance years 2 and 3, the effective discount 
factor would continue to apply for hospitals that qualify for and earn 
a reconciliation payment; the applicable discount factor would only be 
applied in those cases where a hospital exceeded expected episode 
spending and would be responsible for repayment.
    We proposed to implement these terminology changes in all 
communications with participant hospitals 60 days after the change is 
finalized. We proposed to establish these definitions in the 
regulations at Sec.  510.2 and update our regulations at Sec.  510.300 
and Sec.  510.315 to reflect our use of the term ``quality-adjusted 
target price'' in lieu of ``episode target price'' and our use of the 
term ``applicable discount factor.'' We received no comments regarding 
our proposed payment terminology changes.
    Final Decision: We are finalizing the proposal, without 
modification, to use the term ``quality-adjusted target price'' in lieu 
of ``episode target price,'' and to use the term ``applicable discount 
factor'' to refer to the discount used to determine repayment amounts 
in performance years 2 and 3. We are making one technical change to our 
proposed regulations text to avoid inadvertently deleting existing 
Sec.  510.300(a)(5), by renumbering it to (a)(6).

D. Reconciliation

    In this final rule, in addition to the changes we proposed, 
detailed later in this section, we also want to correct an example of a 
reconciliation calculation that we included in the preamble to the CJR 
final rule (80 FR 73399). This example incorrectly suggested that stop-
loss and stop-gain limits would be applied separately for each MS-DRG/
fracture level. In actuality, we will apply stop-loss and stop-gain 
limits after aggregating quality-adjusted target prices at 
reconciliation and episode spending across all MS-DRG/fracture levels 
for a given hospital participant. This methodology is correctly 
described in the regulatory text of the CJR final rule 42 CFR 
510.305(e).
    In addition, we are correcting the definition of HCPCS in Sec.  
510.2 to read Healthcare Common Procedure Coding System.
1. Hospital Responsibility for Increased Post-Episode Payments
    As discussed in the CJR final rule, participant hospitals will be 
responsible for repaying Medicare for post-episode spending that 
exceeds 3 standard deviations from the regional mean (80 FR 73408). We 
refer readers to the CJR final rule (80 FR 73407) for further 
discussion of our rationale for holding participant hospitals 
financially accountable for significant increases in Medicare Parts A 
and B spending during the 30 days after a CJR episode ends. We also 
finalized a policy to include the result of our post-episode spending 
calculation (the amount exceeding 3 standard deviations above the 
regional mean) in a participant hospital's NPRA for a given performance 
year; as a result, a hospital's financial responsibility for post-
episode spending would be subject to the stop-loss and stop-gain limits 
we

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finalized for the CJR model (80 FR 73398).
    We proposed to modify our policy to hold hospitals responsible for 
post-episode payments that exceed 3 standard deviations from the 
regional mean. First, we proposed to calculate post-episode payments 
using the same timeframes we use for the subsequent reconciliation 
calculation, not when we conduct the initial reconciliation for a 
performance year (80 FR 73383). Given that we will begin reconciliation 
calculations 2 months after the conclusion of a performance year, we do 
not believe there would be sufficient time for claims run-out in order 
to set a reliable regional threshold for determining post-episode 
spending. Since in all cases any responsibility for post-episode 
payments would decrease a participant hospital's reconciliation payment 
or increase its repayment amount, our proposed change would more 
accurately and fairly hold hospitals accountable for increased post-
episode spending. We believe instances in which a CJR participant 
hospital is responsible for post-episode spending repayment will be 
rare, given our belief that hospitals in the CJR model will focus on 
care redesign during the LEJR episode and our other monitoring efforts 
under the CJR model. Our intent is to prevent hospitals from delaying 
services or care until the conclusion of a CJR episode by monitoring 
for cases in which hospitals have significantly increased spending in 
the 30 days following the episode. Assessing post-episode spending when 
we have more complete claims information would allow a more accurate 
assessment of hospitals' behavior under the model and prevent 
potentially high fluctuations in results that may occur if we calculate 
regional thresholds and hold hospitals responsible for post-episode 
spending beginning 2 months after the conclusion of a performance year. 
We proposed that this modified timeline would be applied to our 
reconciliation of the first CJR performance year and all performance 
years thereafter. We stated that we would assess post-episode spending 
for the first performance year (episodes beginning and ending between 
April 1, 2016 and December 31, 2016) when we conduct the reconciliation 
for the second CJR performance year (2017) in early 2018.
    We also proposed that hospital responsibility for post-episode 
spending will not be subject to the stop-loss and stop-gain limits. 
Although we believe, as noted previously, that hospital responsibility 
for post-episode spending will be rare, we also believe that in those 
cases where a hospital has financial responsibility for post-episode 
spending, such hospitals should be responsible in full for these 
amounts. The CJR model includes stop-loss limits, including more 
generous limits for certain types of hospitals (80 FR 73403), which are 
designed to limit a participant hospital's responsibility for episode 
spending above the quality-adjusted target price during the anchor 
hospitalization and 90-day post-discharge period. The stop-loss limits 
are not intended to protect hospitals that engage in inappropriate 
behavior or shifting of care beyond the episode from financial 
responsibility for such actions.
    We proposed to implement this policy change when we conduct the 
subsequent reconciliation calculation for performance year 1 of the 
model in the first 2 quarters of 2018 and for all performance years 
thereafter. That is, when we conduct the reconciliation for performance 
year 1 in early 2017, we would not assess post-episode spending for 
performance year 1 at that time. Although hospitals would not have been 
aware of these proposed changes to our reconciliation process during 
performance year 1 of the model, the proposed changes will not impact 
the performance year 1 NPRA.
    We proposed to amend our regulations at Sec.  510.305(e), Sec.  
510.305(h)(6), and add a new paragraph Sec.  510.305(j)(2) to reflect 
these proposals. We sought comment on our proposals. We received no 
comments on our proposal to calculate post-episode spending at the time 
of the subsequent reconciliation and to exempt post-episode spending 
from stop-loss limits.
    Final Decision: We are finalizing the proposal, without 
modification, to calculate post-episode spending for each performance 
year at the time of the subsequent reconciliation for that performance 
year, and to exempt post-episode spending from stop-loss limits.
2. ACO Overlap and Subsequent Reconciliation Calculation
    In the CJR final rule, we finalized a policy to account for overlap 
in situations where a portion of the CJR discount percentage is paid 
out as savings to an ACO participating in the Shared Savings Program or 
specified ACO models. We refer readers to the CJR final rule for 
further discussion of this policy and our rationale for this approach 
(80 FR 73395-73398). We proposed a modification to how we will account 
for such cases of overlap in the CJR model at reconciliation. In the 
final CJR rule, we specified that the results of this overlap 
calculation would be included in the subsequent reconciliation 
calculation that occurs 14 months after the conclusion of a performance 
year (80 FR 73383). We proposed that the subsequent reconciliation 
calculation not include the results of this ACO overlap calculation; 
that is, the subsequent reconciliation calculation will only include 
calculating the prior performance year's episode spending a second time 
with more complete claims data and comparing it to the quality-adjusted 
target price. The ACO overlap calculation will be a separate 
calculation from the subsequent reconciliation (although both 
calculations will occur concurrently) and added with the NPRA, 
subsequent reconciliation calculation, and post-episode spending 
calculation to determine the reconciliation payment or repayment amount 
at reconciliation. The effect of this proposal will be that these 
overlap amounts will not be subject to the stop-loss or stop-gain 
limits that apply to the calculation of the NPRA and subsequent 
reconciliation calculation. We believed this change was appropriate 
because the subsequent reconciliation calculation is intended to 
account for claims run-out and canceled episodes, and to reassess CJR 
episode spending during the model performance years. The stop-loss 
limit, therefore, is intended to ensure that participant hospitals that 
do not reduce actual episode payments below the quality-adjusted target 
price have a limit on the amount they must repay Medicare due to 
spending during CJR episodes. The stop-gain limit, conversely, is 
intended to place judicious limits on the degree to which hospitals can 
be rewarded based on responsible stewardship of CMS resources. In 
contrast, the ACO overlap calculation is intended to account for cases 
in which a portion of the CJR discount percentage is paid out to an ACO 
as shared savings, and does not hinge upon a participant hospital's 
performance in the CJR model. If ACO overlap amounts are included in 
calculations of the stop-loss limit, CMS could in some cases pay twice 
for the same cost-reducing activities, thereby skewing the model 
results. We believe the stop-loss and stop-gains should provide limits 
on the amount a hospital could earn or lose due to episode spending, 
not limit CMS's ability to adjust for overlap between models. For these 
reasons, we do not believe our policy to avoid paying out savings twice 
for the same beneficiary during the same period should be subject to 
the stop-loss or stop-gain limits. More details on how the proposed 
modification will impact the steps involved in the reconciliation

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process are provided further in this section.
    We proposed to implement the policy change when we conduct the 
subsequent reconciliation calculation for performance year 1 of the 
model in the first 2 quarters of 2018 and for all performance years 
thereafter. Although hospitals would not have been aware of these 
proposed changes to our reconciliation process during performance year 
1 of the model, we believed this timeframe was reasonable for the 
following reasons. First, if CMS must recoup a portion of the CJR 
discount percentage paid out as shared savings, this calculation must 
occur during the same timeframe as the subsequent reconciliation 
calculation for a given performance year to ensure that the ACO models 
and program have already completed their financial reconciliation for a 
given performance year. Second, this policy change (that is, not 
including the ACO overlap calculation in assessing whether a hospital 
has met the stop-loss or stop-gain limit for a given year) will not 
impact the performance year 1 NPRA.
    We proposed to add a new paragraph to our regulations at Sec.  
510.305(i). We sought comment on our proposal. We received no comments 
on our proposal to calculate ACO overlap amounts separately from the 
subsequent reconciliation, so that ACO overlap amounts will not be 
subject to stop-loss limits.
    Final Decision: We are finalizing the proposal, without 
modification, to perform ACO overlap calculations separately from the 
subsequent reconciliation, so that ACO overlap amounts will not be 
subject to stop-loss limits.
3. Stop-Loss and Stop-Gain Limits
    In the CJR final rule, we finalized our proposal to limit the 
amount a CJR participant hospital will be required to repay Medicare or 
could earn as a reconciliation payment under the CJR model. 
Specifically, we stated that CJR participant hospitals would be subject 
to the following stop-loss limits: 5 percent in performance year 2, 10 
percent in performance year 3, and 20 percent in performance years 4 
and 5. Similarly, we finalized symmetrical stop-gain limits: 5 percent 
in performance years 1 and 2, 10 percent in performance year 3, and 20 
percent in performance years 4 and 5 (80 FR 73401 through 73402). We 
finalized separate limits to provide additional financial protections 
for rural hospitals, Medicare-dependent hospitals, rural referral 
centers, and sole community hospitals (80 FR 73406). These limits are 
intended to provide financial protections for CJR participant 
hospitals, who may have varying levels of experience with episode 
payment models. We finalized symmetrical stop-gain limits to ensure 
hospitals do not have an incentive to excessively reduce services 
provided during episodes or shift services outside the CJR episode (80 
FR 73398). As noted previously in this section, we proposed a 
modification to our application of the stop-loss and stop-gain limits 
for the CJR model by excluding the post-episode spending amount and 
situations in which the CJR discount percentage is paid out to an ACO 
as shared savings.
    In light of our proposal to exclude the ACO overlap and post-
episode spending adjustments from the stop-loss and stop-gain limits, 
to calculate the stop-loss and stop-gain limits, we would use a 
hospital's quality-adjusted target price at reconciliation. For 
example, a hospital with benchmark episode spending of $30,000 and a 
composite quality score of ``excellent,'' would have an effective 
discount percentage of 1.5 percent and a quality-adjusted target price 
of $29,550 at reconciliation. The hospital's stop-loss and stop-gain 
limits for year 2 (assuming for simplicity that the hospital has only 1 
episode) would be 5 percent of the quality-adjusted target price, or 
$1,477.50. This is consistent with our proposed calculation of stop-
loss and stop-gain limits for the proposed EPMs described in section 
III.C. of this final rule. This approach is also consistent with our 
regulations at Sec.  510.305(e)(1)(v)(A) and Sec.  510.305(e)(1)(v)(B) 
to calculate stop-loss and stop-gain based on the effective discount 
factor at reconciliation.
    In order to determine whether a participant hospital has reached 
the stop-loss or stop-gain limits, we would compare actual episode 
payments during the performance year to the quality-adjusted target 
price to calculate the NPRA. In the example previously noted, if the 
participant hospital had actual episode spending of $35,000 during 
performance year 2, this would be compared against its quality-adjusted 
target price of $29,550. The difference between the quality-adjusted 
target price and actual episode spending is $5,450, but since the 
applicable stop-loss limit is $1,477.50, the hospital would need to 
repay Medicare $1,477.50. In this example, any post-episode spending 
amount or adjustment for ACO overlap from the prior performance year 
(performance year 1 in this example) would not be included in 
determining whether a hospital has met the stop-loss or stop-gain limit 
for a performance year, but rather would be added, unadjusted, to the 
performance year 2 NPRA in order to calculate the reconciliation 
payment or repayment amount. Therefore, if the hospital in this example 
owed $1,000 due to post-episode spending in performance year 1, and we 
determined that $2000 represented the CJR discount percentage that was 
paid out as shared savings for performance year 1, the full $3000 would 
be added to the hospital's performance year 2 NPRA regardless of stop-
loss, resulting in a repayment of $4,477.50. In addition, when 
performing the subsequent reconciliation calculation for performance 
year 2, which would be done simultaneously with the calculation of NPRA 
for performance year 3, we would apply the results of the performance 
year 2 subsequent reconciliation calculation to the year 2 stop-loss 
limit of $1,477.50 to ensure that, aggregated across all episodes in 
the performance year, the participant hospital is not responsible for 
repaying Medicare more for episode spending above the quality-adjusted 
target price than the stop-loss limit for that performance year. Thus, 
if the subsequent reconciliation calculation determined that the 
hospital in our example had actually spent $36,000 during performance 
year 2, resulting in a larger difference between actual spending and 
the quality-adjusted target price, the higher amount of $6,450 would 
still be subject to the stop-loss limit of $1,477.50, so the hospital 
would not be responsible for the additional $1,000 of episode spending 
beyond the quality-adjusted target price.
    As discussed previously in this section, we proposed to implement 
these changes to our reconciliation process beginning with the 
reconciliation for performance year 1.
    We proposed to amend our regulations at Sec.  510.305(e), Sec.  
510.305(f), and add a new paragraph (j) to reflect these proposals. We 
also proposed to streamline Sec.  510.305(i)(2) for clarity.
    We sought comment on our proposal. The following is a summary of 
the comments received and our responses.
    Comment: One commenter requested that stop-loss be capped at 10 
percent for all years of the model.
    Response: While we appreciate the commenter's thoughts on capping 
stop loss, we note that we did not propose to change the stop-loss and 
stop-gain limits. As we noted in the CJR final rule (80 FR 73401), we 
believe that we have taken sufficient steps to limit downside risk by 
capping high cost episodes and phasing in downside risk more gradually 
than originally proposed over performance years 2 and 3. Our proposal 
here was limited to the manner

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in which the stop-loss and stop-gain limits are applied and therefore 
we decline to adopt the commenter's suggested approach.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to apply 
the stop-loss or stop-gain amount calculated in the first 
reconciliation to the NPRA of both the first reconciliation and the 
subsequent reconciliation NPRA, but not to post-episode spending or ACO 
overlap adjustments.
4. Modifications to Reconciliation Process
    As previously discussed in this section, we proposed several 
modifications to how we conduct the reconciliation process for 
participant hospitals in the CJR model for all performance years. We 
proposed how these steps would modify the CJR reconciliation process we 
finalized in the CJR final rule (80 FR 73383).
    The following example illustrates our proposed modifications to the 
reconciliation process, reflecting our proposals to compare actual 
episode payments to the quality-adjusted target price; calculate post-
episode spending beginning 14 months after the conclusion of a 
performance year; calculate post-episode spending amounts and the ACO 
overlap calculation separately from the NPRA and subsequent 
reconciliation calculation; and apply the stop-loss and stop-gain 
limits only to calculations of NPRA and the subsequent reconciliation 
calculation (that is, exclude post-episode spending amounts and the ACO 
overlap calculation) for a given performance year:
    Beginning 2 months after the conclusion of performance year 2, CMS 
would compare actual episode payments to the quality-adjusted target 
prices for the episodes at a CJR participant hospital. The quality-
adjusted target price that applies at reconciliation would be based on 
a participant hospital's composite quality score for performance year 
2. We would aggregate episodes at each CJR participant hospital and 
calculate the hospital's NPRA. The NPRA would be the difference between 
the quality-adjusted target price times the number of episodes and 
actual episode payments times the number of episodes during the 
performance year. We would apply the stop-gain and stop-loss limits of 
5 percent of the quality-adjusted target price to determine if a 
hospital reached the limit.
    We would simultaneously perform the subsequent reconciliation 
calculation for performance year 1, to account for claims run-out and 
canceled episodes from performance year 1. We would reapply the stop-
gain limit for performance year 1, by summing the result of the 
subsequent reconciliation calculation for performance year 1 and the 
performance year 1 NPRA (which was calculated during the prior 
reconciliation). For example, if the participant hospital's NPRA for 
performance year 1 was greater than the stop-gain limit and the result 
of the subsequent reconciliation calculation for performance year 1 was 
positive, the subsequent reconciliation calculation would not be added 
to the reconciliation payment made to the participant hospital in the 
second quarter of 2018, because the stop-gain limit had already been 
reached for performance year 1.
    Concurrently with our subsequent reconciliation calculation, we 
would also determine if a participant hospital is responsible for post-
episode spending from performance year 1, as well as determine any 
potential amount of the CJR discount percentage that was paid out as 
savings to an ACO entity as previously described in this section during 
performance year 1. In this example, the results of all three 
calculations (the subsequent reconciliation calculation for performance 
year 1--subject to the stop-loss and stop-gain limits--and the post-
episode spending calculation and ACO overlap calculation) would be 
added to the NPRA calculated for performance year 2 in order to create 
the reconciliation payment or repayment amount. (The exception to this 
pattern will be performance year 5, as the subsequent reconciliation, 
post-episode spending, and ACO overlap calculations will occur in 2022 
without a concurrent NPRA calculation.)
    We note that this approach mirrors the reconciliation process we 
proposed for the AMI, CABG, and SHFFT models at III.D.5. of this final 
rule. We refer readers to that section for additional discussion of our 
approach. The following is a summary of the comments received and our 
responses.
    Comment: One commenter requested that reconciliation be performed 
on a quarterly basis, in order to provide faster feedback to help 
hospitals improve their overall quality and cost performance.
    Response: As we did not propose to change the frequency of 
reconciliation, we decline to adopt this change. As we noted in the CJR 
final rule (80 FR 73385), our experience with the BPCI quarterly 
reconciliation process has shown that, because providers and suppliers 
have a calendar year to submit FFS claims for payment, many claims are 
incomplete at the time of an initial quarterly reconciliation, leading 
to significant fluctuation between initial and subsequent 
reconciliation calculations. Time spent in such frequent reconciliation 
and appeals processes can detract from participants' efforts focusing 
on care redesign and coordination with providers and suppliers engaged 
in furnishing care for beneficiaries under the model. While quarterly 
data feeds are subject to similar limitations with respect to the 
completeness of claims, we believe the quarterly data feeds that 
hospitals receive, which include both line-level and summary claims 
data, provide sufficiently detailed and timely feedback to guide 
quality improvement efforts.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals to the CJR pricing and 
reconciliation process without modification.

E. Use of Quality Measures and the Composite Quality Score

1. Hospitals Included in Quality Performance Distribution
    As finalized in the CJR final rule, CMS computes quality 
performance points for each quality measure based on the participant 
hospital's performance percentile relative to the national distribution 
of all hospitals' performance on that measure. We proposed to compute 
quality performance points for each quality measure based on the 
participant hospital's performance relative to the distribution of 
performance of all ``subsection (d)'' hospitals reporting the measure 
that are eligible for payment under IPPS and meet the minimum patient 
case or survey count for that measure. This approach is similar to the 
methodologies of other CMS programs, such as the HVBP Program. In 
addition, comparing CJR participant hospitals' quality performance to 
IPPS-eligible subsection (d) hospitals' quality performance on the same 
measures is a fairer comparison of quality performance, as CJR 
participant hospitals are all IPPS-eligible subsection (d) hospitals. 
Defining and limiting the relative distribution in this way will 
minimize variability due to factors that are unrelated to quality, 
thereby increasing the validity of the quality performance score.
    We proposed to amend the regulations at Sec.  510.315(c) to reflect 
this change. We also proposed a technical change to the regulations to 
renumber

[[Page 525]]

certain subparagraphs. We sought comment on our proposals.
    Final Decision: We did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
2. Quality Improvement Points
    As finalized in the CJR final rule, quality improvement points for 
each measure are added to the composite quality score if the hospital's 
score on that quality measure increases by at least 3 deciles on the 
performance percentile scale compared to the previous performance year. 
We proposed to clarify that, for performance year 1, we will compare 
the hospital's performance percentile with the corresponding time 
period in the previous year, not the previous performance year. We 
proposed this clarification because there is no performance year 
preceding performance year 1. For performance years 2 through 5, we 
will still compare the hospital's performance percentile with the 
previous performance year. We also proposed to modify this policy to 
define quality measure improvement as an increase of at least 2 deciles 
on the performance percentile scale compared to the previous 
performance year. Reducing the threshold for improvement from 3 deciles 
to 2 deciles will increase the number of CJR participant hospitals 
eligible for quality improvement points and provide CJR participant 
hospitals at all current levels of quality performance, including those 
historically lagging, with significant incentives to achieve 
improvement in the quality of care. Quality improvement points can 
contribute up to 1.8 points toward a CJR participant hospital's 
composite quality score, so increasing the number of CJR participant 
hospitals that are eligible for these points may also increase the 
number of CJR participant hospitals that are eligible for a reduced 
quality-adjusted target price. As defined in section V.C. of this final 
rule, the quality-adjusted target price is the price used at 
reconciliation to determine whether a CJR participant hospital is 
eligible for a reconciliation payment or repayment and the amount of 
the reconciliation payment or repayment. This mirrors the approach we 
proposed for the proposed EPMs as discussed in section III.E.3.c. of 
this final rule.
    We proposed to amend our regulations at Sec.  510.315(d) to reflect 
these changes. We sought comment on our proposal.
    Final Decision: We did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
3. Relationship of Composite Quality Score to Quality Categories
    As finalized in the CJR final rule, CMS will place participant 
hospitals into one of four quality categories to determine 
reconciliation payment eligibility and, if applicable, the value of the 
effective discount percentage at reconciliation. We refer readers to 
the CJR final rule for a full discussion of our approach (80 FR 73363-
73381). We described a technical correction to our composite quality 
scores that will determine reconciliation payment eligibility and the 
effective discount percentage at reconciliation. We noted that this 
technical correction does not affect our estimation of savings due to 
the CJR model, because the measure distribution used for such 
calculations in the CJR final rule was the correct one we describe in 
this section.
    As we stated in the proposed rule, participant hospitals will be 
required to achieve a minimum composite quality score of greater than 
or equal to 5.0 to be eligible for a reconciliation payment if actual 
episode spending is less than the target price. Participant hospitals 
with a composite quality score less than 5.0 will be assigned to the 
``Below Acceptable'' quality category and will not be eligible for a 
reconciliation payment if actual episode spending is less than the 
target price. Participant hospitals with a composite quality score 
greater than or equal to 5.0 and less than 6.9 will be assigned to the 
``Acceptable'' quality category and will be eligible for a 
reconciliation payment if actual episode spending is less than the 
target price. Participant hospitals in the ``Acceptable'' quality 
category will not be eligible to receive a reduced effective discount 
percentage at reconciliation. Participant hospitals with a composite 
quality score greater than or equal to 6.9 and less or equal to 15.0 
will be assigned to the ``Good'' quality category and will be eligible 
for a reconciliation payment if actual episode spending is less than 
the target price. Participant hospitals in the ``Good'' quality 
category will be eligible to receive a reduced effective discount 
percentage (80 FR 73378). Participant hospitals with a composite 
quality score greater than 15.0 will be assigned to the ``Excellent'' 
quality category and will be eligible for a reconciliation payment if 
actual episode spending is less than the target price. Participant 
hospitals in the ``Excellent'' quality category will be eligible to 
receive a reduced effective discount percentage (80 FR 73378).
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concern that this technical 
correction would penalize hospitals because fewer hospitals would fall 
into the ``Acceptable'' category and, as a result, fewer hospitals 
would be eligible for a reconciliation payment. Commenters stated that 
CJR participant hospitals have been modeling savings based on the 
composite quality scores and corresponding quality categories published 
in the CJR final rule, and, thus, changing these values would result in 
a funding shortfall for hospitals that have budgeted for savings based 
on the original values. Some of these commenters suggested that CMS 
ensure that all the hospitals that fell into the ``Acceptable'' 
category based on composite quality scores and corresponding quality 
categories in the final rule would also fall in the ``Acceptable'' 
category using the proposed corrected values.
    Response: We appreciate the commenters' concern that the proposed 
technical correction to the composite quality scores and corresponding 
quality categories would penalize CJR participant hospitals. In the CJR 
final rule, we described calculating the quality improvement points 
separately from the quality performance points for each measure. For 
example, as finalized in the CJR final rule, hospitals could earn a 
maximum of 8.0 quality performance points (80 FR 73376) and a maximum 
of 0.8 quality improvement points (80 FR 73380) for the HCAHPS Survey 
measure. Instead, we should have calculated improvement points as part 
of the total composite quality score points for a measure. For example, 
assigning a maximum of 7.2 quality performance points for the HCAHPS 
Survey measure would have allowed for the addition of a maximum of 0.8 
quality improvement points, for a total of 8.0 maximum composite 
quality score points for the HCAHPS Survey measure. This correct 
method--calculating improvement points as part of the total composite 
quality score points for a measure--was the method used to estimate 
savings for the CJR model.
    To correct this error, we are finalizing our proposal to change the 
composite quality scores and corresponding quality categories. We 
appreciate that this could present a challenge for some hospitals that 
were expecting to fall into a certain category based on modeling their 
own composite quality score values. Similar to the method used to 
estimate savings for the CJR model, the composite quality scores and 
corresponding quality categories we are

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finalizing in this rule will place over 90 percent of participant 
hospitals in the ``Acceptable'' category or better. In addition, the 
changes made to the quality performance distribution and quality 
improvement points in sections V.E.1. and V.E.2. of this final rule, 
respectively, will also affect estimations of a hospital's composite 
quality score. As stated in section V.E.2. of this final rule, reducing 
the threshold for improvement from 3 deciles to 2 deciles will increase 
the number of CJR participant hospitals eligible for quality 
improvement points and, thus, provide more opportunities for hospitals 
to earn a higher composite quality score.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
correct the composite quality scores that will determine reconciliation 
payment eligibility and the effective discount percentage at 
reconciliation. We also are making conforming changes to the other 
provisions in Sec.  510.305 to reflect the new composite quality score 
ranges for the quality categories.
4. Maximum Composite Quality Score
    As finalized in the CJR final rule, a participant hospital could be 
awarded a maximum composite quality score of 21.8 if the hospital 
received maximum quality performance points for each quality measure, 
maximum quality improvement points for each quality measure, and 
successfully submitted voluntary patient-reported outcomes and limited 
risk variable data. We proposed to award up to 10 percent of the 
maximum measure performance score on the THA/TKA Complications and 
HCAHPS Survey measures, and to impose a cap on the CJR model composite 
quality score at 20 points. This change would bring the calculation of 
the CJR composite quality score into greater alignment with existing 
CMS programs, such as the HVBP Program, by reducing the number of 
participants who receive both the highest quality performance score on 
a measure and the maximum points for measure improvement.
    We proposed to amend our regulations at Sec.  510.315(d) to reflect 
this change. We sought comment on our proposal.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
5. Acknowledgement of Voluntary Data Submission
    Our regulations at Sec.  510.400(c)(3) state that although we do 
not publicly report the voluntary patient-reported outcomes and limited 
risk variable data during the CJR model, we do indicate whether a 
hospital has voluntarily submitted such data. We proposed to amend 
Sec.  510.400(c)(3) to clarify that we would acknowledge only CJR 
participant hospitals that successfully submit voluntary patient-
reported outcomes and limited risk variable data, in accordance with 
Sec.  510.400(b). We sought comment on our proposal.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
6. Calculation of the HCAHPS Linear Mean Roll-Up (HLMR) Score
    We proposed to calculate the HCAHPS Linear Mean Roll-up (HLMR) 
score by taking the average of the linear mean scores (LMS) for 10 of 
the 11 publicly reported HCAHPS measures for IPPS hospitals with 100 or 
more completed HCAHPS surveys in a 4-quarter period. The HLMR will 
summarize HCAHPS performance on all of the publicly reported measures, 
except for Pain Management. We proposed this change because removal of 
Pain Management from the HVBP Program was proposed in the Hospital 
Outpatient Prospective Payment System and Ambulatory Surgical Center 
Payment System Proposed Rule (81 FR 45603).
    This mirrors the approach we proposed for the proposed EPMs as 
discussed in section III.E.4.d.(1)(f) of this final rule. Our 
regulations do not include the methods to calculate the HLMR, so we 
refer readers to section III.E.4.d.(1)(f) of this final rule for 
additional discussion of our approach.
    We proposed to implement the proposed changes to hospitals included 
in the quality performance distribution, the maximum number of points 
in the composite quality score, the change from 3 to 2 deciles for 
assessing quality improvement, and the calculation of the HLMR score 
starting with the reconciliation for performance year 1 of the CJR 
model, when we calculate each participant hospital's composite quality 
score for year 1.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.

F. Accounting for Overlap With CMS ACO Models and the Shared Savings 
Program

    The CJR final rule details our policies to address cases of overlap 
in which beneficiaries that are aligned or attributed to an ACO model 
or Shared Savings Program participant are also included in a CJR 
episode. We recognize that there will be circumstances in which a 
Medicare beneficiary in a CJR episode is also aligned or attributed to 
an ACO participating in the Shared Savings Program or a CMS ACO model. 
In the CJR final rule, we finalized an approach to allow for such cases 
of overlap and minimize any double counting of savings through the 
following policies. We will conduct our annual reconciliation prior to 
the ACO reconciliation process, and make our reconciliation payments 
and repayment amounts available for the ACO models and program to take 
into account when performing their reconciliation, as their financial 
methodologies permit. In addition, in cases where a portion of the CJR 
discount percentage is paid out as shared savings to a participant 
hospital that participates in an ACO as a participant or provider/
supplier, we would make an adjustment to the participant hospital's 
reconciliation results. We refer readers to the CJR final rule for a 
full discussion of our approach and the options we considered (80 FR 
73387).
    Given commenters' concerns about our approach, which are summarized 
in the final rule (80 FR 73387) we have continued to consider 
alternative options for accounting for overlap between the ACO models 
and program and the CJR model. Specifically, we considered, as some 
commenters suggested, attributing savings achieved during CJR episodes 
in which beneficiaries are also aligned or attributed to an ACO 
accepting downside risk to the ACO entity, not the participant 
hospital. We recognize that ACOs are engaged in care management 
activities for beneficiaries across the spectrum of care, which may 
also include care redesign during acute episodes. As a result, we 
proposed to cancel (or never initiate) a CJR episode for beneficiaries 
that are prospectively aligned to a Next Generation ACO or ESRD 
Seamless Care Organization (ESCO) in the Comprehensive ESRD Care 
initiative in tracks with downside risk for financial losses. While the 
CJR model excludes beneficiaries whose eligibility for Medicare is on 
the basis of end stage renal disease, not all beneficiaries aligned to 
ESCOs meet this criterion. Thus, some beneficiaries aligned to ESCOs 
could be included in the CJR model.
    We proposed to implement this policy for episodes beginning on or 
after July 1, 2017, to align with the timeframe for implementation of 
the proposed AMI, CABG, and SHFFT models which proposed the same 
exclusion of

[[Page 527]]

beneficiaries aligned to Next Generation ACOs and ESCOs in downside 
risk tracks. We proposed this change to how we determine episodes 
included in CJR because these ACOs and ESCOs are accepting a high level 
of financial risk for the total cost of care for their aligned 
beneficiaries; for example, Next Generation ACOs are held to as much as 
80 percent to 100 percent of first dollar losses. In addition, 
beneficiaries are prospectively aligned to ACOs in both initiatives. We 
believe that if we were to implement a policy where we would cancel CJR 
episodes based on a given beneficiary's ACO alignment status, we would 
do so only in those cases where the ACO alignment is prospective and 
does not change during a performance year. In such cases, CJR model 
participant hospitals could be aware of a beneficiary's ACO alignment 
status, reducing uncertainty as to whether a given beneficiary is 
included in the CJR model. We note that we proposed elsewhere in this 
final rule to exclude beneficiaries prospectively aligned to a Next 
Generation ACO model participant or an ESCO in the Comprehensive ESRD 
Care Initiative in a downside risk track from the proposed AMI, CABG, 
and SHFFT model episodes because we wish to test this alternative 
approach to ACO overlap. We did not propose to exclude beneficiaries 
assigned to Shared Savings Program Track 3 ACOs, however, because we 
intended to test the approach of excluding prospectively-aligned ACO 
beneficiaries from the CJR model with the limited number of 
beneficiaries assigned to Next Generation ACOs and ESCOs in a downside 
risk track. We did not seek to disrupt the operations of our large, 
permanent ACO program to test this novel approach for accounting for 
overlap. The Shared Savings Program is a national program; we did not 
believe that testing a new approach to addressing overlap in a national 
program would be appropriate prior to testing such an approach with a 
smaller population. However, we sought comment on whether we should 
extend this proposed policy--that is, excluding from the CJR model 
beneficiaries who are prospectively assigned to an ACO--to 
beneficiaries who are assigned to a Track 3 Shared Savings Program ACO. 
We refer readers to section III.D.6.c. of this final rule for further 
discussion of our proposed approach and rationale, including details on 
how we would operationalize the approach if finalized for CJR or the 
proposed EPMs.
    In cases where a beneficiary is in a CJR episode and also aligned 
to a Pioneer ACO, Medicare Shared Savings Program ACO, or ESCO not 
participating in a downside risk track, we would not cancel the CJR 
episode. The policies we previously finalized for accounting for such 
overlap would continue to apply. We refer readers to the CJR final rule 
(80 FR 73391 through 73398) for additional discussion of our policies. 
Because the Pioneer ACO model ends on December 31, 2016, no adjustments 
are necessary to account for overlap between beneficiaries in the 
proposed AMI, CABG, and SHFFT models and the Pioneer ACO model. 
However, since the first CJR performance year began in April 2016, we 
will make an adjustment for overlap between the two models during the 
first performance year of the CJR model.
    Finally, we note that we proposed elsewhere in this final rule to 
allow certain ACOs to be CJR collaborators. Our proposal, which is 
discussed in detail in section V.J.1.a. of this final rule, would allow 
for gainsharing arrangements between ACOs (as defined in the CJR rule) 
and CJR participant hospitals. The proposal would allow such 
partnerships in regions where such relationships could be mutually 
beneficial for ACOs and CJR participant hospitals. We believe these 
proposals will mitigate concerns about the limited opportunities for 
collaboration between ACOs and CJR participant hospitals that are often 
caring for the same beneficiaries. We refer readers to section V.J.1.a. 
of this final rule for additional detail on the proposed and final 
policy.
    The proposal for addressing overlap between the CJR model and CMS's 
ACO models and program is included in Sec.  510.305(j)(1). We sought 
comment on our proposal to exclude beneficiaries aligned to a Next 
Generation ACO or ESCO downside risk track from the CJR model beginning 
with episodes that are initiated on or after July 1, 2017. The 
following is a summary of the comments received and our responses.
    Comment: Several commenters expressed support for the proposed 
exclusion of beneficiaries attributed to ACOs in either the Next 
Generation ACO or Comprehensive ESRD Care models. A substantial number 
of these commenters also supported extending the exclusion to 
beneficiaries attributed to Medicare Shared Savings Program Track 3 
ACOs, as Medicare Shared Savings Program Track 3 ACOs include downside 
risk as well. A number of these commenters recommended extending the 
exclusion even further to include more ACO related exclusions from the 
CJR model and expressed concern that the current approach to model 
overlaps undermines ACOs. One commenter noted that ACOs have invested 
significant resources in managing acute and post-acute care already and 
overlap with the CJR model deprives them of a key source of savings and 
of a return on their investment. In support of this perspective, 
several commenters recommended the ACO exclusions from CJR should be 
extended to include beneficiaries attributed to any ACO unless a 
collaborative agreement is in place. If there is no collaborative 
agreement in place between a CJR model participant and an ACO that it 
is not part of, then beneficiaries attributed to that ACO should be 
excluded from the CJR model episodes.
    Response: We acknowledge the range of perspectives expressed by 
commenters and appreciate the many specific suggestions for handling 
these overlaps. We also acknowledge the operational challenge both ACOs 
and CJR hospital participants face and the financial implications for 
both when there are overlaps. We believe the level and range of 
comments reflect the challenge in balancing multiple perspectives that 
we discussed in the proposed rule. The predominance of commenters 
supported our proposal to exclude from the CJR model those 
beneficiaries attributed to Next Generation ACOs and the downside risk 
track of Comprehensive ESRD Care models, and a significant number of 
commenters made compelling arguments for extending it to Shared Savings 
Program Track 3 ACOs. These comments have convinced us that the best 
way to balance the interests of both ACOs and CJR participant 
hospitals, as well as CMS's interest in maximizing population health 
and lowering total costs of care, is to finalize our original proposal 
with the addition of Shared Savings Program Track 3 ACO beneficiaries.
    As we describe more fully in section III.D.6.c of this final rule, 
we believe that existing ACO models that assume downside risk and 
prospectively commit to coordinating a beneficiary's overall care for 
the entire year should not be deprived of the opportunity to benefit 
from cost savings achieved during an LEJR episode of care. Post-acute 
care, in particular, is an area in which ACOs have made significant 
investments, and existing ACOs that assume both downside risk and 
prospective responsibility for a beneficiary's care should have the 
opportunity to share in the cost savings achieved in the post-acute 
phase of an LEJR episode. However, we continue to be concerned about 
depleting the eligible population of CJR participants, which would not 
only diminish the power of the model test and potentially

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exclude patients who would not ultimately be assigned to an ACO, but 
would also deprive CJR participant hospitals of opportunities to save 
under the model.
    For these reasons, we are finalizing our proposal with the one 
modification; that is, we are excluding from the CJR model those 
beneficiaries that are assigned to a Shared Savings Program ACO 
participating in Track 3. In order to accurately reflect these changes 
and align beneficiary inclusion criteria with EPMs, we are also 
incorporating these changes into the CJR model beneficiary inclusion 
criteria, which will apply to CJR episodes that begin on or after July 
1, 2017.
    Comment: Many commenters expressed concern about the challenge of 
having accurate and timely information on patient attribution with 
multiple models. They believed it was unrealistic to expect hospital 
staff and others to be able to accurately identify patients in excluded 
ACO models and questioned how CJR participants and their partners would 
be able verify a patient's status.
    Response: We appreciate the operational challenges that CJR 
participants and their collaborating partners face in an environment 
where there are many, potentially overlapping models in place. We are 
actively looking for opportunities to reduce operational barriers where 
we can practically and effectively do so. To this end, we are in the 
process of developing a web portal where CJR participant hospitals can, 
at the point of care, look up and identify beneficiaries prospectively 
assigned to ACOs who will be excluded from the CJR model. This system, 
which is being developed consistent with the requirements of the 
Privacy Act and is currently in testing, is expected to be operational 
when EPMs are implemented in July of 2017. Model participants will be 
provided with more specific information on this portal project as it is 
rolled out.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal with the one modification; 
that is, we are excluding from the CJR model those beneficiaries that 
are assigned to a Medicare Shared Savings Program ACO participating in 
Track 3. As discussed in the proposed rule (81 FR 50955), these 
exclusions would apply for episodes that begin on or after July 1, 
2017. We also note that CMS will implement an on-line system for 
verification of attribution to support CJR participant hospitals in 
their ability to identify such excluded beneficiaries.
    We are also finalizing modifications to the beneficiary inclusion 
criteria at Sec.  [thinsp]510.205 to indicate that, for episodes 
beginning on or after July 1, 2017, the CJR model will include Medicare 
beneficiaries not prospectively assigned to--
     An ACO in the Next Generation ACO model;
     An ACO in a track of the Comprehensive ESRD Care Model 
incorporating downside risk for financial losses; or
     A Shared Savings Program ACO in Track 3.

G. Appeals Process

    Currently, the CJR model provides that participant hospitals may 
dispute a calculation that involves a matter related to payment, 
reconciliation amounts, repayment amounts, or determinations associated 
with quality measures affecting payment. The hospital is required to 
provide written notice of the error, in a form and manner specified by 
CMS, if the hospital wishes to dispute such calculation. Unless the 
participant hospital provides a written notice of the error, the CJR 
reconciliation report is deemed final 45 calendar days after it is 
issued, and CMS will then proceed with the payment or repayment process 
as applicable. In order to further specify our timeline for this 
process, we proposed that a timely notice of a calculation error means 
a notice received by CMS within 45 calendar days of CMS issuing a 
participant hospital's reconciliation report.
    In continuing our efforts to be clear and concise, we proposed to 
add language to our regulations highlighting the available appeals 
process for a participant hospital that receives a notice of 
termination from the CJR model. We previously described the appeals 
process for notice of termination in the CJR final rule at Sec.  
510.310(c), by using the notice of termination as an example of an 
exception to a participant hospital having to provide CMS with notice 
of calculation error. A notice of calculation error continues not to be 
required by participant hospitals that receive a notice of termination, 
as this matter does not involve an issue contained in, or a calculation 
that contributes to, a CJR reconciliation report. We proposed that if a 
participant hospital receives notification that it has been terminated 
from the CJR model and wishes to appeal such termination, it must 
provide a written request for reconsideration to CMS requesting review 
of the termination within 10 calendar days of the notice. Following 
receipt of the participant hospital's timely written request, CMS would 
have 30 days to respond to the participant hospital's request for 
review. If the participant hospital fails to notify CMS, the 
termination would be deemed final.
    We proposed to amend the regulations at Sec.  510.310 to reflect 
the proposals, and to correct a technical error in paragraph (d)(6) 
(which would be renumbered (e)(6)). We also proposed to delete Sec.  
510.310(a)(3) in the current regulations as it is duplicative with 
Sec.  510.310(a)(1). We sought comment on our proposal.
    Comment: No comments unique to the CJR model were submitted in 
response to our proposed amendments to the appeals process in the CJR 
model.
    Response: We appreciate the comments surrounding the appeals 
processes for the CJR model and EPMs. We refer to section III.C.8 of 
this final rule for a detailed discussion of comments and responses in 
regards to the appeal processes for these models.
    Final Decision: In current CJR regulations at Sec.  510.310(a), a 
participant hospital may dispute a calculation that involves a matter 
related to 'determinations associated with quality measures affecting 
payment.' We explain in the preamble of the CJR final rule that 
determinations associated with quality measures affecting payment may 
include the calculation of the percentiles of quality measure 
performance to determine eligibility to receive a reconciliation 
payment (80 FR. 73411). For consistency with the final EPM regulation 
text in Sec.  512.310(a) that was modified in response to comments in 
order to more fully identify those determinations associated with 
quality measures affecting payment that may be disputed under this 
provision, we are making a technical change in this final rule to the 
regulation text at Sec.  510.310(a), that a participant hospital may 
dispute a calculation that involves a matter related to the use of 
quality measure results in determining the composite quality score, or 
the application of the composite quality score during reconciliation. 
This does not change the substantive standard that we proposed and 
finalized in the CJR final rule, but rather refines the regulatory text 
to better reflect our final policy. Therefore, Sec.  510.310(a) is 
finalized as follows:
     Notice of calculation error (first level of appeal). 
Subject to the limitations on review in subpart D of Part 510, if a 
participant hospital wishes to dispute calculations involving a matter 
related to payment, reconciliation amounts, repayment amounts, the use 
of quality measure results in determining the composite quality score, 
or the application of the

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composite quality score during reconciliation, the participant hospital 
is required to provide written notice of the calculation error, in a 
form and manner specified by CMS.

H. Beneficiary Notification

    As stated in the proposed rule, CMS currently requires participant 
hospitals and CJR collaborators to provide written notice to any 
Medicare beneficiary that meets certain criteria in Sec.  510.205 of 
his or her inclusion in the CJR model. The notification must detail the 
structure of the model, the existence of providers and suppliers with 
whom the participant hospital has a sharing arrangement, and the fact 
that the beneficiary retains the freedom of choice. We refer readers to 
the CJR final rule (80 FR 73516-73521) for further discussion of these 
requirements, which are codified under Sec.  510.405. Although we did 
not propose specific changes to Sec.  510.405(a)(1), which requires 
that participant hospitals provide CJR beneficiaries with lists of all 
post-acute care providers in an area, we did proposed a parallel 
beneficiary notification provision for the EPMs. As discussed in detail 
in section III.G.2 of this final rule, we received comments on both the 
EPM beneficiary notification proposals and the existing CJR provision 
and we are making changes to the EPM beneficiary notification 
regulations in response to these comments. Since we proposed to 
maintain alignment between the CJR model and the EPMs to the extent 
possible as referenced in sections V.C; V.I.1; V.J.1 through V.J.4; and 
V.K. of the proposed rule, we are also making conforming changes to 
Sec.  510.405(a)(1) for the CJR model to match the modifications we are 
finalizing for the EPMs in Sec.  512.450(a)(1). Specifically, we are 
revising Sec.  510.405(a)(1) to state that as part of discharge 
planning and referral, participant hospitals must provide a complete 
list of HHAs, SNFs, IRFs, or LTCHs that are participating in the 
Medicare program, and that serve the geographic area (as defined by the 
HHA) in which the patient resides, or in the case of the SNF, IRF, or 
LTCH, the geographic area requested by the patient. This list must be 
presented to CJR beneficiaries for whom home health care, SNF, IRF, or 
LTCH services are medically necessary. In addition, we are adding the 
definition of area to the CJR model definitions under Sec.  510.2. The 
definition we are adding is the same definition that is used in the 
Conditions of Participation (CoP) for discharge planning. Area means 
``as defined in Sec.  400.200 of this chapter, the geographical area 
within the boundaries of a State, or a State or other jurisdiction, 
designated as constituting an area with respect to which a Professional 
Standards Review Organization or a Utilization and Quality Control Peer 
Review Organization has been or may be designated.'' We note that we 
expect the SNF list provided to a CJR beneficiary would also include 
all rural hospital providers of SNF-level care in swing beds in the 
geographic area requested by the patient. We believe that these changes 
will clarify and streamline the requirements for the provision of the 
list of post-acute care providers, as well as reduce the burden on 
participant hospitals.
    In the proposed rule, we proposed to amend Sec.  510.405 to include 
all CJR collaborators in the requirements for delivery of beneficiary 
notices and to streamline our current regulations. We also proposed to 
require participant hospitals and CJR collaborators to be able to 
generate and provide to CMS upon request a list of all beneficiaries 
who received a notice, including the type of notice and the date it was 
delivered. We sought comments on all aspects of this proposal. We also 
note that we proposed, but did not summarize in the preamble, new 
language for Sec.  510.405(b) that would permit delivery of the 
hospital detailed beneficiary notice as soon as reasonably practicable 
after admission, but during the stay and prior to discharge, when a 
beneficiary's medical condition makes notice on admission infeasible.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters expressed concern that the multiple beneficiary 
notifications required under CMS' proposal would create an overload for 
CJR beneficiaries, would result in administrative burden on providers, 
and would be infeasible in some cases. Several commenters also 
expressed concern about the times at which beneficiaries must receive 
beneficiary notifications from participant hospitals or CJR 
collaborators, the requirement that beneficiary notifications must be 
in writing, and a participant hospital's ability to generate lists of 
all beneficiaries that received beneficiary notifications.
    Response: We appreciate the commenters' feedback on our proposals. 
We received similar comments for the proposed EPM regulations for 
beneficiary notification and refer readers to III.G.3. for a detailed 
summary of comments we received and our responses on beneficiary 
notification as applicable to the CJR model. In response to these 
comments, we are modifying the notice provisions to, among other 
things, permit flexibility in the timing of notice delivery as a result 
of a beneficiary's condition and delay until July 1, 2017 
implementation of the requirement that participant hospitals and CJR 
collaborators be able to generate a list of beneficiaries to whom the 
notices have been delivered.
    Comment: Several commenters expressed concern with the current 
beneficiary notification form provided by CMS on the CJR model's Web 
site. Commenters requested that we simplify the wording of our current 
forms as they believe the notifications as written are more 
sophisticated than a sixth grade reading level, and that beneficiaries 
find the policy terms discussed throughout the beneficiary 
notifications confusing.
    Response: We appreciate the commenters' feedback on the beneficiary 
notification forms we have made available for use by participant 
hospitals to assist in compliance with the regulations under Sec.  
510.405. We will work to find ways to revise and simplify the language 
in the beneficiary notification template so that beneficiaries can more 
easily understand the model. Revised versions of the template will be 
made available on the CMS Web site soon after the publication of this 
final rule.
    Comment: Commenters recommended the hospital beneficiary 
notification clarify for beneficiaries that all hospitals within the 
metropolitan area are required to participate in the CJR model, as they 
believe the current beneficiary notification template implies that CJR 
beneficiaries who do not want to participate in the CJR model are able 
to seek care at another provider not participating in the CJR model.
    Response: We appreciate the commenter's feedback. We disagree with 
the commenter's suggestion to require that the notification state that 
all hospitals within the applicable metropolitan area are required to 
participate in the CJR model, because some hospitals in the MSA are not 
required to participate in light of the exception in Sec.  510.100(b). 
Moreover, other than participant hospitals, no providers or suppliers 
are required to participate in the CJR model or enter into a sharing 
arrangement; therefore, the CJR model does not restrict Medicare 
beneficiaries' ability to choose any other Medicare enrolled provider 
or supplier. However, to address the commenter's concern about what the 
notice template implies, as part of our update to the templates we will 
explore making changes to provide further information about the scope 
of the

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model and the hospitals that are required to participate.
    Comment: One commenter voiced concern that the current beneficiary 
notification omits outpatient therapy providers in the list of post-
acute care options, noting that this omission could influence a 
Medicare beneficiary to believe certain treatments or services, such as 
outpatient physical therapy, are not an option for them in this model. 
The commenter recommended that at a minimum, beneficiaries should be 
provided a written list of all of the local providers from whom they 
can choose to receive their rehabilitation therapy.
    Response: Under current CJR regulation in Sec.  510.405(a)(1) which 
complement the discharge planning CoP, participant hospitals must 
inform beneficiaries of all Medicare participating post-acute care 
providers in an area and must identify those post-acute care providers 
with whom they have sharing arrangements. By post-acute care providers 
we do not mean providers of outpatient therapy services, which are 
unlikely to be the initial provider/supplier that furnishes 
rehabilitation services to a CJR beneficiary immediately following 
discharge from the anchor hospitalization. We mean HHAs, SNFs, IRFs, 
and LTCHs where post-acute care services may be covered under Part A 
following hospital discharge. Similar to the discharge planning CoP, we 
believe the lists provided to CJR beneficiaries at discharge should be 
of those institutional post-acute providers that provide Part A-covered 
services if institutional post-acute care is medically necessary for 
the beneficiary immediately following hospital discharge in order to 
specifically safeguard beneficiary freedom of choice of post-acute care 
providers under the CJR model and establish transparency about 
financial relationships between post-acute care providers and CJR 
hospital participants. Under the CJR model, we do not require complete 
lists of other providers or suppliers of outpatient therapy or any 
other Part B services that a beneficiary might need during the 90-day 
post-discharge episode duration to be provided by the CJR participant 
hospital to the beneficiary, just as the discharge planning CoP does 
not require lists of other providers or suppliers for follow up Part B-
covered services to be provided to a patient.
    However, as discussed in this section, in response to comments, we 
are modifying the requirements of Sec.  510.405(a)(1) to provide 
greater clarity about the complete list of post-acute care providers to 
be provided to a CJR beneficiary. Under revised Sec.  510.405(a)(1), 
participant hospitals will be required to provide, to beneficiaries for 
whom home health care, SNF, IRF, or LTCH services are medically 
necessary, a complete list of participating HHAs, SNFs, IRFs, or LTCHs 
that serve the geographic area in which the patient resides (as defined 
by the HHA) or in the case of SNFs, IRFs, or LTCS, the area requested 
by the patient. This revised provision makes clear that CJR participant 
hospitals need only provide a complete list of HHAs, SNFs, IRFs, or 
LTCHs to a CJR beneficiary if one of these types of post-acute care 
services is medically necessary and, in that case, only a list of those 
post-acute care providers that furnish the medically necessary level of 
services. In situations where home health care, SNF, IRF, or LTCH 
services are not medically necessary immediately following discharge, 
CJR participant hospitals may provide recommendations to CJR 
beneficiaries about follow up services immediately following discharge 
and thereafter during the CJR episode, including outpatient therapy 
services, consistent with all existing laws and regulations. However, 
we believe it is unlikely that outpatient therapy services immediately 
following hospital discharge would be a medically appropriate option 
for most CJR beneficiaries, who would likely be homebound for a period 
of time and require more comprehensive post-acute care services rather 
than outpatient therapy services.
    Comment: A commenter currently participating in the CJR model 
stated that in cases of emergent fracture, the requirement to provide 
the beneficiary notification at the time of admission has presented 
significant operational hurdles, in that these patients upon admission 
are unable to comprehend the notification and that providing the 
notification to accompanying family members has resulted in confusion. 
This commenter recommended that in cases of emergent fracture, the 
notification should be provided to patients after the surgery, to avoid 
causing additional confusion and distress for patients experiencing a 
traumatic event.
    Response: We appreciate the commenter's feedback. We note that in 
the case of an emergent patient immediate notification of model 
participation is not always appropriate, and we note that the first 
priority of the participant hospital should be providing medical care 
to the beneficiary. For this reason, we proposed to modify the 
regulation at Sec.  510.405(b) to permit the notification to be 
provided to the beneficiary or his or her representative as soon as is 
reasonably practicable but no later than discharge from the participant 
hospital accountable for the CJR episode, in cases where the patient's 
condition makes it infeasible to deliver the notice at admission. We 
believe that providing the participant hospital this flexibility will 
avoid causing additional confusion for the beneficiaries and his or her 
family members. For the same reasons, we are modifying the proposed 
requirements for CJR collaborator delivery of notices to permit similar 
flexibility in consideration of a patient's condition.
    Final Decision: After consideration of the public comments received 
on EPM and CJR beneficiary notification policies, we are finalizing our 
proposal to modify Sec.  510.405, with additional modifications. 
Specifically, we are finalizing changes to Sec.  510.405(a)(1) to 
specify when a complete list of certain post-acute care providers must 
be provided to the CJR beneficiary as part of discharge planning and 
referral. We are also finalizing changes to Sec.  510.405(b) to 
streamline the requirements for required beneficiary notification and 
to reduce provider burden and provide additional flexibilities. These 
changes are effective as of the effective date of this final rule.
    Since we are adding to the list of CJR collaborators, as discussed 
in section V.J.1.a. of the proposed rule and in this final rule, we 
proposed to amend the beneficiary notifications requirements at Sec.  
510.405(b) to account for these additional types of CJR collaborators. 
We are finalizing these proposals with modifications to clarify when 
beneficiary notifications must be provided to beneficiaries, and to 
address specific requirements for PGPs, NPPGPs, TGPs, members of the 
PGP, members of the NPPGP, members of the TGP, ACOs, ACO participants, 
and ACO providers/suppliers. These modifications are made in response 
to comments on the proposed changes to Sec.  510.405(b) and the 
corresponding proposals for the EPMs that are discussed in section 
III.G.3. However, because elsewhere in this final rule we are 
finalizing our proposals to permit these new types of CJR collaborators 
effective July 1, 2017, we are similarly delaying the effective date of 
the beneficiary notice requirements that would apply to these types of 
CJR collaborators. We believe this approach will reduce confusion that 
could result from imposing requirements with respect to entities that 
cannot be CJR collaborators until July 1, 2017.
    We proposed to amend Sec.  510.405(b)(4) to reflect changes to the 
SNF waiver. We did not receive any comments on this

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proposal, so we are finalizing the text as proposed, but renumbering to 
Sec.  510.410(b)(3). We note that we are making conforming changes for 
related cross-references in Sec.  510.610. These changes are effective 
as of the effective date of this final rule.
    To provide CJR hospitals and their collaborators with more time to 
come into compliance and to provide consistency with the EPMs, we are 
delaying until July 1, 2017 the effective date of the requirement 
proposed as Sec.  510.405(b)(5) to generate a list of beneficiaries who 
have received notifications upon request until July 1, 2017 and are 
renumbering to Sec.  510.410(b)(4). Effective July 1, 2017 we also will 
make certain conforming changes to other provisions of Sec.  510.405(b) 
to reflect this requirement.
    Please refer to the Regulations Text section at the end of this 
final rule for the final regulation text language.

I. Compliance Enforcement

    We proposed numerous amendments to the regulations in Sec.  
510.410. The amendments are largely to address the revisions to the CJR 
model to allow for additional financial relationships and to align 
terminology so that the CJR model regulations mirror the proposed EPM 
regulations at Sec.  512.460 in order to avoid confusion for hospitals 
that are participating in CJR and one or more of the proposed EPMs. 
Although our proposed changes reflect an intent that compliance 
enforcement under the CJR model would stay mostly the same, we proposed 
changes in Sec.  510.410 to adapt it to our proposal to amend the 
regulations at Sec.  510.500 and Sec.  510.505, as well as to reflect 
the addition of Sec.  510.506. For example, we proposed to remove the 
term 'collaborator agreement' from Sec.  510.410 in keeping with the 
proposed deletion of this concept from Sec.  510.500.
1. Failure To Comply
    Currently, CMS may take remedial action against a participant 
hospital if a participant hospital or any of the hospital's CJR 
collaborators are noncompliant in any of the ways listed in Sec.  
510.410(b)(1). We proposed that CMS may also take remedial action 
against a participant hospital if any of hospital's related 
collaboration agents and downstream collaboration agents were 
noncompliant in order for CMS to have the ability to address any 
noncompliance of these collaboration agents or downstream collaboration 
agents. As discussed in section V.J.1.a. of this final rule, the 
proposed addition of ACOs as CJR collaborators, combined with the 
proposed modifications of the financial arrangements available under 
the CJR model, would allow for many additional entities and individuals 
to have financial arrangements under the CJR model as collaborators, 
collaboration agents, or downstream collaboration agent. We believe our 
compliance enforcement must give us the authority to ensure that all 
such entities and individuals are advancing the goals of the CJR model, 
such as maintaining access to care. We believe that CJR participant 
hospitals should ensure that their sharing arrangements, the 
distribution arrangements of their collaborators, and the downstream 
distribution arrangements of their collaboration agents comply with the 
model requirements and safeguard program integrity. Therefore, we 
proposed that CMS may take remedial actions against the participant 
hospital if any collaboration agent of such participant hospital's CJR 
collaborators, or any downstream collaboration agent of such CJR 
collaboration agent is not compliant with applicable requirements in 
any of the ways listed in Sec.  510.410(b)(1). Further, we proposed 
that CMS may take remedial actions against a participant hospital if a 
participant hospital or any of the participant hospital's CJR 
collaborators, any collaboration agent of such CJR collaborators or any 
downstream collaboration agent has signed a sharing arrangement, 
distribution arrangement, or downstream distribution arrangement that 
is noncompliant with the requirements of part 510.
    We proposed to amend the regulations at Sec.  510.410 to include 
these requirements. We sought comment on our proposal. The following is 
a summary of the comments received and our response.
    Comments: Commenters generally supported the amendments to the 
regulations concerning compliance enforcement. However, some commenters 
expressed concerns regarding the proposal that participant hospitals 
are responsible for compliance of CJR collaborators' collaboration 
agents, and collaboration agents' downstream collaboration agents, and 
believe these requirements are burdensome for the participant hospital, 
in that participant hospitals do not have direct contractual 
relationships with collaboration agents or downstream collaboration 
agents. Additionally, one commenter expressed concern about the 
proposal in Sec.  510.410(b)(1)(ix) that CMS may take remedial action 
when the participant hospital or its related CJR collaborator, 
collaboration agent, or downstream collaboration is subject to action 
involving violations of the physician self-referral law, civil monetary 
penalties law, Federal anti-kickback statute, antitrust laws, or any 
other applicable Medicare laws, rules, or regulations that are relevant 
to the CJR model. The commenter stated that violations of any other 
applicable Medicare laws, rules, or regulations that are relevant to 
CJR model is overly broad and instead, CMS should apply a reasonable 
knowledge standard to the participant hospital's awareness of a 
collaborator's involvement in such matters. Commenters also requested 
that CMS provide in the final rule examples of actions that are not 
clear violations of existing health care fraud and abuse statutes.
    Response: We received similar comments and recommendations from 
commenters for the proposed EPMs compliance enforcement section. Given 
the proposed amendments to the CJR model regulations for compliance 
enforcement at Sec.  510.410 mirror the proposed EPM regulations at 
Sec.  512.460, we refer readers to section III.F.2. for a detailed 
explanation of our responses as they relate to the CJR model as well as 
the EPMs.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  510.410 for 
compliance enforcement, with modifications to delete as redundant the 
proposal to amend Sec.  510.410(b)(vi) to separately authorize CMS to 
take remedial action based on non-compliance with requirements 
specified in Sec.  510.120(b). We are also clarifying that the 25 
percent that CMS may add to the repayment amount under certain 
conditions as set forth in existing Sec.  510.410(b)(3) is a penalty. 
Additionally, since changes to the financial arrangement provisions 
discussed in V.J. will not be effective until July 1, 2017, we are also 
making the amendments to related sections effective July 1, 2017 to 
avoid confusion and preserve the existing CJR regulations until these 
changes take effect.

J. Financial Arrangements Under the CJR Model

    Currently, participant hospitals may engage in financial 
arrangements under the CJR model. The arrangements published in the CJR 
final rule (80 FR 73412 through 73437) allow participant hospitals and 
providers and suppliers caring for CJR beneficiaries to share in the 
financial risks and rewards under the CJR model, to engage in care 
redesign and CJR beneficiary care management, and to establish close 
partnerships with these individuals and entities to promote 
accountability for

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the quality, cost, and overall care for CJR beneficiaries. In order to 
ensure that goals of the CJR model are met, and to ensure program 
integrity and protect from abuse, the CJR model has many requirements 
for financial arrangements. We proposed a full replacement for the 
prior CJR regulations for financial arrangements Sec. Sec.  510.500 and 
Sec.  510.505 in order to streamline and consolidate our regulations in 
line with the proposed financial arrangements for the EPMs at Sec.  
512.500 and Sec.  512.505. Our proposals reflected changes from the 
current CJR model regulations that generally fell into the following 
four categories:
     Removing duplication of requirements in similar 
provisions.
     Streamlining and reorganizing the provisions for clarity 
and consistency.
     Providing additional flexibility in response to feedback 
from CJR participant hospitals and other stakeholders.
     Expanding the scope of financial arrangements available 
under the model.
    Many of our proposed changes were largely organizational in nature, 
not changes to policy or requirements; however, in several cases we 
proposed new financial arrangements policies and/or requirements for 
the CJR model. We discuss these policies in detail later in this 
section and we also refer readers to section III.I. of this final rule 
for further discussion and rationale behind our proposed approach.
    We proposed that all amendments to regulations discussed in this 
section V.J. would be effective beginning July 1, 2017, in order to 
align with the beginning of the first performance year of the proposed 
EPMs. We sought comment on all proposals discussed further in this 
section.
    The following is a summary of the comments received and our 
responses.
    Comment: We received several comments for both the CJR model and 
EPM in regards to the immediate need for waivers of existing fraud and 
abuse laws as well as the need for revisions to fraud and abuse.
    Response: We appreciate the commenters' perspectives on fraud and 
abuse law reform and specific suggestions about fraud and abuse law 
waivers for CMS-led bundled payment models, including the CJR model and 
the EPM. As we explain in section III.I.2, these issues are beyond the 
scope of this rulemaking.
    Comment: One commenter requested that CMS provide a mechanism for 
EPM participants and CJR participant hospitals to ask questions about 
fraud and abuse law waivers.
    Response: As we noted, section III.I.2, waivers of fraud and abuse 
laws are outside the scope of this rulemaking. We note that the public 
may contact CMS with programmatic questions related to the EPM and CJR 
model by emailing [email protected] and [email protected], respectively.
    We did not receive any comments on our proposal that all amendments 
to regulations discussed in this section V.J. would be effective 
beginning July 1, 2017, in order to align with the beginning of the 
first performance year of the proposed EPMs. Therefore, we are 
finalizing this proposal without modification. In addition, we note 
that the July 1, 2017 effective date provides CJR participants with 
additional time to come into compliance with the revised requirements 
and preserves the existing CJR regulations until these changes take 
effect. We refer readers to Sec.  510.2 for effective dates of 
definitions discussed in section V.J.
1. Definitions Related to Financial Arrangements
a. Addition to the Definition of CJR Collaborators
    In order to align with the proposed financial arrangements for the 
EPMs and to provide further opportunity for coordination between 
participant hospitals and their partners in care redesign, we proposed 
to allow the following entities to be CJR collaborators: ACOs (with the 
limitations discussed later in this section), hospitals, and CAHs. We 
believe the proposal would allow for increased care coordination 
opportunities across the spectrum of care for beneficiaries in CJR 
episodes. Given that the proposals in this section mirror those 
proposed for the EPMs in section III.I.3. of this final rule, we refer 
readers to that section for further discussion of our rationale for 
allowing ACOs, hospitals, and CAHs to be collaborators.
    Many ACOs and other stakeholders have expressed strong interest in 
being collaborators in episode payment models such as CJR. In the CJR 
final rule, we did not include ACOs in the definition of CJR 
collaborators, responding that we decided to limit the testing of 
gainsharing relationships to solely those between hospitals and 
providers and suppliers enrolled in Medicare because we expected 
enrolled providers and suppliers to be most directly and specifically 
engaged with the CJR participant hospital in care redesign and episode 
care for beneficiaries who had surgery at the participant hospitals (80 
FR 73417). We also noted that a number of scenarios discussed by 
commenters to support their request to allow ACOs to be CJR 
collaborators could be achieved outside of the context of gainsharing 
relationships between the participant hospital and ACOs. However, with 
the steady growth in the number of ACOs and ACO-attributed 
beneficiaries, we have further considered the potential for ACOs to be 
CJR collaborators, especially given ACO expertise in care coordination 
and accountability for the quality and expenditures for health care for 
ACO-attributed beneficiaries over an annual period. In addition, we 
note that the challenges of attributing savings and changes in the 
quality of care for beneficiaries simultaneously in CJR and total cost-
of-care models or programs, such as ACOs, remain not fully resolved, as 
discussed in section III.D.6. of this final rule.
    We proposed that ``ACOs,'' meaning accountable care organizations, 
as defined at Sec.  425.20, that participate in the Medicare Shared 
Savings Program and is not in Track 3, be permitted to be CJR 
collaborators. The proposal would allow locally variable financial 
arrangements that could account for the way CJR episode care is 
coordinated and managed in communities, and ensure that entities with 
appropriate skills and experience are permitted to share in the risks 
and rewards with participant hospitals. Our proposal would not allow 
any entities that are not providers or suppliers to be CJR 
collaborators other than ACOs. Like providers and suppliers, ACOs are 
regulated by CMS. We can verify that these ACOs meet current Shared 
Savings Program requirements such that they are suitable for a role as 
CJR collaborators.
    We also proposed to allow participant hospitals to enter into 
financial arrangements with other hospitals and CAHs that care for CJR 
beneficiaries. We believe it is important to allow participant 
hospitals to enter into financial arrangements with other hospitals and 
CAHs that care for CJR beneficiaries, in order to align the financial 
incentives of such other hospitals and CAHs with the CJR model's goals 
of improving the quality and efficiency of CJR episodes and to align 
with the proposed financial arrangements for the EPMs.
    In summary, we proposed that the following providers, suppliers, 
and other entities be added to the list of permissible CJR 
collaborators: ACOs, hospitals, and CAHs.
    We sought comment on our proposal to include ACOs, hospitals, and 
CAHs in the definition of CJR collaborators.

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    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters requested clarification about whether 
certain groups of health care professionals that do not include 
physicians could be CJR collaborators. The commenters requested that, 
in addition to PGPs, groups of certified registered nurse anesthetists 
(CRNAs), advanced practice registered nurses (APRNs), outpatient 
speech-language pathologists, physical therapists, and other qualified 
licensed healthcare professionals who are not physicians, be permitted 
to be CJR collaborators. One commenter explained that these groups are 
identified by a TIN.
    A number of commenters pointed out that while the proposed rule 
specifically listed PGPs as eligible to be CJR collaborators, CMS' 
proposal did not separately list groups of physical therapists or other 
therapists as eligible to be CJR collaborators. One commenter asserted 
that allowing only individual therapists to be CJR collaborators and 
excluding therapy practice groups from entering into sharing 
arrangements with EPM participants is shortsighted because 
rehabilitation therapy practices and independent therapists are likely 
to be significant contributors to SHFFT episodes. The commenters 
requested that CMS clarify the regulations to explicitly permit groups 
of therapists to enter into sharing arrangements with participant 
hospitals. One commenter further proposed that once a therapy practice 
group contracts with a hospital as a collaborator, it should be up to 
the practice group to ensure that financial exchanges with the 
participant hospital were attributed to the physical therapists who 
directly furnished services to CJR beneficiaries.
    Response: We appreciate the interest of the commenters in ensuring 
groups of nonphysician practitioners and groups of therapists have the 
same opportunities to be CJR collaborators that we proposed for PGPs, 
as well as their interest in allowing financial exchanges with their 
members who furnished services to CJR beneficiaries.
    Under our current regulation, individual nonphysician practitioners 
are permitted to be CJR collaborators. Individual therapists are also 
permitted to be collaborators to the extent that they fall within the 
collaborator category in the current CJR regulations for provider or 
supplier of outpatient therapy services. As collaborators, these 
individuals would be eligible to receive gainsharing payments from 
participant hospitals. Moreover, our existing definition of proposal 
defined a PGP member includes a physician, nonphysician practitioner or 
therapist who is an owner or employee of a PGP who has reassigned to 
the PGP his or her right to receive Medicare payments. Accordingly, as 
PGP members, these nonphysician practitioners and therapists would be 
eligible for distribution payments and downstream distribution payments 
from a PGP. We agree with the commenters that because the CJR 
regulations and our proposed revisions to these regulations addressed 
the role of PGPs without reference to other types of groups, we left 
some uncertainty about whether groups without a physician owner or 
employee are eligible to be CJR collaborators and whether under our 
proposals such groups would be permitted to enter into distribution 
arrangements or downstream distribution arrangements with their 
members. We also agree with the commenters that our provision allowing 
providers and suppliers of outpatient therapy services to be CJR 
collaborators is potentially unclear, because this term does separately 
identify therapists in private practice or groups of therapists in 
private practice on the list of CJR collaborators, as does our 
regulatory provision regarding physicians and PGPs. We also appreciate 
the commenters' uncertainty associated with the fact that we did not 
address whether a collaborator that was a therapy group practice would 
be permitted to enter into distribution arrangements or downstream 
distribution arrangements with their members, given that we did specify 
this in the language that we proposed for PGPs.
    We do not believe it would be appropriate to allow a group of 
licensed health care professionals to be CJR collaborators if that 
group consists solely of individuals who are not among the categories 
of individuals that may be CJR collaborators. However, we believe that 
if a category of individuals is eligible to be CJR collaborators, then 
Medicare-enrolled groups that include such individuals should also be 
permitted to be collaborators. Further, we believe that such groups 
should also be permitted to enter into distribution arrangements or 
downstream distribution arrangements with their members. We clarify 
these policies through this final rule.
    Groups of nonphysician practitioners that do not include a 
physician are not included in the category of PGPs that are on the 
current list of CJR collaborators. However, we believe these groups of 
nonphysician practitioners should be permitted to be CJR collaborators, 
just as we allow both individual physicians and nonphysician 
practitioners to be CJR collaborators. We also believe these groups of 
nonphysician practitioners should be treated similarly to PGPs with 
regard to their ability to engage in distribution arrangements and 
downstream distribution arrangements with their members, consistent 
with our treatment of nonphysician practitioners who are PGP members. 
Therefore, we are adding to the list of entities that are eligible to 
be CJR collaborators a nonphysician practitioner group practice 
(NPPGP), defined as ``an entity that is enrolled in Medicare as a group 
practice, includes at least one owner or employee who is a nonphysician 
practitioner, does not include a physician owner or employee, and has a 
valid and active TIN.'' The requirements for sharing arrangements, 
distribution arrangements, and downstream distribution arrangements for 
NPPGPs and NPPGP members are discussed in the sections of this final 
rule that address our policies for these arrangements.
    We further believe that our provisions allowing a provider or 
supplier of outpatient therapy services to be a CJR collaborator should 
be modified to provide greater clarity about the providers and 
suppliers of outpatient therapy services that can be CJR collaborators. 
The Medicare Claims Processing Manual, Chapter 5, Part B Outpatient 
Rehabilitation and CORF/OPT Services, Section 10 lists the following 
Medicare-enrolled providers and suppliers that can submit claims for 
outpatient therapy services: SNF; outpatient hospital; CAH; HHA; 
outpatient physical therapy provider (OPT), otherwise known as 
rehabilitation agency; comprehensive outpatient rehabilitation facility 
(CORF); physician; nonphysician practitioner; and physical or 
occupational therapist or speech-language pathologist in private 
practice.\136\ We note that the list of CJR collaborators in the 
current regulations already includes, SNFs, HHAs, physicians, and 
nonphysician practitioners so their inclusion as collaborators under 
the definition of provider or supplier of outpatient therapy services 
is duplicative. Therefore, rather than maintaining a definition of 
provider of outpatient therapy services which would have included all 
providers and suppliers of outpatient therapy services, we believe it 
is clearer to specify individually on the list of CJR collaborators all 
the types of Medicare-enrolled providers and suppliers that can bill 
Medicare for

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outpatient therapy services. Thus, we are defining a new term therapist 
in private practice as ``a therapist that either: complies with the 
special provisions for services furnished by physical therapists in 
private practice in Sec.  410.60(c) of this chapter; or complies with 
the special provisions for services furnished by occupational 
therapists in private practice in Sec.  410.59(c) of this chapter; or 
complies with the special provisions for services furnished by speech-
language pathologists in private practice in Sec.  410.62(c) of this 
chapter.'' We are adding therapist in private practice to the list of 
CJR collaborators, which ensures that all individual suppliers of 
outpatient therapy services are on the CJR collaborator list. In 
addition, we are revising our definition of provider of outpatient 
therapy services to mean ``an entity that is enrolled in Medicare as a 
provider of therapy services and furnishes one or more of the 
following: outpatient physical therapy services as defined in Sec.  
410.60 of this chapter; outpatient occupational therapy services as 
defined in Sec.  410.59 of this chapter; outpatient speech-language 
pathology services as defined in Sec.  410.62 of this chapter.'' Under 
this revised definition, provider of outpatient therapy services now 
includes only those entities that enroll in Medicare specifically as a 
provider of outpatient physical therapy/occupational therapy/speech-
language pathology services, and we are revising the list of CJR 
collaborators to use this defined term in place of ``provider or 
supplier of outpatient therapy services.'' Finally, in addition to 
finalizing our proposal to add hospitals and CAHs to the list of CJR 
collaborators, we are adding CORFs to the list of CJR collaborators 
because it is the only other type of provider that can furnish 
outpatient therapy services that is not included on the CJR 
collaborator list under our new and revised terms. Thus, with the 
addition of therapy group practices as discussed specifically below, in 
total, these changes to the definitions and supplements to the list of 
CJR collaborators clarify which individuals and entities may be CJR 
collaborators by separately specifying each type of supplier and 
provider of outpatient therapy services that is eligible to be a CJR 
collaborator.
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    \136\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c05.pdf.
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    With respect to the specific interest of commenters in therapy 
practice groups being eligible to be CJR collaborators that can share 
payments under CJR financial arrangements with their members, we agree 
with the commenters that such groups should be permitted to be CJR 
collaborators and to enter into distribution arrangements and 
downstream distribution arrangements with their members, consistent 
with our treatment of PGPs and NPPGPs. Thus, we are defining therapy 
group practice (TGP) as ``an entity that is enrolled in Medicare as a 
therapy group in private practice, includes at least one owner or 
employee that is a therapist in private practice, does not include an 
owner or employee who is a physician or nonphysician practitioner, and 
has a valid and active TIN'' and adding TGP to the list of CJR 
collaborators. The requirements for sharing arrangements, distribution 
arrangements, and downstream distribution arrangements for TGPs and TGP 
members are discussed in the sections of this final rule that address 
our policies for these arrangements.
    We are finalizing, with the modifications discussed, the definition 
of CJR collaborator in Sec.  512.2 to mean an ACO or one of the 
following Medicare-enrolled individuals or entities that enters into a 
sharing arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) TGP.
    Comment: A number of commenters expressed support for CMS' proposed 
definition of ``CJR collaborators,'' including the proposed addition of 
ACOs, hospitals, and CAHs to the types of collaborators that were 
previously adopted for the CJR model. The commenters claimed that 
allowing additional health care providers, suppliers, and ACOs to be 
CJR collaborators would further encourage robust care coordination 
across the CJR episode. Several commenters asserted that by recognizing 
the expertise that ACOs may offer participant hospitals as CJR 
collaborators with regard to managing the cost and quality of care that 
Medicare beneficiaries receive, ACOs will be able to use their 
substantial expertise and resources to contribute to the CJR model's 
dual goals of limiting spending and increasing quality. One commenter 
further commended CMS for making the list of CJR collaborators 
exhaustive and not including third party conveners, who the commenter 
believes lack a commitment to patients, local providers, or their 
community.
    In contrast, some commenters expressed disappointment that the list 
of CJR collaborators did not include entities such as pharmaceutical 
companies; medical device companies; medical technology companies; 
social services aging networks; and other third parties, such as the 
types of convening organizations participating in other CMMI models. 
Several commenters believe that were medical device and pharmaceutical 
manufacturers allowed to be CJR collaborators, those manufacturers may 
make meaningful contributions to the success of the CJR model by 
ensuring their products are used appropriately; aligning financial and 
other incentives to improve patient outcomes; demonstrating the value 
of their products; and reducing costs. Other commenters who favored 
adding medical technology companies as CJR collaborators asserted that 
medical technology companies can make a significant, positive impact on 
care redesign and cost containment as well as provide integrated data 
analytic infrastructure and services to optimize care and to achieve 
quality goals. A few commenters suggested that CMS should expand the 
list of potential CJR collaborators to include non-provider or non-
supplier entities that have a track record of providing Medicare 
providers and suppliers participating in other models with support 
services such as care redesign, data analytics, and general program 
support, as well as community-based organizations that are well-
equipped and efficient in providing social and supportive services that 
help beneficiaries stay out of the hospital. Several commenters also 
encouraged CMS to include all APM entities as CJR collaborators, 
reasoning that APM entities are similar to ACOs in that they are a 
legal entity that is separate from its participants.
    Additionally, one commenter recommended that Next Generation ACOs 
be included in the definition of ACOs that are on list on CJR 
collaborators, so the Next Generation ACO may act on behalf of its 
providers to enter into financial arrangements with participant 
hospitals for beneficiaries not assigned to the ACO. The commenter 
explained that not including Next Generation ACOs in the definition of 
ACOs that CMS proposed could be CJR collaborators will require ACO 
participants and ACO providers/suppliers of the Next Generation ACO to 
enter in CJR sharing arrangements on their own without the Next 
Generation ACO to represent them.

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    Finally, one commenter shared its perspective that CMS should not 
restrict the definition of CJR collaborators because such an approach 
discourages the introduction of new entities and individuals in the 
healthcare market. The commenter requested that CMS allow market forces 
to shape the innovation of CJR participants and their community 
partners in order to determine the financial partnerships that would be 
most beneficial to achieving the overarching goals of the CJR model. 
The commenter asserted that being too prescriptive regarding the 
individuals and entities that can and cannot enter into financial 
arrangements under the CJR model would not allow for new organizations 
to develop in the market that may have the potential to generate 
substantial cost savings for participant hospitals.
    Response: We appreciate the support of the commenters for our 
proposed list of the types of individuals and entities that can be CJR 
collaborators, including our proposal to include hospitals, CAHs, and 
ACOs that would expand the list beyond current CJR collaborators 
adopted in the CJR Final Rule (80 FR 73418).
    We note that some of the potential contributions, such as 
integrating the data analytic infrastructure and services to optimize 
care to achieve quality goals, that were suggested by commenters as 
reasons to allow third parties, such as pharmaceutical, medical device, 
and medical technology companies as well as other types of convening 
organizations participating in other CMMI models, to be CJR 
collaborators can be achieved outside of the context of sharing 
arrangements through other relationships between the participant 
hospital and those entities. In response to the specific requests that 
we include APM entities on the list of CJR collaborators, given that an 
APM entity, as defined in Sec.  414.1305, means an entity that 
participates in an APM or payment arrangement with a non-Medicare payer 
through a direct agreement or through Federal or State law or 
regulation, we believe that adding all APM entities to the list of CJR 
collaborators would be overly expansive and risk loosening the clinical 
link between the CJR collaborator, participant hospital, and 
beneficiary that we believe is important for improving the quality and 
reducing the cost of care under the model. With the exception of ACOs, 
PGPs, NPPGPs, and TGPs, we continue to believe that any CJR 
collaborator that receives a gainsharing payment must have furnished a 
billable service included in the episode to a CJR beneficiary and that 
the payment arrangements for gainsharing payments must be substantially 
based on the quality of care and the provision of CJR activities. In 
the case of ACOs, PGP, NPPGPs, and TGPs that are CJR collaborators, we 
require that the entity itself must have contributed to CJR activities 
and been clinically involved in the care of beneficiaries in order to 
be eligible to receive a gainsharing payment or be required to make an 
alignment payment. At this point we are not convinced any APM entities 
could meet these eligibility criteria, other than ACOs. We also do not 
agree with the commenter who recommended that we not restrict the 
definition of CJR collaborators to any specific individuals or 
entities. We believe it is important for participant hospitals to 
engage CJR collaborators that have a commitment to their local 
communities, local providers, and Medicare beneficiaries in order to 
create the greatest potential for sustained improvements in quality and 
reductions in cost under the CJR.
    We appreciate the commenter's suggestion that Next Generation ACOs 
be included in the definition of ACOs that are on the list of CJR 
collaborators, so the Next Generation ACO may act on behalf of its ACO 
participants and ACO providers/suppliers to establish sharing 
arrangements with participant hospitals for beneficiaries not assigned 
to the ACO. While we understand that the Next Generation ACO would like 
to enter into a CJR sharing arrangement as a CJR collaborator on behalf 
of its providers and suppliers, to be eligible to receive a gainsharing 
payment or be required to make an alignment payment under the sharing 
arrangement the Next Generation ACO itself must have contributed to CJR 
activities and been clinically involved in the care of beneficiaries 
through activities such as providing care coordination services to 
beneficiaries during and/or after inpatient admission; engaging with a 
participant hospital in care redesign strategies, and actually 
performing a role in implementing such strategies, that are designed to 
improve the quality of care and reduce spending for the CJR episodes; 
or in coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the participant hospital, and 
post-acute care providers) implementing strategies designed to address 
and manage the comorbidities of beneficiaries. We are unclear of the 
role the Next Generation ACO itself would play in the care of 
beneficiaries that are not assigned to the ACO, beyond serving as a 
contracting agent for its ACO participants and ACO providers/suppliers. 
We further believe that such an arrangement would require 
distinguishing activities on behalf of beneficiaries assigned to the 
ACO who are excluded from CJR episodes and beneficiaries not assigned 
to the ACO who are included in CJR episodes, and such distinctions 
could create confusion for beneficiaries, providers, and suppliers, as 
well as administrative complexity for the Next Generation ACO. 
Therefore, we do not believe it would be appropriate to include Next 
Generation ACOs in the definition of ACOs that may be CJR 
collaborators.
    Finally, we note that as discussed in section III.D.6.c.(3) of this 
final rule, we are additionally finalizing the exclusion of 
beneficiaries from CJR episodes who are prospectively assigned to a 
Shared Savings Program ACO in Track 3. Therefore, for consistency with 
our policy for Next Generation ACOs whose assigned beneficiaries are 
also excluded from CJR episodes, we are excluding Shared Savings 
Program ACOs in Track 3 from the definition of ACOs that may be CJR 
collaborators. Thus, we are modifying our definition of ACO to read 
``ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Shared Savings Program 
and is not in Track 3.'' We emphasize that no CJR policy precludes 
providers or suppliers who are ACO participants or ACO providers/
suppliers in a Next Generation ACO from entering into a sharing 
arrangement with a participant hospital on their own, provided they are 
on the list of CJR collaborators.
    In summary, at this time we will not adopt a final policy that 
includes additional entities or individuals that are not providers or 
suppliers beyond those we proposed to be CJR collaborators. We selected 
acute care hospitals as the financially responsible entity for the CJR 
model because we are interested in 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 payment arrangements. We believe that it is most appropriate to 
identify a single type of provider to bear financial responsibility for 
making repayment to CMS under the CJR model. Given that hospitals 
perform a central role in coordinating episode-related care and 
ensuring smooth transitions for beneficiaries, this role factored in 
our decision to select IPPS hospitals as the financially responsible 
entity for this model. Under this structure, we believe that limiting 
the testing of gainsharing relationships to solely those between 
participant hospitals, certain Shared

[[Page 536]]

Savings Program ACOs, and providers and suppliers enrolled in Medicare 
is most appropriate because we expect enrolled providers and suppliers 
to be most directly and specifically engaged with the participant 
hospitals in care redesign and CJR episode care for beneficiaries. 
While we recognize that Shared Savings Program ACOs are not providers 
or suppliers, Medicare has a close relationship with such ACOs, which 
are regulated by CMS, so we can verify that these ACOs meet current 
Shared Savings Program requirements that make them suitable for a role 
as CJR collaborators. Further, by including such ACOs on the list of 
CJR collaborators, we are permitting locally variable financial 
arrangements that could account for the way care in CJR episodes is 
coordinated and managed in communities, and ensure that entities with 
appropriate skills and experience are permitted to share the CJR's 
risks and rewards with participant hospitals.
    We are finalizing in Sec.  510.2 the definition of ACO, with 
modification to mean an accountable care organization, as defined at 
Sec.  425.20 of this chapter, that participates in the Shared Savings 
Program and is not in Track 3.
    Comment: One commenter requested clarification about whether 
outpatient speech-language pathologists are considered providers of 
outpatient therapy services and, therefore, eligible to be CJR 
collaborators.
    Response: We appreciate the opportunity to clarify that speech-
language pathologists are eligible to be CJR collaborators under the 
existing CJR regulations if they meet the definition of provider of 
outpatient therapy. Moreover, as discussed previously in this section, 
speech-language pathologists in private practice are included under the 
new definition of therapist in private practice when they are 
therapists that comply with the special provisions for services 
furnished by speech-language pathologists in private practice in Sec.  
410.62(c). In addition, a group of speech-language pathologists in 
private practice is included under the new definition of TGP when the 
group is entity that is enrolled in Medicare as a therapy group in 
private practice, includes at least one owner or employee that is a 
therapist in private practice, does not include an owner or employee 
who is a physician or nonphysician practitioner, and has a valid and 
active TIN. Therefore, under the revisions that will take effect on 
July 1, 2017, we will clarify that both therapists in private practice 
and TGPs may be CJR collaborators and therefore make clearer that 
individual speech-language pathologists in private practice, as well as 
speech-language pathology groups in private practice, are eligible to 
be CJR collaborators.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  510.2 for the 
definition of CJR collaborator and other terms used in that definition, 
with modification to revise the definitions of provider of outpatient 
therapy services; and ACO; create new definitions for CORF, therapist 
in private practice, NPPGP, and TGP; and include these additional 
individuals and entities on the list of CJR collaborators. With the 
exception of the new definition of therapist in private practice, these 
revised definitions will be effective July 1, 2017. CJR collaborator 
means an ACO (as defined in Sec.  510.2) or one of the following 
Medicare-enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) TGP.
b. Deletion of Term `Collaborator Agreements'
    In order to reduce duplicative language in Sec.  510.500 and 
streamline the regulations for financial arrangements between CJR 
participant hospitals and CJR collaborators, we proposed to delete the 
term ``collaborator agreement'' in Sec.  510.2 and transition the 
requirements of collaborator agreements to requirements of sharing 
arrangements. Overall, the proposal would simplify and streamline the 
requirements for sharing arrangements under CJR, allow CMS to align the 
CJR financial arrangements with those of the proposed EPMs, and provide 
consistent regulations to potential parties that may participate in 
both the CJR model and the EPMs.
    We recognize that current participant hospitals and CJR 
collaborators already have existing collaborator agreements. However, 
as noted further in this section, although we proposed to change 
several terms, the proposed sharing arrangements policies are largely 
similar to the current policies regarding collaborator agreements.
    We sought to amend the regulations at Sec.  510.2 by deleting the 
term collaborator agreement in Part 510. We sought comment on our 
proposals.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters requested clarification as to whether 
the proposed changes to financial arrangements in the CJR model would 
require CJR participant hospitals to review their current financial 
arrangements and modify the terminology to reflect the changes if they 
are finalized. One commenter acknowledged CMS' efforts to providing 
consistency between the CJR model and the EPM, but claimed that 
requiring CJR participant hospitals to review their financial 
arrangements would constitute a significant burden on CJR participant 
hospitals.
    Response: The proposed changes to CJR financial arrangements in 
Sec. Sec.  510.500 and 510.505 would require CJR participant hospitals, 
and any other individual or entity involved in a financial arrangement 
under these regulations, to review the changes to the requirements of 
the CJR model, and to revise their financial arrangements and 
applicable terminology if necessary. While we acknowledge that the 
amendments to the financial arrangements requirements in the CJR model 
will create some short-term administrative burden on CJR participants 
and other parties involved in these arrangements, we believe that the 
revised CJR model regulations streamline and clarify the requirements 
for all parties and will help facilitate compliance with the 
requirements of the CJR model. In addition, the major policy changes, 
such as allowing ACOs to be collaborators and adopting the term CJR 
activities as the comprehensive framework for capturing both direct 
patient care and care redesign for CJR episodes, received widespread 
support from commenters. We recognize the time that CJR participant 
hospitals and CJR collaborators with financial arrangements under the 
existing requirements will need to review the amended requirements 
finalized in this final rule and revise their existing financial 
arrangements in order to be compliant. As such, the amended 
requirements for financial arrangements in the CJR model will be 
effective on July 1, 2017, the same date when the first performance 
year for the EPM begins. Therefore, CJR participant hospitals and CJR 
collaborators will have knowledge of the federal requirements for CJR 
financial arrangements approximately 6 months prior to their effective 
date in the CJR model, which we believe is sufficient to

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review and revise their existing financial arrangements if necessary.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification to delete 
the term collaborator agreement effective July 1, 2017.
c. Addition of CJR Activities
    We proposed to use the term ``CJR activities'' to identify certain 
obligations of parties in a sharing arrangement that are currently 
described as ``changes in care coordination or delivery'' in the CJR 
regulations governing the contents of the written agreement 
memorializing the sharing arrangement. In addition to the quality of 
care provided during episodes, we believe the activities that would 
fall under this proposed definition of CJR activities would encompass 
the totality of activities upon which it would be appropriate for 
certain financial arrangements under the CJR model to be based in order 
to value the contributions of providers, suppliers, and other entities 
toward meeting the CJR model's goals of improving the quality and 
efficiency of episodes. Therefore, for purposes of financial 
arrangements under the CJR model, we proposed to define CJR activities 
as activities related to promoting accountability for the quality, 
cost, and overall care for CJR beneficiaries, including managing and 
coordinating care; encouraging investment in infrastructure, enabling 
technologies, and redesigned care processes for high quality and 
efficient service delivery; the provision of items and services during 
a CJR episode in a manner that reduces costs and improves quality; or 
carrying out any other obligation or duty under the CJR models. 
Sections V.J.2. through V.J.4. of this final rule provide more detail 
as to how the addition of CJR activities affect other proposals in this 
part.
    We proposed to amend Sec.  510.2 by adding the term `CJR 
activities.' We sought comment on our proposal to add CJR activities as 
an inclusive and comprehensive framework for capturing direct care and 
care redesign for CJR episodes that contribute to improving the quality 
and efficiency of these episodes. We received comments regarding both 
CJR activities and EPM activities and refer readers to section 
III.I.4.b. of this final rule for a detailed explanation of the 
comments and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal to add the term CJR 
activities, without modifications, effective July 1, 2017.
2. Sharing Arrangements
    We believe the proposed amendments to this section will provide 
participant hospitals and CJR collaborators with more organized, and 
streamlined regulations.
a. General
    With the exception of adding ``past or anticipated'' to the 
selection criteria for CJR collaborators, and replacing ``collaborator 
agreement'' with ``sharing arrangement'' the following proposed 
criteria are similar to the current requirements of the CJR model as 
finalized in prior regulations at Sec.  510.500. In the proposed rule, 
we discussed the proposed requirements for sharing arrangements, 
including both our continuation of policies we finalized in the CJR 
final rule, and several new proposals. We proposed that participant 
hospitals must develop, maintain, and use a set of written policies for 
selecting individuals and entities to be CJR collaborators, and that 
such policies must include the quality of care delivered by the 
potential CJR collaborator. The selection criteria cannot be based 
directly or indirectly on the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the 
participant hospital, any CJR collaborator, any collaboration agent, 
any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent. Our proposed addition of 
``past or anticipated'' does not effect a substantive change, but 
merely conforms the way the volume or value standard is articulated in 
this provision with the way that the volume or value standard is 
articulated in other provisions at Sec.  510.500. However, by adding 
``past or anticipated,'' we make clear that all previous and future 
referrals between or among participant hospital, any CJR collaborator, 
any collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent 
would be encompassed. We do not believe it would be appropriate for 
sharing arrangements to be based on criteria that include the volume or 
value of past or anticipated referrals because the sole purpose of 
sharing arrangements is to create financial alignment between 
participant hospitals and CJR collaborators toward the CJR model's 
goals of improving the quality and efficiency of episode care. Thus, we 
continue to require that CJR participant hospitals select CJR 
collaborators based on criteria that include the quality of care 
furnished by the potential CJR collaborator to ensure that the 
selection of CJR collaborators takes into consideration the likelihood 
of their future performance in improving the quality of episode care.
    In summary, we proposed to amend Sec.  510.500(a) as follows:
     A participant hospital may enter into a sharing 
arrangement with a CJR collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both.
     A participant hospital must not make a gainsharing payment 
or receive an alignment payment except in accordance with a sharing 
arrangement.
     A sharing arrangement must comply with the provisions of 
this section and all other applicable laws and regulations, including 
the applicable fraud and abuse laws and all applicable payment and 
coverage requirements.
     Participant hospitals must develop, maintain, and use a 
set of written policies for selecting individuals and entities to be 
CJR collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
     If a participant hospital enters into a sharing 
arrangement, its compliance program must include oversight of sharing 
arrangements and compliance with the applicable requirements of the CJR 
model.
    We sought comment on our proposal. We received a number of comments 
on our proposal. Because the comments and responses to our proposal for 
CJR were not substantively different from the comments and responses on 
proposed Sec.  512.500(a), we refer readers to section III.I.4.a for a 
discussion of the comments and our responses to them
    Additionally, we note that the CJR model and the EPMs' policies 
surrounding the various requirements of financial arrangements mirror 
one another. We provided in Table 46 in section III.I.4.a. of this 
final rule to list the standards related to ``volume and value'' for 
EPM financial arrangements, and here provide Table 51 below with

[[Page 538]]

the parallel information for the CJR model.

                Table 51--Standards Related to ``Volume or Value'' for CJR Financial Arrangements
----------------------------------------------------------------------------------------------------------------
                                         Volume/value         Scope of volume/value
                                         prohibition?              prohibition                  Citation
----------------------------------------------------------------------------------------------------------------
Collaborator selection criteria..  Yes....................  Cannot be based directly   Sec.   510.500(a)(3).
                                                             or indirectly on past or
                                                             anticipated referrals or
                                                             business otherwise
                                                             generated by, between or
                                                             among:
                                                            vi. Participant hospital
                                                            vii. Collaborator
                                                            viii. Collaboration agent
                                                            ix. Downstream
                                                             collaboration agent
                                                            x. Any individual or
                                                             entity affiliated with
                                                             (i)-(iv)
Opportunity to make or receive a   Yes....................  Same as for collaborator   Sec.   510.500(c)(7)
 payment.                                                    selection criteria.        (gainsharing or
                                                                                        alignment payments).
                                                                                       Sec.   510.505(b)(4)
                                                                                        (distribution payment).
                                                                                       Sec.   510.510(b)(4)
                                                                                        (downstream distribution
                                                                                        payment).
Alignment payment methodology....  Yes....................  Cannot directly account    Sec.   510.500(c)(14).
                                                             for volume or value of
                                                             past or anticipated
                                                             referrals or business
                                                             otherwise generated by,
                                                             between or among (i)-(v)
                                                             above.
Gainsharing payment methodology..  No.....................  N/A--methodology must be   Sec.   510.500(c)(5)
                                                             substantially based on     (gainsharing payments).
                                                             quality of care and the
                                                             provision of CJR
                                                             activities; may consider
                                                             relative amount of CJR
                                                             activities provided.
Distribution and downstream        No.....................  N/A--same methodology      Sec.   510.505(b)(5), (6)
 distribution payment                                        standard as for            (distribution payments).
 methodologies.                                              gainsharing payments,     Sec.   510.510(b)(5), (6)
                                                             except that amounts        (downstream distribution
                                                             distributed by a PGP to    payments).
                                                             a PGP member can also be
                                                             determined in a manner
                                                             that complies with Sec.
                                                              411.352(g) of the
                                                             physician self-referral
                                                             regulations.
----------------------------------------------------------------------------------------------------------------

    Final Decision: After consideration of the public comments 
received, we are finalizing effective July 1, 2017, the proposals in 
Sec.  510.500(a) for the general requirements for CJR sharing 
arrangements, with modification to clarify that a CJR collaborator 
selection criterion that considers whether a potential collaborator has 
performed a reasonable minimum number of services that would qualify as 
CJR activities will be deemed not to violate the volume or value 
standard if the purpose of the requirement is to ensure the quality of 
care furnished to CJR beneficiaries. CJR sharing arrangements must 
comply with the following general provisions:
     A participant hospital may enter into a sharing 
arrangement with a CJR collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. A participant hospital must 
not make a gainsharing payment or receive an alignment payment except 
in accordance with a sharing arrangement.
     A sharing arrangement must comply with the provisions of 
this section and all other applicable laws and regulations, including 
the applicable fraud and abuse laws and all applicable payment and 
coverage requirements.
     The participant hospital must develop, maintain, and use a 
set of written policies for selecting individuals and entities to be 
CJR collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent. A selection criterion that considers 
whether a potential CJR collaborator has performed a reasonable minimum 
number of services that would qualify as CJR activities will be deemed 
not to violate the volume or value standard if the purpose of the 
criterion is to ensure the quality of care furnished to CJR 
beneficiaries.
     If a participant hospital enters into a sharing 
arrangement, its compliance program must include oversight of sharing 
arrangements and compliance with the applicable requirements of the CJR 
model.
b. Requirements
    Currently, there are a number of specific requirements for sharing 
arrangements under the CJR model. We proposed to delete the term 
``collaborator agreements'' and to incorporate many of the requirements 
from the existing CJR provision at Sec.  510.500(c) into a streamlined 
provision regarding the requirements for ``sharing arrangements.'' We 
discuss the proposal in detail further in this section in order to 
ensure current and future participant hospitals and CJR collaborators 
are aware of all requirements that would apply under these proposed 
revisions.
    We proposed that the sharing arrangement must be in writing, signed 
by the parties, and entered into before care is furnished to CJR 
beneficiaries under the sharing arrangement. In addition, participation 
in a sharing arrangement must be voluntary and without penalty for 
nonparticipation. We proposed that the sharing arrangement must require 
the CJR collaborator and its employees, contractors, and subcontractors 
to comply with certain requirements that are important for program 
integrity protections under the arrangement. We noted that the terms 
contractors and subcontractors, respectively, include

[[Page 539]]

collaboration agents and downstream collaboration agents as defined 
later in this section.
    The sharing arrangement must require all of the individuals and 
entities in this group to comply with the applicable provisions of Part 
510, including requirements regarding beneficiary notifications, access 
to records, record retention, and participation in any evaluation, 
monitoring, compliance, and enforcement activities performed by CMS or 
its designees, because these individuals and entities all would play a 
role in CJR care redesign and be part of financial arrangements under 
the CJR model. The sharing arrangement must also require all 
individuals and entities in the group to comply with the applicable 
Medicare provider enrollment requirement at Sec.  424.500, including 
having a valid and active TIN or NPI, during the term of the sharing 
arrangement. This is to ensure that the individuals and entities have 
the required enrollment relationship with CMS under the Medicare 
program, although we note that they are not responsible for complying 
with requirements that do not apply to them. Finally, the sharing 
arrangement must require individuals and entities to comply with all 
other applicable laws and regulations.
    We proposed that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between participant hospitals and CJR 
collaborators do not negatively impact beneficiary protections under 
the CJR.
    Further we proposed that sharing arrangements must require the CJR 
collaborator to have a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the 
CJR, just as we would require participant hospitals to have a 
compliance plan for this purpose as a program integrity safeguard. We 
noted that the CJR compliance program requirement does not mandate that 
a CJR collaborator's compliance program take a particular form or 
include particular components.
    It is necessary that participant hospitals have adequate oversight 
over sharing arrangements to ensure that all arrangements meet the 
requirements of this section and provide program integrity protections. 
Therefore, we proposed that the board or other governing body of the 
CJR participant hospital have responsibility for overseeing the 
participant hospital's participation in the CJR model, its arrangements 
with CJR collaborators, its payment of gainsharing payments, its 
receipt of alignment payments, and its use of beneficiary incentives in 
the CJR. We proposed that the written agreement memorializing a sharing 
arrangement must specify a number of parameters of the arrangement, 
including the following:
     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified CJR activities and other services to be performed by the 
parties under the sharing arrangement.
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out CJR activities.
     The date of the sharing arrangement.
     The financial or economic terms for payment, including--
    ++ Eligibility criteria for a gainsharing payment;
    ++ Eligibility criteria for an alignment payment;
    ++ Frequency of gainsharing or alignment payment;
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is substantially based on quality of care 
and the provision of CJR activities; and
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we proposed to require that the terms of the sharing 
arrangement must not induce the participant hospital, CJR collaborator, 
or any employees, contractors, or subcontractors of the participant 
hospital or CJR collaborator to reduce or limit medically necessary 
services to any Medicare beneficiary or restrict the ability of a CJR 
collaborator to make decisions in the best interests of its patients, 
including the selection of devices, supplies, and treatments. These 
requirements are to ensure that the quality of care for CJR 
beneficiaries is not negatively affected by sharing arrangements under 
the CJR.
    We proposed the requirements for sharing arrangements at Sec.  
510.500(b). We sought comment on our proposals. Because this proposal 
mirrors what we proposed for the EPM and the comments on these 
proposals and our responses are substantially the same, we refer 
readers to section III.I.4.b for a detailed explanation of the comments 
and our responses to them.
    Final Decision: After consideration of the public comments 
received, we are finalizing effective July 1, 2017, the proposals in 
Sec.  510.500(b) for the requirements for CJR sharing arrangements, 
with modifications. We are modifying our proposal at Sec.  
510.500(b)(4) to specify that the CJR collaborator must have or be 
covered by a compliance program which must include oversight of the 
sharing arrangement and compliance with the requirements of the CJR 
model that apply to its role as a CJR collaborator, including any 
distribution arrangements. We are also modifying our proposal to remove 
the requirement that the written agreement memorializing a sharing 
arrangement include management and staffing information, a change which 
results in renumbering proposed Sec.  510.500(b)(7)(v) (requiring the 
financial or economic terms for payment be specified in the written 
agreement about the sharing arrangement) to Sec.  510.500(b)(7)(iv). 
CJR sharing arrangements must meet the following requirements:
     A sharing arrangement must be in writing and signed by the 
parties, and entered into before care is furnished to CJR beneficiaries 
under the sharing arrangement.
     Participation in a sharing arrangement must be voluntary 
and without penalty for nonparticipation.
     The sharing arrangement must require the CJR collaborator 
and its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with the following:
    ++ The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees);
    ++ All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement; and
    ++ All other applicable laws and regulations.
     The sharing arrangement must require the CJR collaborator 
to have or be covered by a compliance program that includes oversight 
of the sharing arrangement and compliance with the requirements of the 
CJR model that apply to its role as a CJR collaborator, including any 
distribution arrangements.
     The sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care.
     The board or other governing body of the participant 
hospital must have

[[Page 540]]

responsibility for overseeing the participant hospital's participation 
in the CJR model, its arrangements with CJR collaborators, its payment 
of gainsharing payments, its receipt of alignment payments, and its use 
of beneficiary incentives in the CJR model.
     The written agreement memorializing a sharing arrangement 
must specify the following:
    ++ The purpose and scope of the sharing arrangement.
    ++ The obligations of the parties, including specified CJR 
activities and other services to be performed by the parties under the 
sharing arrangement;
    ++ The date of the sharing arrangement.
    ++ The financial or economic terms for payment, including the 
following:
--Eligibility criteria for a gainsharing payment.
--Eligibility criteria for an alignment payment.
--Frequency of gainsharing or alignment payment.
--Methodology and accounting formula for determining the amount of a 
gainsharing payment or alignment payment.

     The sharing arrangement must not--
    ++ Induce the participant hospital, CJR collaborator, or any 
employees, contractors, or subcontractors of the participant hospital 
or CJR collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    ++ Restrict the ability of a CJR collaborator to make decisions in 
the best interests of its patients, including the selection of devices, 
supplies, and treatments.
c. Gainsharing Payment, Alignment Payment, and Internal Cost Savings 
Conditions and Restrictions
    Under the CJR model, we placed a number of conditions and 
limitations on gainsharing payments, alignment payments, and internal 
cost savings. Our proposal to amend the limitations and conditions 
would allow us to reorganize and clarify current policies, account for 
the addition of ACOs, CAHs, and hospitals as CJR collaborators, and 
align the CJR model with the proposed financial arrangements for the 
EPMs. Though many of the proposed requirements under sharing 
arrangements are largely similar to the current requirements under 
gainsharing payments, alignment payments, and internal cost savings 
conditions and restrictions, we discuss these requirements in detail 
further in this section in order to ensure current and future 
participant hospitals and CJR collaborators are aware of such 
requirements, in particular those that we proposed to change.
    We proposed that to be eligible to receive a gainsharing payment, 
or to be required to make an alignment payment, a CJR collaborator 
other than a PGP or an ACO must have directly furnished a billable item 
or service to a CJR beneficiary during a CJR episode that occurred in 
the same performance year for which the participant hospital has 
calculated a gainsharing payment or been assessed a repayment amount. 
For purposes of this requirement, we consider a hospital, CAH, or post-
acute care provider to have ``directly furnished'' a billable service 
if one of these entities billed for an item or service for a CJR 
beneficiary during a CJR episode that occurred in the same performance 
year for which the CJR participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount. The phrase 
``performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount'' does not mean 
the year in which the gainsharing payment was made. These requirements 
ensure that there is a required relationship between eligibility for a 
gainsharing payment and the quality of direct care for CJR 
beneficiaries during CJR episodes for these CJR collaborators. We 
believe the provision of direct care is essential to the implementation 
of effective care redesign, and the requirement provides a safeguard 
against payments to CJR collaborators other than a PGP or an ACO that 
are unrelated to direct care for CJR beneficiaries during CJR episodes.
    Further, we proposed to establish similar requirements for PGPs and 
ACOs that vary because these entities do not themselves directly 
furnish billable services. To be eligible to receive a gainsharing 
payment or required to make an alignment payment, a PGP must have 
billed for an item or service that was rendered by one or more members 
of the PGP to a CJR beneficiary during a CJR episode that occurred 
during the same performance year for which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount. Further, we proposed that to be eligible to receive a 
gainsharing payment or required to make an alignment payment, an ACO 
must have had an ACO provider/supplier that directly furnished, or an 
ACO participant that billed for, an item or service that was rendered 
to a CJR beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
With respect to ACOs, an ``ACO participant'' and ``ACO provider/
supplier'' have the meaning set forth in Sec.  425.20 of regulations. 
Like the proposal for CJR collaborators that are not PGPs or ACOs, 
these proposals also require a linkage between the CJR collaborator 
that is the PGP or ACO and the provision of items and services to CJR 
beneficiaries during CJR episodes by PGP members or ACO participants or 
ACO providers/suppliers, respectively.
    Moreover, we further proposed that because PGPs and ACOs do not 
directly furnish items and services to beneficiaries, in order to be 
eligible to receive a gainsharing payment or be required to make an 
alignment payment, the PGP or ACO must have contributed to CJR 
activities and been clinically involved in the care of CJR 
beneficiaries during the same performance year for which the 
participant hospital accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount. For example, a PGP or ACO or might have 
been clinically involved in the care of CJR beneficiaries by providing 
care coordination services to CJR beneficiaries during and/or after 
inpatient admission; engaging with a participant hospital in care 
redesign strategies, and actually performing a role in implementing 
such strategies that are designed to improve the quality of care for 
CJR episodes and reduce CJR episode spending; or in coordination with 
providers and suppliers (such as members of the PGP, ACO participants, 
ACO providers/suppliers, the participant hospital, and post-acute care 
providers), implementing strategies designed to address and manage the 
comorbidities of CJR beneficiaries.
    Because internal cost savings may be shared through gainsharing 
payments with CJR collaborators, we have certain requirements for their 
calculation as a safeguard against fraud and abuse. We proposed that 
the internal cost savings reflect care redesign under the CJR in order 
to be eligible to be shared through gainsharing payments. We also 
proposed that the methodology used to calculate internal cost savings 
must reflect the actual, internal cost savings achieved by the 
participant hospital through the documented

[[Page 541]]

implementation of CJR activities identified by the participant hospital 
and must exclude any savings realized by any individual or entity that 
is not the participant hospital and ``paper'' savings from accounting 
conventions or past investment in fixed costs. Unlike the current CJR 
model policy where we require that sharing arrangements document the 
methodology for accruing, calculating, and verifying the internal cost 
savings generated by the participant hospital based on the care 
redesign elements specifically associated with the particular 
collaborator, we proposed a revised policy to not require in the CJR 
model that the calculation of internal cost savings be tied to the 
activities of a specific CJR collaborator. We believe the proposed 
change recognizes that multiple collaborators and collaboration agents 
contribute to internal cost savings and provide participant hospitals 
with flexibility to focus on overall internal cost savings due to model 
activities, rather than the activities of any specific collaborator or 
collaboration agent. Rather, we believe it is appropriate for 
participant hospitals to calculate internal cost savings based on the 
implementation of CJR activities and then provide gainsharing payments 
to CJR collaborators that may include internal cost savings, 
reconciliation payments, or both, based on a methodology that meets the 
requirements described later in this section.
    We proposed that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision of CJR activities. Further, we 
proposed the methodology may take into account the amount of such CJR 
activities provided by a CJR collaborator relative to other CJR 
collaborators. While we emphasized that financial arrangements may not 
be conditioned directly or indirectly on the volume or value of past or 
anticipated referrals or other so that their sole purpose is to align 
the financial incentives of the participant hospital and CJR 
collaborators toward the CJR goals of improved CJR episode care quality 
and efficiency. We believe that accounting for the relative amount of 
CJR activities by CJR collaborators in the determination of gainsharing 
payments does not undermine this objective. Rather, the proposed 
requirement recognizes that the relative amount of CJR activities 
(including direct care) furnished by a CJR collaborator to CJR 
beneficiaries during CJR episodes may contribute relatively more or 
less to both the internal cost savings and participant hospital's 
reconciliation payment that may be available for making a gainsharing 
payment. We refer readers to section III.I.4. of this final rule for 
additional discussion of our rationale. We sought comment on this 
proposal for gainsharing payments, where the methodology could take 
into account the amount of CJR activities provided by a CJR 
collaborator relative to other CJR collaborators. In addition we 
invited comment on whether additional safeguards or a different 
standard was needed to allow for greater flexibility to provide certain 
performance-based payments consistent with the goals of program 
integrity, protecting against abuse and ensuring the goals of the model 
are met.
    In the CJR model, we continue to have certain limitations on 
alignment payments. Currently for a performance year, the aggregate 
amount of all alignment payments received by the participant hospital 
must not exceed 50 percent of the participant hospital's repayment 
amount. In addition, the aggregate amount of all alignment payments 
from a CJR collaborator to the participant hospital may not be greater 
than 25 percent of the participant hospital's repayment amount for a 
CJR collaborator that is not an ACO and we proposed 50 percent of the 
participant hospital's repayment amount for a CJR collaborator that is 
an ACO. We proposed to allow a higher percentage of the participant 
hospital's repayment amount to be paid by an ACO than by CJR 
collaborators that are not ACOs in recognition that some ACOs are 
sizable organizations with significant financial and other resources. 
In addition, their expertise in managing the cost and quality of care 
for Medicare beneficiaries over a period of time may make some ACOs 
uniquely capable of sharing a higher percentage of downside risk under 
the CJR with the participant hospital under a sharing arrangement 
between the ACO and CJR participant hospital that meets all 
requirements for such arrangements, including that participation in the 
sharing arrangement must be voluntary and without penalty for 
nonparticipation as discussed previously. We sought comment on the 
proposed limitation that would apply to ACOs that are CJR 
collaborators.
    Additionally, we proposed that all gainsharing payments and 
alignment payments must be made by check, electronic funds transfer, or 
another traceable cash transaction. This is different from the current 
CJR model policy which requires gainsharing payments and alignment 
payments to be made by electronic funds transfer. We proposed to revise 
this requirement in the CJR model in order to provide additional 
flexibility for entities making gainsharing payments and alignment 
payments. We believe our proposal would mitigate the administrative 
burden that the EFT requirement would place on the financial 
arrangements between certain participant hospitals and CJR 
collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, which could discourage participation of 
those suppliers as CJR collaborators. We sought comment on the effect 
of this proposal on reducing the administrative barriers to individual 
physician and nonphysician practitioner and small PGP participation in 
the CJR as CJR collaborators.
    In summary, we proposed the following conditions and restrictions 
on gainsharing payments, alignment payments, and internal cost savings:
     Gainsharing payments, if any, must--
    ++ Be derived solely from reconciliation payments, or internal cost 
savings, or both;
    ++ Be distributed on an annual basis (not more than once per 
calendar year);
    ++ Not be a loan, advance payment, or payment for referrals or 
other business; and
    ++ Be clearly identified as a gainsharing payment at the time it is 
paid.
     To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality of care criteria for the performance 
year for which the CJR participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment. The quality of care criteria must be established 
by the participant hospital and directly related to the CJR episode.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator other than a 
PGP or an ACO must have directly furnished a billable item or service 
to a CJR beneficiary during a CJR episode that occurred in the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is a PGP 
must meet the following criteria:
    ++ The PGP must have billed for an item or service that was 
rendered by one or more members of the PGP to a CJR beneficiary during 
a CJR episode that

[[Page 542]]

occurred during the same performance year for which the participant 
hospital has calculated a gainsharing payment or been assessed a 
repayment amount.
    ++ The PGP must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the participant hospital has calculated a 
gainsharing payment or been assessed a repayment amount. For example, a 
PGP might have been clinically involved in the care of CJR 
beneficiaries by--

--Providing care coordination services to beneficiaries during and/or 
after inpatient admission;
--Engaging with a participant hospital in care redesign strategies, and 
actually performing a role in implementing such strategies, that are 
designed to improve the quality of care for CJR episodes and reduce CJR 
episode spending; or
--In coordination with other providers and suppliers (such as members 
of the PGP, the participant hospital, and post-acute care providers), 
implementing strategies designed to address and manage the 
comorbidities of CJR beneficiaries.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is an 
ACO must meet the following criteria:

    ++ The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a CJR beneficiary during a CJR episode that 
occurred during the same performance year for which the participant 
hospital has calculated a gainsharing payment or been assessed a 
repayment amount.
    ++ The ACO must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries. For example, an 
ACO might be have been clinically involved in the care of CJR 
beneficiaries by--

--Providing care coordination services to CJR beneficiaries during and/
or after inpatient admission;
--Engaging with a participant hospital in care redesign strategies, and 
actually performing a role in implementing such strategies, that are 
designed to improve the quality of care and reduce spending for CJR 
episodes; or
--In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the participant hospital, and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of CJR beneficiaries.
     The methodology for accruing, calculating and verifying 
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 used to calculate internal cost savings 
must reflect the actual, internal cost savings achieved by the 
participant hospital through the documented implementation of CJR 
activities identified by the participant hospital and must exclude--
    ++ Any savings realized by any individual or entity that is not the 
participant hospital; and
    ++ ``Paper'' savings from accounting conventions or past investment 
in fixed costs.
     The total amount of a gainsharing payment for a 
performance year paid to a CJR collaborator must not exceed the 
following:
    ++ In the case of a CJR collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the participant hospital's CJR 
beneficiaries during CJR episodes that occurred during the same 
performance year in which the participant hospital accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being made.
    ++ In the case of a CJR collaborator that is a PGP, 50 percent of 
the Medicare-approved amounts under the PFS for items and services 
billed by the PGP and furnished to the participant hospital's CJR 
beneficiaries by members of the PGP during CJR episodes that occurred 
during the same performance year in which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment being made.
     The amount of any gainsharing payments must be determined 
in accordance with a methodology that is substantially based on quality 
of care and the provision of CJR activities. The methodology may take 
into account the amount of such CJR activities provided by a CJR 
collaborator relative to other CJR collaborators.
     For a performance year, the aggregate amount of all 
gainsharing payments that are derived from a reconciliation payment 
must not exceed the amount of the reconciliation payment the 
participant hospital receives from CMS.
     No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments on the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent.
     A participant hospital must not make a gainsharing payment 
to a CJR collaborator that is subject to any action for noncompliance 
with this part or the fraud and abuse laws, or for the provision of 
substandard care in CJR episodes or other integrity problems.
     The sharing arrangement must require the participant 
hospital to recoup any gainsharing payment that contained funds derived 
from a CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
     Alignment payments from a CJR collaborator to a 
participant hospital may be made at any interval that is agreed upon by 
both parties, and must not be--
    ++ Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    ++ Loans, advance payments, or payments for referrals or other 
business; or
    ++ Assessed by a participant hospital if it does not owe a 
repayment amount.
     The participant hospital must not receive any amounts from 
a CJR collaborator under a sharing arrangement that are not alignment 
payments.
     For a performance year, the aggregate amount of all 
alignment payments received by the participant hospital must not exceed 
50 percent of the participant hospital's repayment amount.
     The aggregate amount of all alignment payments from a CJR 
collaborator to the participant hospital may not be greater than--
    ++ With respect to a CJR collaborator other than an ACO, 25 percent 
of the participant hospital's repayment amount; and
    ++ With respect to a CJR collaborator that is an ACO, 50 percent of 
the participant hospital's repayment amount.

[[Page 543]]

     The methodology for determining alignment payments must 
not directly account for the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the 
participant hospital, any CJR collaborator, any collaboration agent, 
any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent.
     All gainsharing payments and any alignment payments must 
be administered by the participant hospital in accordance with 
generally accepted accounting principles.
     All gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction.
    We proposed to amend the regulations at Sec.  510.500(c) as 
described previously. We sought comment on our proposal, including the 
feasibility of implementing the proposed safeguards in the context of 
the current regulatory framework applicable to ACOs and whether 
additional or different safeguards were reasonable, necessary or 
appropriate to ensure the goals of program integrity, protecting 
against abuse and ensuring the goals of the model are met.
    Because this proposal mirrors what was proposed for the EPM and the 
comments on these proposals and our responses are substantially the 
same, we refer readers to section III.I.4.c for a detailed explanation 
of the comments and our responses to them.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals, with modifications, for 
gainsharing payments, alignment payments, and internal cost savings 
conditions and restrictions, in Sec.  510.500(c). In addition to the 
modifications discussed in our responses in section III.I.4.c, we are 
specifying that to be eligible to receive a gainsharing payment or to 
be required to make an alignment payment, an NPPGP or TGP (like PGPs) 
must have billed for an item or service that was rendered by one or 
more NPPGP members or TGP members respectively to a CJR beneficiary 
during a CJR episode that occurred during the same performance year for 
which the CJR participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment or 
was assessed a repayment amount. In addition, like PGPs, the NPPGP or 
TGP must have contributed to CJR activities and been clinically 
involved in the care of CJR beneficiaries during the same performance 
year for which the CJR participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount.
    As finalized, effective July 1, 2017 gainsharing payments, 
alignment payments, and internal cost savings must meet the following 
conditions and restrictions:
     Gainsharing payments, if any, must--
    ++ Be derived solely from reconciliation payments, or internal cost 
savings, or both;
    ++ Be distributed on an annual basis (not more than once per 
calendar year);
    ++ Not be a loan, advance payment, or payment for referrals or 
other business; and
    ++ Be clearly identified as a gainsharing payment at the time it is 
paid.
    ++ To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality of care criteria for the performance 
year for which the participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment. The quality of care criteria must be established 
by the participant hospital and directly related to CJR episodes.
    ++ To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator other than an 
ACO, PGP, NPPGP, or TGP must have directly furnished a billable item or 
service to a CJR beneficiary during a CJR episode that occurred in the 
same performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
    ++ To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:

--The PGP, NPPGP, or TGP must have billed for an item or service that 
was rendered by one or more PGP member, NPPGP member, or TGP member 
respectively to a CJR beneficiary during a CJR episode that occurred 
during the same performance year for which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount; and
--The PGP, NPPGP, or TGP must have contributed to CJR activities and 
been clinically involved in the care of CJR beneficiaries during the 
same performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
For example, a PGP, NPPGP, or TGP might have been clinically involved 
in the care of CJR beneficiaries by--

    [caret][caret] Providing care coordination services to CJR 
beneficiaries during and/or after inpatient admission;
    [caret][caret] Engaging with a participant hospital in care 
redesign strategies, and actually performing a role in implementing 
such strategies, that are designed to improve the quality of care for 
CJR episodes and reduce CJR episode spending; or
    [caret][caret] In coordination with other providers and suppliers 
(such as PGP members, NPPGP members, or TGP members; the participant 
hospital; and post-acute care providers), implementing strategies 
designed to address and manage the comorbidities of CJR beneficiaries.

--To be eligible to receive a gainsharing payment, or to be required to 
make an alignment payment, a CJR collaborator that is an ACO must meet 
the following criteria:
    [caret][caret] The ACO must have had an ACO provider/supplier that 
directly furnished, or an ACO participant that billed for, an item or 
service that was rendered to a CJR beneficiary during a CJR episode 
that occurred during the same performance year for which the 
participant hospital accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount; and
    ++ The ACO must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
For example, an ACO might be have been clinically involved in the care 
of CJR beneficiaries by--
    [caret][caret] Providing care coordination services to CJR 
beneficiaries during and/or after inpatient admission;
    [caret][caret] Engaging with a participant hospital in care 
redesign strategies, and actually performing a role in implementing 
such strategies, that are designed to improve the quality of care and 
reduce spending for CJR episodes; or

[[Page 544]]

    [caret][caret] In coordination with providers and suppliers (such 
as ACO participants, ACO providers/suppliers, the CJR participant 
hospital, and post-acute care providers), implementing strategies 
designed to address and manage the comorbidities of CJR beneficiaries.
    ++ The methodology for accruing, calculating and verifying 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 used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the participant 
hospital through the documented implementation of CJR activities 
identified by the participant hospital and must exclude:

--Any savings realized by any individual or entity that is not the CJR 
participant hospital; and
--``Paper'' savings from accounting conventions or past investment in 
fixed costs.
     The total amount of a gainsharing payment for a 
performance year paid to a CJR collaborator must not exceed the 
following:
    ++ In the case of a CJR collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the participant hospital's CJR 
beneficiaries during CJR episodes that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
    ++ In the case of a CJR collaborator that is a PGP or NPPGP, 50 
percent of the Medicare-approved amounts under the PFS for items and 
services billed by that PGP or NPPGP and furnished to the participant 
hospital's CJR beneficiaries by the PGP members or NPPGP members 
respectively during CJR episodes that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
     The amount of any gainsharing payments must be determined 
in accordance with a methodology that is substantially based on quality 
of care and the provision of CJR activities. The methodology may take 
into account the amount of such CJR activities provided by a CJR 
collaborator relative to other CJR collaborators.
     For a performance year, the aggregate amount of all 
gainsharing payments that are derived from a reconciliation payment the 
participant hospital receives from CMS must not exceed the amount of 
that reconciliation payment.
     No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
     A participant hospital must not make a gainsharing payment 
to a CJR collaborator if CMS has notified the participant hospital that 
such collaborator is subject to any action for noncompliance with this 
part or the fraud and abuse laws, or for the provision of substandard 
care to CJR beneficiaries or other integrity problems.
     The sharing arrangement must require the participant 
hospital to recoup any gainsharing payment that contained funds derived 
from a CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
     Alignment payments from a CJR collaborator to a 
participant hospital may be made at any interval that is agreed upon by 
both parties, and must not be--
    ++ Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    Loans, advance payments, or payments for referrals or other 
business; or
    ++ Assessed by a participant hospital if it does not owe a 
repayment amount.
     The CJR participant hospital must not receive any amounts 
under a sharing arrangement from a CJR collaborator that are not 
alignment payments.
     For a performance year, the aggregate amount of all 
alignment payments received by the CJR participant hospital must not 
exceed 50 percent of the participant hospital's repayment amount.
     The aggregate amount of all alignment payments from a CJR 
collaborator to the participant hospital may not be greater than--
    ++ With respect to a CJR collaborator other than an ACO, 25 percent 
of the participant hospital's repayment amount; or
    ++ With respect to a CJR collaborator that is an ACO, 50 percent of 
the participant hospital's repayment amount.
     The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent.
     All gainsharing payments and any alignment payments must 
be administered by the participant hospital in accordance with 
generally accepted accounting principles (GAAP) and Government Auditing 
Standards (The Yellow Book).
     All gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction.
d. Documentation
    We proposed revisions to Sec.  510.500(d) for organization and 
formatting purposes, and to align with the proposed regulations of the 
EPMs. Besides the proposed definitional changes, these revisions would 
not change any policies under the current documentation section of the 
CJR model.
    In summary we proposed the following requirements for 
documentation:
     Participant hospitals must--
    ++ Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    ++ Maintain accurate current and historical lists of all CJR 
collaborators, including collaborator names and addresses; update such 
lists on at least a quarterly basis; and publicly report the current 
and historical lists of CJR collaborators on a Web page on the 
participant hospital's Web site; and
    ++ Maintain and require each CJR collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--


[[Page 545]]


--Nature of the payment (gainsharing payment or alignment payment);
--Identity of the parties making and receiving the payment;
--Date of the payment;
--Amount of the payment; and
--Date and amount of any recoupment of all or a portion of a CJR 
collaborator's gainsharing payment.
     The participant hospital must keep records of the 
following:
    ++ Its process for determining and verifying its potential and 
current CJR collaborators' eligibility to participate in Medicare.
    ++ Its plan to track internal cost savings.
    ++ Information on the accounting systems used to track internal 
cost savings.
    ++ A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    ++ Its plan to track gainsharing payments and alignment payments.
     The participant hospital must retain and provide access 
to, and must require each CJR collaborator to retain and provide access 
to, the required documentation in accordance with Sec.  510.110.
    In the proposed Sec.  510.500(d)(3), we proposed that participant 
hospitals must retain and provide access to the required documentation 
in accordance with Sec.  510.110 and must obligate CJR collaborators to 
do the same. We proposed to add a new section, Sec.  510.110, to the 
CJR regulations, which would apply all records access and retention 
requirements under the CJR model, including those for financial 
arrangements as well as beneficiary notifications and beneficiary 
incentives. Because we proposed to consolidate all records access and 
retention requirements in one place in the regulations, we proposed to 
delete Sec.  510.500(e) from the current CJR regulations. We discussed 
further our proposal to consolidate the requirements under the CJR 
model for access to records and record retention and apply them more 
broadly in the model. This approach mirrors our proposed records 
retention policies for the EPMs, which are discussed in detail in 
section III.H. of this final rule. We refer readers to that section for 
further discussion of our proposed policies and rationale.
    We proposed to amend the regulations at Sec.  510.500(d). We sought 
comment on our proposals. We received no specific comments on the 
proposed documentation requirements for CJR sharing arrangements other 
than the comment discussed in section III.I.4.d. previously requesting 
further documentation related to the criteria for selection of CJR 
collaborators.
    Final Decision: We are finalizing the proposals in Sec.  510.500(d) 
for CJR documentation requirements, with the modification previously 
discussed to require the participant hospital to publicly post the 
written policies for selecting CJR collaborators on a Web page on the 
participant hospital's Web site and the reorganization to consolidate 
and streamline the documentation requirements related to public 
posting. CJR sharing arrangements must meet the following documentation 
requirements:
     The participant hospital must do all of the following:
    ++ Document the sharing arrangement contemporaneously with the 
establishment of the arrangement.
    ++ Publicly post (and update on at least a quarterly basis) on a 
Web page on the CJR participant hospital's Web site:
    ++ Accurate current and historical lists of all CJR collaborators, 
including CJR collaborator names and addresses.
    ++ Written policies for selecting individuals and entities to be 
CJR collaborators required by Sec.  510.500(a)(3).
    ++ Maintain and require each CJR collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
all of the following:

--Nature of the payment (gainsharing payment or alignment payment).
    Identity of the parties making and receiving the payment.
--Date of the payment.
--Amount of the payment.
--Date and amount of any recoupment of all or a portion of a CJR 
collaborator's gainsharing payment.
--Explanation for each recoupment, such as whether the CJR collaborator 
received a gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation report, or was based on the submission 
of false or fraudulent data.
     The participant hospital must keep records of the 
following:
    ++ Its process for determining and verifying its potential and 
current CJR collaborators' eligibility to participate in Medicare.
    ++ Its plan to track internal cost savings.
    ++ Information on the accounting systems used to track internal 
cost savings.
    ++ A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    ++ Its plan to track gainsharing payments and alignment payments.
     The participant hospital must retain and provide access 
to, and must require each EPM collaborator to retain and provide access 
to, the required documentation in accordance with Sec.  510.110.
3. Distribution Arrangements
    Though we proposed a complete revision of the regulations in Sec.  
510.505, these changes are mainly to accommodate our proposals to add 
ACOs as CJR collaborators, add the term `collaboration agent,' remove 
the term `collaborator agreement,' move the requirements for such 
agreements to appear as requirements for sharing arrangements, and to 
mirror the proposed EPM regulations at Sec.  512.505 to avoid confusion 
for hospitals that are participating in CJR as well as one or more of 
the proposed EPMs. Our proposed changes to the regulations reflect that 
the requirements and rules regarding distribution arrangements under 
the CJR model would stay largely the same.
a. General
    We proposed that certain financial arrangements between CJR 
collaborators and other individuals or entities called ``collaboration 
agents'' be termed ``distribution arrangements.'' A distribution 
arrangement is a financial arrangement between a CJR collaborator that 
is an ACO or PGP and a collaboration agent for the sole purpose of 
sharing a gainsharing payment received by the ACO or PGP. A 
collaboration agent is an individual or entity that is not a CJR 
collaborator and that is either a PGP member that has entered into a 
distribution arrangement with the same PGP in which he or she is an 
owner or employee or an ACO participant or ACO provider/supplier that 
has entered into a distribution arrangement with the same ACO in which 
it is participating. Where a payment from a CJR collaborator to a 
collaboration agent is made pursuant to a distribution arrangement, we 
proposed to define that payment as a ``distribution payment.'' A 
collaboration agent may make a distribution payment only in accordance 
with a distribution arrangement which complies with the provisions of 
Sec.  510.505 and all other applicable laws and regulations, including 
the fraud and abuse laws. We solicited comment on whether requirements 
for distribution payments by ACOs under the proposal were reasonable, 
necessary and appropriate to

[[Page 546]]

promote program integrity, prevent fraud and abuse, and achieve the 
goals of the model. In addition, we solicited comment on how the 
regulation of the financial arrangements the proposal may interact with 
and on how these or similar financial arrangements are regulated under 
the Medicare Shared Savings Program.
    We received no specific comments on the proposed general provisions 
for distribution arrangements under the CJR model. However, as 
discussed previously, we are finalizing revisions to allow NPPGP to be 
eligible to be CJR collaborators and we are modifying our general 
provisions for distribution arrangements to allow NPPGPs to enter into 
distribution arrangements with NPPGP members. Similarly, we are 
modifying our general provisions for distribution arrangements to allow 
TGPs to enter into distribution arrangements with TGP members. In 
addition, we are modifying the EPM proposals in response to the 
comments that we received, and therefore, consistent with our proposal 
to amend the CJR regulations to streamline and simply requirements for 
CJR and to align them with the EPMs, we are making corresponding 
changes to the CJR regulations. We believe these modifications also 
will reduce any burden that could arise from having to comply with 
different requirements for each model for hospitals participating in 
both CJR and EPMs. We refer readers to the discussion at III.I.5. for 
further information.
    Final Decision: We are finalizing effective July 1, 2017 the 
proposals in Sec.  510.505(a) for the general requirements for CJR 
distribution arrangements, with modification to allow NPPGPs or TGPs to 
enter into distribution arrangements with NPPGP members or TGP members 
respectively. Similar to PGPs when they are CJR collaborators, we 
believe it is appropriate to allow NPPGPs or TGPs to enter into 
distribution arrangements with NPPGP members or TGP members 
respectively for the sole purpose of sharing a gainsharing payment 
received by the NPPGP or TGP. Distribution arrangements under the CJR 
model must comply with the following general provisions:
     An ACO, PGP, NPPGP, or TGP that has entered into a sharing 
arrangement with a CJR participant hospital may distribute all or a 
portion of any gainsharing payment it receives from the participant 
hospital only in accordance with a distribution arrangement.
     All distribution arrangements must comply with the 
provisions of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
b. Requirements
    We proposed to amend the requirements for distribution payments in 
Sec.  510.505 as discussed in this section.
    We proposed the opportunity to make or receive a distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the participant hospital, any CJR collaborator, 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent. 
The proposed requirement is substantively the same as the existing 
requirement in the CJR model. By adding the word ``past or 
anticipated,'' the proposed provision makes clear that all previous and 
future referrals between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent are encompassed.
    Currently, methodologies for determining distribution payments must 
not directly account for volume or value of referrals, or business 
otherwise generated, by, between or among the participant hospital, 
PGP, other CJR collaborators, any collaboration agent, any downstream 
collaboration agent, and any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent. We proposed to change the requirement 
as follows.
    Like our proposal for gainsharing payments discussed previously, we 
proposed a more flexible standard for the determination of the amount 
of distribution payments from ACOs and PGPs for the same reasons we 
propose this standard for the determination of gainsharing payments. 
Specifically, for ACOs we proposed that the amount of any distribution 
payments must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of CJR 
activities and that may take into account the amount of such CJR 
activities provided by a collaboration agent relative to other 
collaboration agents. We believe that the amount of a collaboration 
agent's provision of CJR activities (including direct care) to CJR 
beneficiaries during a CJR episode may contribute to the participant 
hospital's internal cost savings and reconciliation payment that may be 
available for making a gainsharing payment to the CJR collaborator with 
which the collaboration agent has a distribution arrangement. Greater 
contributions of CJR activities by one collaboration agent versus 
another collaboration agent that result in different contributions to 
the gainsharing payment made to the CJR collaborator with which those 
collaboration agents both have a distribution arrangement may be 
appropriately valued in the methodology used to make distribution 
payments to those collaboration agents. Accordingly, we believe this is 
the appropriate standard for determining the amount of distribution 
payments from an ACO to its collaboration agents.
    We noted that for distribution payments made by a PGP to PGP 
members, the requirement that the amount of any distribution payments 
must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of CJR 
activities may be more limiting in how a PGP pays its members than is 
allowed under existing law. Therefore, to retain existing flexibility 
for distribution payments by a PGP to PGP members, we proposed that the 
amount of the distribution payment from a PGP to PGP members must be 
determined either using the methodology previously described for 
distribution payments from an ACO or in a manner that complies with 
Sec.  411.352(g). The proposal would allow a PGP the choice either to 
comply with the general standard that the amount of a distribution 
payment must be substantially based on quality of care and the 
provision of CJR activities or to provide its members a financial 
benefit through the CJR without consideration of the PGP member's 
individual quality of care. In the latter case, PGP members who are not 
collaboration agents (including those who furnished no services to CJR 
beneficiaries) would be able receive a share of the profits from their 
PGP that includes the monies contained in a gainsharing payment. We 
believe that our proposal to modify the current CJR regulations to 
allow the amount of the distribution payment from a PGP to a PGP member 
to be determined in a manner that complies with Sec.  411.352(g) is an 
appropriate exception to the general standard for determining the 
amount of distribution payment under the CJR model from a PGP to a PGP 
member. CMS has determined under the physician self-referral law that 
payments from a group

[[Page 547]]

practice as defined under Sec.  411.352 to its members that comply with 
Sec.  411.352(g) are appropriate. The proposal would allow a PGP the 
choice either to comply with the general standard that the amount of a 
distribution payment must be substantially based on quality of care and 
the provision of CJR activities or to provide its members a financial 
benefit through the CJR model without consideration of the PGP member's 
individual quality of care. The approach mirrors our proposed policies 
for distribution arrangements for the EPMs, which are discussed in 
detail in section III.I.5. of this final rule.
    We proposed to amend the regulations at Sec.  510.505(b)(4) and 
(b)(5). We sought comment on the proposal and specifically whether 
additional safeguards or a different standard was needed to allow for 
greater flexibility in calculating the amount of distribution payments 
consistent with the goals of promoting program integrity, protecting 
against abuse, and ensuring that the goals of the model are met. In 
addition, we solicited comment on the proposal to allow distribution 
payments by a PGP to its members that comply with Sec.  411.352(g) or 
whether additional/different safeguards are reasonable, necessary, and 
appropriate.
    Except for a distribution payment from a PGP to a PGP member that 
complies with Sec.  411.352(g), we proposed to continue the limits in 
the current CJR regulations on the total amount of distribution 
payments to physicians, nonphysician practitioners, and PGPs as we 
proposed for gainsharing payments. Specifically, in the case of a 
collaboration agent that is a physician or nonphysician practitioner, 
absent the alternative safeguards afforded by compliance with Sec.  
411.352(g), we would limit the total amount of distribution payments 
paid for a performance year to the collaboration agent to 50 percent of 
the total Medicare-approved amounts under the PFS for items and 
services furnished by the collaboration agent to the CJR participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year for which the CJR participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed. In the case of a 
collaboration agent that is a PGP, the limit would continue to be 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services billed by the PGP for items and services furnished by 
members of the PGP to the CJR participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the CJR participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed.
    We proposed that all distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction. The 
proposal would provide additional flexibility for entities making 
distribution payments as well as would mitigate the administrative 
burden that the EFT requirement previously placed on the financial 
arrangements between certain participant hospitals and CJR 
collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, which could discourage participation of 
those suppliers as CJR collaborators.
    Finally, we proposed at Sec.  510.505(b)(15) that CJR collaborators 
must retain and provide access to the required documentation in 
accordance with Sec.  510.110 and must require each collaboration agent 
to do so as well. We discussed further our proposal to consolidate the 
requirements under the CJR model for access to records and record 
retention and apply them more broadly in the model. The approach 
mirrors our proposed records retention policies for the EPMs, which are 
discussed in detail in section III.H. of this final rule. We refer 
readers to that section for further discussion of our proposed policies 
and rationale.
    We sought comment on our proposals regarding distribution 
arrangements
    The following is a summary of the comments received and our 
responses.
    Comment: We received comments on the requirements of a distribution 
arrangement under the CJR model and EPM, including the proposed cap on 
distribution and downstream distribution payments, which are discussed 
in section III.I.5.b.
    Response: We appreciate the comments on the requirements of a 
distribution arrangement under the CJR model and the EPM. We refer to 
section III.I.5.b for a detailed discussion of comments and responses 
in regards to distribution arrangements under these models.
    We are finalizing in Sec. Sec.  510.505(6) and 510.510(6) that the 
amount of any distribution payments or downstream distribution payments 
from a PGP to a PGP member must be determined either in a manner that 
complies with Sec.  411.352(g) of this chapter or in accordance with a 
methodology that is substantially based on quality of care and the 
provision CJR activities.
    Comment: One commenter requested clarification about whether 
outpatient therapy providers can receive distribution or downstream 
distribution payments as either a member of a PGP who is a CJR 
collaborator or as a member of a PGP that is an ACO participant in an 
ACO that has a distribution arrangement with a CJR collaborator.
    Response: Certain outpatient therapy providers are included in the 
definition of a member of a PGP or PGP member which means ``a 
physician, nonphysician practitioner, or therapist who is an owner or 
employer of a PGP and who has reassigned to the PGP his or her right to 
receive Medicare payment.'' Thus, therapists who are PGP members may be 
eligible to receive distribution payments or downstream distribution 
payments when those PGPs enter into financial arrangements under the 
CJR model in accordance with all the requirements in this final rule.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  510.505(b) for the 
requirements for CJR distribution arrangements, with modification to 
include policies for NPPGPs or TGPs that enter into distribution 
arrangements with NPPGP members or TGP members respectively. Like a 
PGP, an NPPGP that is an ACO participant in an ACO that is a CJR 
collaborator may enter into distribution arrangement with the ACO. The 
distribution payments to the NPPGP are subject to the same requirements 
as distribution payments to PGPs that are collaboration agents. The 
NPPGP is eligible to receive a distribution payment only if the 
collaboration agent billed for an item or service rendered to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed. The distribution 
payment to the NPPGP is capped at 50 percent of the total Medicare-
approved amounts under the PFS for items and services billed by the 
NPPGP for items and services furnished by NPPGP members to the CJR 
participant hospital's CJR beneficiaries during CJR episodes that 
occurred during the same performance year for which the CJR participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment being distributed.
    If an NPPGP is a CJR collaborator, it may enter into a distribution 
arrangement with an NPPGP member, which is defined as a nonphysician

[[Page 548]]

practitioner or therapist who is an owner or employee of an NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment. The requirements for NPPGP distribution payments under those 
distribution arrangements are the same as those for PGPs, except that 
we allow the amount of any distribution payments from a PGP to a PGP 
member to be determined in a manner that complies with Sec.  
411.352(g). While CMS has determined under the physician self-referral 
law that payments from a group practice as defined under Sec.  411.352 
to its members that comply with Sec.  411.352(g) are appropriate, 
NPPGPs do not fall under this definition of group practice. Therefore, 
the amount of any distribution payments from an NPPGP to an NPPGP 
member must always be determined in accordance with a methodology that 
is substantially based on quality of care and the provision CJR 
activities, the same standard that applies to PGP distribution payments 
that are not determined in a manner that complies with Sec.  
411.352(g). Like the requirement for PGP members when a distribution 
payment does not comply with Sec.  411.352(g), an NPPGP member is 
eligible to receive a distribution payment only if the collaboration 
agent furnished an item or service to a CJR beneficiary during a CJR 
episode that occurred during the same performance year for which the 
CJR participant hospital accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment being 
distributed. Finally, the total amount of distribution payments paid 
for a performance year to the NPPG member may not exceed 50 percent of 
the total Medicare-approved amounts under the PFS for items and 
services furnished by the NPPGP member to the CJR participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year for which the CJR participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment being distributed.
    In addition, with respect to the distribution of any gainsharing 
payment received by an NPPGP, the total amount of all distribution 
payments must not exceed the amount of the gainsharing payment received 
by the CJR collaborator from the CJR participant hospital.
    Like a PGP and NPPGP, a TGP that is an ACO participant in an ACO 
that is a CJR collaborator may enter into distribution arrangement with 
the ACO. The distribution payments to the TGP are not subject to the 
cap that applies to PGPs and NPPGPs. While we cap distribution payments 
to physicians and nonphysician practitioners, we will not cap such 
payments to therapists in private practice for the same reasons 
discussed for gainsharing payments to these individuals and, therefore, 
we will not cap distribution payments to TGPs. Like PGPs and NPPGPs, 
the TGP is eligible to receive a distribution payment only if the 
collaboration agent billed for an item or service rendered to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    If a TGP is a CJR collaborator, it may enter into a distribution 
arrangement with a TGP member, who is a therapist who is an owner or 
employee of a TGP and who has reassigned to the TGP his or her right to 
receive Medicare payment. Like distribution payments from an NPPGP to 
an NPPGP member, the amount of any distribution payments from a TGP to 
a TGP member must be determined in accordance with a methodology that 
is substantially based on quality of care and the provision CJR 
activities, the same standard that applies to PGP distribution payments 
that are not determined in a manner that complies with Sec.  
411.352(g). Like the requirement for PGP members when a distribution 
payment does not comply with Sec.  411.352(g) and for NPPG members, a 
TGP member is eligible to receive a distribution payment only if the 
collaboration agent furnished an item or service to CJR beneficiary 
during a CJR episode that occurred during the same performance year for 
which the CJR participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed. We will not cap the total amount of 
distribution payments paid for a performance year to a TGP member for 
the reasons discussed previously for not applying caps on gainsharing 
payments to therapists in private practice. Finally, with respect to 
the distribution of any gainsharing payment received by a TGP, the 
total amount of all distribution payments must not exceed the amount of 
the gainsharing payment received by the CJR collaborator from the CJR 
participant hospital.
    We are finalizing that distribution arrangements under the CJR 
model must comply with the following requirements:
     All distribution arrangements must be in writing and 
signed by the parties, contain the date of the agreement, and be 
entered into before care is furnished to CJR beneficiaries under the 
distribution arrangement.
     Participation in a distribution arrangement must be 
voluntary and without penalty for nonparticipation.
     The distribution arrangement must require the 
collaboration agent to comply with all applicable laws and regulations.
     The opportunity to make or receive a distribution payment 
must not be conditioned directly or indirectly on the volume or value 
of past or anticipated referrals or business otherwise generated by, 
between or among the participant hospital, any CJR collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent.
     The amount of any distribution payments from an ACO, from 
an NPPGP to an NPPGP member, or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision CJR activities and that may take 
into account the amount of such CJR activities provided by a 
collaboration agent relative to other collaboration agents.
     The amount of any distribution payments from a PGP must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on quality of care and the provision CJR activities and that may 
take into account the amount of such CJR activities provided by a 
collaboration agent relative to other collaboration agents.
     Except for a distribution payment from a PGP to a PGP 
member that complies with Sec.  411.352(g), a collaboration agent is 
eligible to receive a distribution payment only if the collaboration 
agent furnished or billed for an item or service rendered to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
     Except for a distribution payment from a PGP to a PGP 
member that complies with Sec.  411.352(g), the total amount of 
distribution payments for a performance year paid to a collaboration 
agent must not exceed the following:

[[Page 549]]

    ++ In the case of a collaboration agent that is a physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed.
    ++ In the case of a collaboration agent that is a PGP or NPPGP, 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services billed by that PGP or NPPGP for items and services 
furnished by PGP members or NPPGP members to the CJR participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year for which the CJR participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment being distributed.
     With respect to the distribution of any gainsharing 
payment received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the CJR collaborator from the CJR participant 
hospital.
     All distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
     The collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments.
     The distribution arrangement must not--
    ++ Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The CJR collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.110, including the following:
    The relevant written agreements.
    ++ The date and amount of any distribution payment(s);
    ++ The identity of each collaboration agent that received a 
distribution payment; and
    ++ A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
     The CJR collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same CJR participant hospital.
     The CJR collaborator must retain and provide access to, 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with Sec.  512.110.
4. Downstream Distribution Arrangements Under the CJR Model
a. General
    We proposed that the CJR model allow for certain financial 
arrangements within an ACO between a PGP and its members. We discussed 
our proposals for downstream distribution arrangements, which mirror 
our proposals for the proposed EPMs described in section III.I.6. of 
this final rule. Specifically, we proposed that certain financial 
arrangements between a collaboration agent that is both a PGP and an 
ACO participant and other individuals termed ``downstream collaboration 
agents'' be termed a ``downstream distribution arrangement.'' A 
downstream distribution arrangement is a financial arrangement between 
a collaboration agent that is a both a PGP and an ACO participant and a 
downstream collaboration agent for the sole purpose of sharing a 
distribution payment received by the PGP. A downstream collaboration 
agent is an individual who is not a CJR collaborator or a collaboration 
agent and who is a PGP member that has entered into a downstream 
distribution arrangement with the same PGP in which he or she is an 
owner or employee, and where the PGP is a collaboration agent. Where a 
payment from a collaboration agent to a downstream collaboration agent 
is made pursuant to a downstream distribution arrangement, we defined 
that payment as a ``downstream distribution payment.'' A CJR 
collaboration agent may only make a downstream distribution payment in 
accordance with a downstream distribution arrangement which complies 
with the requirements of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
    The proposals for the general provisions for downstream 
distribution arrangements under the CJR model are included in Sec.  
510.506. These provisions mirror those proposed for the proposed EPMs 
in Sec.  512.510(a). We sought comment on our proposals for these 
general provisions, as well as any alternatives to this structure.
    We received no specific comments on the proposed general provisions 
for downstream distribution arrangements under the CJR model. However, 
we are modifying the EPM proposals in response to the comments that we 
received, and therefore, consistent with our proposal to amend the CJR 
regulations to align them with the EPMs, we are making corresponding 
changes to the CJR regulations. We believe these modifications also 
will reduce any burden on hospitals participating in both CJR and an 
EPM that could arise from having to comply with different requirements 
for each model. We refer readers to the discussion at III.I.6. for 
further information.
    Final Decision: We are finalizing effective July 1, 2017 the 
proposals in Sec.  510.510(a) for the general requirements for CJR 
downstream distribution arrangements with modification to allow NPPGPs 
or TGPs to enter into downstream distribution arrangements with NPPGP 
members or TGP members respectively. Downstream distribution 
arrangements under the CJR model must comply with the following general 
provisions:
     An ACO participant that is a PGP, NPPGP, or TGP and that 
has entered into a distribution arrangement with a CJR collaborator 
that is an ACO may distribute all or a portion of any distribution 
payment it receives from the CJR collaborator only in accordance with a 
downstream distribution arrangement.
     All downstream distribution arrangements must comply with 
the provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
b. Requirements
    We proposed a number of specific requirements for downstream 
distribution arrangements to help ensure that their sole purpose is to 
create financial alignment between collaboration agents that are PGPs 
which are also ACO participants and downstream collaboration agents 
toward the goal of the CJR model to improve the quality and efficiency 
of CJR episodes. We refer readers to section III.I.6.(b) of this final 
rule for further discussion of our proposals regarding downstream 
distribution arrangements and our rationale for each proposal. Our 
proposed requirements largely parallel those proposed in Sec. Sec.  
510.510(b) andSec.  510.505(b) for sharing and distribution 
arrangements and gainsharing and distribution payments based on similar 
reasoning for these

[[Page 550]]

three types of arrangements and payments.
    As listed in Sec.  510.506 and described in detail in III.I.6(b) of 
this final rule, we proposed requirements addressing the agreements 
governing downstream distribution arrangements, eligibility for receipt 
of downstream distribution payments, a cap on the amount of such 
payments, the methodologies used to determine the amount of downstream 
distribution payments, and documentation regarding downstream 
distribution arrangements. Specifically, we proposed that all 
downstream distribution arrangements must be in writing and signed by 
the parties, contain the date of the agreement, and entered into before 
care is furnished to CJR beneficiaries under the distribution 
arrangement. We proposed that participation must be voluntary and 
without penalty for nonparticipation, and the downstream distribution 
arrangement must require the downstream collaboration agent to comply 
with all applicable laws and regulations.
    As with our proposals for gainsharing and distribution payments, we 
proposed that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the participant hospital, any 
CJR collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent. In determining the amount of downstream 
distribution payments we proposed a more flexible approach, as we did 
with the proposed EPMs. Consistent with our proposal for distribution 
payments, we proposed that the amount of any downstream distribution 
payments must be determined either in a manner that complies with Sec.  
411.352(g) or that is substantially based on quality of care and the 
provision of CJR activities and that may take into account the amount 
of CJR activities provided by a downstream collaboration agent relative 
to other downstream collaboration agents. We also proposed that the 
amount of a downstream distribution payment from a PGP to a PGP member 
may be determined in a manner that complies with Sec.  411.352(g) or in 
a manner that is substantially based on quality of care and the 
provision of CJR activities.
    Similar to our proposed requirements for distribution arrangements 
for those EPM collaborators that are PGPs, we proposed that, except for 
a downstream distribution arrangement that complies with Sec.  
411.352(g), a downstream collaboration agent is eligible to receive a 
downstream distribution payment only if the PGP billed for an item or 
service furnished by the downstream collaboration agent to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprise the gainsharing payment from which the ACO made the 
distribution payment to the PGP that is an ACO participant. This 
approach mirrors our proposed requirements for distribution 
arrangements between collaborators and collaboration agents, as well as 
the proposed approach for the EPMs.
    With regard to limitations on the amount of downstream distribution 
payments made to downstream collaboration agents, we proposed the same 
limit as that proposed for distribution payments by CJR collaborators 
that are PGPs. With the exception of downstream distribution payments 
that comply with Sec.  411.352(g), we proposed to limit the total 
amount of downstream distribution payments paid for a performance year 
to a downstream collaboration agent to 50 percent of the total 
Medicare-approved amounts under the PFS for services billed by the PGP 
and furnished by the downstream collaboration agent to the participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year in which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the PGP. We further proposed that the total 
amount of all downstream distribution payments made to downstream 
collaboration agents must not exceed the amount of the distribution 
payment received by the collaboration agent (PGP that is an ACO 
participant) from the ACO that is a CJR collaborator. In addition, all 
downstream distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction, as with our 
proposed approach for gainsharing, alignment, and distribution 
payments. Finally, the distribution arrangement must not induce the 
downstream collaboration agent to reduce or limit medically necessary 
items and services to any Medicare beneficiary or reward the provision 
of items and services that are medically unnecessary.
    We proposed that the PGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  510.110, including:
     The relevant written agreements;
     The date and amount of any downstream distribution 
payment(s);
     The identity of each downstream collaboration agent that 
received a downstream distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We proposed that the PGP may not enter into a downstream 
distribution arrangement with any PGP member who has a sharing 
arrangement with a participant hospital or distribution arrangement 
with the ACO in which the PGP is a participant. Finally, we proposed 
that the PGP must retain and provide access to, and must require 
downstream collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.
    The proposals for downstream distribution arrangement requirements 
are included in Sec.  510.506. We sought comment on our proposals.
    We received no specific comments on the proposed requirements for 
downstream distribution arrangements under the CJR model.
    Final Decision: We are finalizing effective July 1, 2017 the 
proposals in Sec.  510.510(b) for the requirements for CJR downstream 
distribution arrangements, with modification to include policies for 
NPPGPs or TGPs that enter into downstream distribution arrangements 
with NPPGP members or TGP members respectively. Consistent with 
commenters' overall request that we streamline the regulations, we are 
also modifying proposed Sec.  510.510(b)(6), which is final Sec.  
510.510(b)(7), to eliminate one of the two proposed requirements for 
eligibility of a downstream collaboration agent to receive a downstream 
distribution payment, specifically the requirement that the PGP bill 
for the item or service furnished by the downstream collaboration 
agent. Instead, we base downstream collaboration agent eligibility only 
on whether the downstream collaboration agent furnished an item or 
service to a CJR beneficiary during a CJR episode that occurred during 
the same performance year for which the participant hospital accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the PGP,

[[Page 551]]

NPPGP, or TGP that is an ACO participant. This approach is parallel to 
Sec.  510.505(b)(7), which applies to distribution payments from ACOs 
to ACO participants or ACO providers/suppliers and certain distribution 
payments from PGPs to PGP members, and ensures that the member of the 
PGP, NPPGP, or TGP receiving the downstream distribution payment 
furnished items and services to a CJR beneficiary during a CJR episode, 
without explicitly requiring that the PGP, NPPGP, or TGP to which the 
member of the PGP, NPPGP, or TGP would have reassigned his or her 
benefits also billed for the item or service. This latter additional 
requirement adds complexity that is unnecessary when our objective of 
the requirement is only to ensure that the recipient of the downstream 
distribution payment furnished an item or service to a CJR beneficiary 
during a CJR episode in order to link the payment to actual care. 
Finally, as discussed previously, in order to achieve consistency in 
the parameters for gainsharing payments and distribution payments to 
therapists and to streamline programmatic requirements, we are revising 
proposed Sec.  510.510(b)(7), which is final in Sec.  510.510(b)(8), by 
removing the cap on downstream distribution payments to PGP members as 
applied to therapists who are PGP members.
    An NPPGP that is an ACO participant that has entered into a 
distribution arrangement with a CJR collaborator that is an ACO may 
enter into a downstream distribution arrangement with an NPPGP member, 
who is a nonphysician practitioner or therapist who is an owner or 
employee of an NPPGP and who has reassigned to the NPPGP his or her 
right to receive Medicare payment. The requirements for NPPGP 
downstream distribution payments under those downstream distribution 
arrangements are the same as those for PGPs, except that we allow the 
amount of any downstream distribution payments from a PGP to be 
determined in a manner that complies with Sec.  411.352(g). The amount 
of any downstream distribution payments from an NPPGP to an NPPGP 
member must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision CJR 
activities, the same standard that applies to PGP downstream 
distribution payments that are not determined in a manner that complies 
with Sec.  411.352(g). Like the requirement for PGP members when a 
downstream distribution payment does not comply with Sec.  411.352(g), 
an NPPGP member is eligible to receive a downstream distribution 
payment only if the downstream collaboration agent furnished an item or 
service to a CJR beneficiary during a CJR episode that occurred during 
the same performance year for which the CJR participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment from which the ACO made the 
distribution payment to the NPPGP that is an ACO participant. Finally, 
the total amount of downstream distribution payments paid for a 
performance year to the NPPGP member who is a nonphysician practitioner 
may not exceed 50 percent of the total Medicare-approved amounts under 
the PFS for items and services furnished by the NPPGP member to the CJR 
participant hospital's CJR beneficiaries during CJR episodes that 
occurred during the same performance year for which the CJR participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment from which the ACO made 
the distribution payment to the NPPGP that is an ACO participant. In 
addition, the total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the NPPGP from the ACO.
    A TGP that is an ACO participant that has entered into a 
distribution arrangement with a CJR collaborator that is an ACO may 
enter into a downstream distribution arrangement with a TGP member, who 
is a therapist who is an owner or employee of an NPPGP and who has 
reassigned to the TGP his or her right to receive Medicare payment. 
Like downstream distribution payments from an NPPGP to an NPPGP member, 
the amount of any downstream distribution payments from a TGP to a TGP 
member must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision CJR 
activities, the same standard that applies to PGP distribution payments 
that are not determined in a manner that complies with Sec.  
411.352(g). Like the requirement for PGP members when a distribution 
payment does not comply with Sec.  411.352(g) and for NPPG members, a 
TGP member is eligible to receive a distribution payment only if the 
downstream collaboration agent furnished an item or service to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the NPPGP that is an ACO participant. We will 
not cap the total amount of downstream distribution payments paid for a 
performance year to a TGP member. Finally, the total amount of all 
downstream distribution payments made to downstream collaboration 
agents must not exceed the amount of the distribution payment received 
by the TGP from the ACO.
    Like PGPs, NPPGPs and TGPs must maintain contemporaneous 
documentation regarding downstream distribution arrangements. 
Similarly, the NPPG or TGP may not enter into a downstream distribution 
arrangement with any NPPG member or TGP member respectively who has a 
sharing arrangement with a CJR participant hospital or a distribution 
arrangement with the ACO the NPPG or TGP is a participant in.
    Downstream distribution arrangements under the CJR model must 
comply with the following requirements:
     All downstream distribution arrangements must be in 
writing and signed by the parties, contain the date of the agreement, 
and be entered into before care is furnished to CJR beneficiaries under 
the downstream distribution arrangement.
     Participation in a downstream distribution arrangement 
must be voluntary and without penalty for nonparticipation.
The downstream distribution arrangement must require the downstream 
collaboration agent to comply with all applicable laws and regulations.
     The opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the CJR participant hospital, 
any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a CJR 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
     The amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision CJR activities and that may take 
into account the amount of such CJR activities provided by a

[[Page 552]]

downstream collaboration agent relative to other downstream 
collaboration agents.
     The amount of any downstream distribution payments from a 
PGP to a PGP member must be determined either in a manner that complies 
with Sec.  411.352(g) of this chapter or in accordance with a 
methodology that is substantially based on quality of care and the 
provision CJR activities, and the methodology may take into account the 
amount of such CJR activities by a downstream collaboration agent 
relative to other downstream collaboration agents.
     Except for a downstream distribution payment from a PGP to 
a PGP member that complies with Sec.  411.352(g), a downstream 
collaboration agent is eligible to receive a downstream distribution 
payment only if the downstream collaboration agent furnished an item or 
service to a CJR beneficiary during a CJR episode that occurred during 
the same performance year for which the participant hospital accrued 
the internal cost savings or earned the reconciliation payment that 
comprise the gainsharing payment from which the ACO made the 
distribution payment to the PGP, NPPGP, or TGP that is an ACO 
participant.
     Except for a downstream distribution payment from a PGP to 
a PGP member that complies with Sec.  411.352(g), the total amount of 
downstream distribution payments for a performance year paid to a 
downstream collaboration agent who is a physician or nonphysician 
practitioner and is either a PGP member or NPPGP member must not exceed 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services furnished by the downstream collaboration agent to 
the participant hospital's CJR beneficiaries during CJR episodes that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the distribution payment being distributed.
     The total amount of all downstream distribution payments 
made to downstream collaboration agents must not exceed the amount of 
the distribution payment received by the PGP, NPPGP, or TGP from the 
ACO.
     All downstream distribution payments must be made by 
check, electronic funds transfer, or another traceable cash 
transaction.
     The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     The downstream distribution arrangement must not--
    ++ Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The PGP, NPPG, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  510.110, including the following:
    ++ The relevant written agreements.
    The date and amount of any downstream distribution payment.
    ++ The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    ++ A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
     The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    ++ A sharing arrangement with a CJR participant hospital; or
    ++ A distribution arrangement with the ACO that the PGP, NPPGP, or 
TGP is a participant in.
    The PGP, NPPGP, or TGP must retain and provide access to, and must 
require downstream collaboration agents to retain and provide access 
to, the required documentation in accordance with Sec.  510.110.
5. Summary of Proposals for Sharing, Distribution, and Downstream 
Distribution Arrangements Under the CJR Model.
    Figure 4 summarizes the proposals for the defined terms and 
financial arrangements discussed in section V.J. of this final rule.

[[Page 553]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.013

    Our final policies for financial arrangements reflect a number of 
changes to the proposals for the CJR model financial arrangements in 
response to comments on the proposed rule. Figure 4. summarizes the 
policies for financial arrangements we proposed for CJR, whereas Figure 
5 summarizes the policies we are finalizing for these arrangements as 
discussed in sections V.J.4. through V.J.6. of this final rule. Given 
the changes to the financial arrangement provisions discussed in V.J. 
will not be effective until July 1, 2017, Figure 5 is not applicable 
until July 1, 2017.

[[Page 554]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.014

K. Beneficiary Incentives Under the CJR Model

    We proposed numerous amendments to the regulations in Sec.  
510.515. These are mainly for organizational purposes, to more clearly 
specify our policies, and for the CJR model regulations to mirror the 
proposed EPM regulations at Sec.  512.525 to avoid confusion for 
hospitals that are participating in CJR as well as one or more of the 
proposed EPMs. Our proposed changes to the regulations reflect that the 
requirements and rules regarding the use of beneficiary incentives 
under the CJR model would stay largely the same. However, we proposed 
several changes in order to ensure adequate documentation of 
beneficiary incentives by participant hospitals and to align with our 
proposed requirements for the EPMs.
    First, as a program safeguard against misuse of beneficiary 
incentives under the CJR model, we would clarify our existing 
requirements for documentation of beneficiary incentives. Documentation 
regarding items of technology exceeding $100 in retail value must also 
include contemporaneous documentation of any attempt to retrieve the 
technology at the end of a CJR episode. Documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement.
    We also proposed to add as a requirement that participant hospitals 
retain and provide access to required documentation pertaining to 
beneficiary incentives as discussed throughout section V.L. of this 
final rule and proposed in Sec.  510.110 of the regulations. 
Participant hospitals retaining and providing access to documentation 
in accordance with Sec.  510.110 would promote parallel record 
retention for all CJR model. As discussed in section V.L. of this final 
rule, the proposed section Sec.  510.110 would apply to beneficiary 
incentives as well as financial arrangements and beneficiary 
notification requirements under the CJR model; therefore, we proposed 
to delete Sec.  510.515(e) to avoid duplicative requirements and 
language and to align the applicable CJR model regulations with the 
proposed regulations of the EPMs.
    We proposed to include these requirements in the regulations at 
Sec. Sec.  510.515(d)(3) and 510.515(d)(4). We sought comment on our 
proposal. We also sought comment on the proposed

[[Page 555]]

additional requirements for compliance with proposed section Sec.  
510.110 and the deletion of Sec.  510.515(e). No comments were 
submitted in response to our proposed amendments to the beneficiary 
engagement incentives under the CJR model. Though we did not propose to 
change our policies regarding beneficiary engagement incentives under 
the CJR model commenters provided comments on beneficiary engagement 
incentives for the EPM, which mirrors the CJR model's policies.
    We refer readers to section III.I.9 for a detailed discussion of 
comments and responses in regards to beneficiary engagement incentives 
under these models.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals, without modification. We are 
making changes related to beneficiary incentives effective July 1, 2017 
in order to align the CJR model with the EPMs, avoid confusion and 
preserve the existing CJR regulations until these changes take effect.

L. Access to Records and Record Retention

    We proposed to consolidate the requirements under CJR for access to 
records and record retention and apply them more broadly in the model. 
The approach mirrors our proposed records retention policies for the 
EPMs, which are discussed in detail in section III.H. of this final 
rule. We refer readers to that section for further discussion of our 
proposed policies and rationale.
    We proposed to add Sec.  510.110 to the CJR regulations, which 
would apply to documentation regarding beneficiary notifications, 
financial arrangements, and beneficiary incentives. Because we proposed 
to consolidate all of the existing records access and retention 
requirements in one place, we proposed to delete Sec. Sec.  510.500(e) 
and Sec.  510.515(c). We further proposed to require participant 
hospitals, CJR collaborators, collaboration agents, downstream 
collaboration agents and any other individuals or entities performing 
CJR activities to allow the Government, including CMS, OIG, HHS and the 
Comptroller General or their designees, scheduled and unscheduled 
access to all books, contracts, records, documents and other evidence 
sufficient to enable the audit, evaluation, inspection or investigation 
of the individual or entity's compliance with CJR model requirements, 
the calculation, distribution, receipt, or recoupment of gainsharing 
payments, alignment payments, distribution payments, and downstream 
distribution payments, the obligation to repay any reconciliation 
payments owed to CMS, the quality of the services furnished to a CJR 
beneficiary during a CJR episode, and the sufficiency of CJR 
beneficiary notifications.
    In general, we proposed that such documents be maintained for a 
period of 10 years from the last day of the participant hospital's 
participation in the CJR model or from the date of completion of any 
audit, evaluation, inspection, or investigation.
    We believe these safeguards regarding access to records and record 
retention are necessary to ensure program integrity and protect against 
abuse, in view of the CJR model's design and requirements. We believe 
that by providing access to CJR records, we promote transparency of 
activities in the CJR model. Further, the proposed access to records 
and record retention requirements would ensure that the compliance of 
participant hospitals, CJR collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing CJR activities can be monitored and assessed. Also, these 
records may be necessary in the event that a participant hospital 
appeals any matter that is subject to dispute resolution through CMS. 
As such, CMS would have the resources necessary to prepare and respond 
to any such appeal. Finally, we proposed to establish CEHRT use 
attestation for CJR participant hospitals so that a CJR participant 
hospital could be in Track 1 of the CJR model that meets the proposed 
requirements in the Quality Payment Program proposed rule to be an 
Advanced APM as discussed in section III.A.2. of this final rule. Thus, 
we proposed to require access to records and record retention about the 
accuracy of each Track 1 CJR model participant hospital's submissions 
under CEHRT use requirements. Specifically, attestation to CEHRT use 
and submission of clinician financial arrangements lists are key 
requirements for Track 1 of the CJR model that is an Advanced APM, and 
the access to records and record retention requirements provide a 
program integrity safeguard by allowing us to assess the completeness 
and accuracy of the participant hospital's compliance with the 
requirements for those submissions.
    In summary, we proposed in Sec.  510.110 that participant 
hospitals, CJR collaborators, collaboration agents, downstream 
collaboration agents, and any other individuals or entities performing 
providing CJR activities must allow the Government, including CMS, OIG, 
HHS and the Comptroller General or their designees, scheduled and 
unscheduled access to all books, contracts, records, documents and 
other evidence (including data related to utilization and payments, 
quality criteria, billings, lists of CJR collaborators, sharing 
arrangements, distribution arrangements, downstream distribution 
arrangements and the documentation required under Sec.  510.500(d) and 
Sec.  510.525(c)) sufficient to enable the audit, evaluation, 
inspection or investigation of the following:
     Individual's or entity's compliance with CJR model 
requirements.
     The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments.
     The obligation to repay any reconciliation payments owed 
to CMS.
     The quality of the services furnished to a CJR beneficiary 
during a CJR episode.
     The sufficiency of CJR beneficiary notifications.
     The accuracy of the CJR participant hospital's submission 
under CEHRT use requirements.
    Further, we proposed that participant hospitals, CJR collaborators, 
collaboration agents, downstream collaboration agents, and any other 
individuals or entities performing providing CJR activities 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 CJR model or from the date of completion of any 
audit, evaluation, inspection, or investigation, whichever is later, 
unless CMS determines a particular record or group of records should be 
retained for a longer period and notifies the participant hospital at 
least 30 calendar days before the disposition date or there has been a 
dispute or allegation of fraud or similar fault against the participant 
hospital, CJR collaborator, collaboration agents, downstream 
collaboration agents, or any other individual or entity performing CJR 
activities related to the CJR model. In this case, the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.
    We sought comment on our proposals, including whether additional or 
different requirements are appropriate to promote program integrity, 
prevent fraud and abuse and promote the goals of the model. The 
following is a

[[Page 556]]

summary of the comments received and our responses.
    Comment: Generally, commenters were supportive of our proposal in 
Sec.  510.110 to consolidate the requirements under the CJR model for 
access to records and record retention and apply them more broadly in 
the CJR model. However one commenter stated that requiring participant 
hospitals, CJR collaborators, collaboration agents, downstream 
collaboration agents, and any other individuals or entities performing 
CJR activities to 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 CJR model or 
from the date of completion of any audit, evaluation, inspection, or 
investigation, whichever is later, is an excessive policy, and would 
burden entities and individuals involved in the CJR model. The 
commenter suggested that CMS reduce the 10 year record retention to 6 
years, as the commenter believes that proposal is more consistent with 
other CMS programs. Further, one commenter recommended that CMS also 
request access to records on gainsharing and other savings-related 
payments so as to help examine the extent to which savings are 
equitably being shared by facilities with participating physicians and 
other healthcare professionals.
    Response: We note that the 10-year record retention policy is the 
current policy of the CJR model. While we understand the commenter's 
concern that 10 years is excessive, we note that, once initiated, 
appeals and recalculation disputes can be lengthy processes and believe 
that maintaining this requirement as proposed would give both the 
participant and CMS as well as those conducting any audit, evaluation, 
inspection, or investigation, the resources to prepare and respond to 
issues that may take several years to surface. We appreciate the 
comment concerning CMS requesting access to records on gainsharing and 
other saving-related payments, and note that in these final regulations 
CMS may request from participant hospitals and their related CJR 
collaborators, collaboration agents, and downstream collaboration 
agents, records of the calculation, distribution, receipt, or 
recoupment of gainsharing payments, alignment payments, distribution 
payments, and downstream distribution payments.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification. Since 
the changes to the financial arrangement provisions discussed in V.J. 
will not be effective until July 1, 2017, we are also making amendments 
to related sections effective July 1, 2017 to avoid confusion and 
preserve the existing CJR regulations until these changes take effect.
M. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount
    In order to correct a technical error in the CJR final rule (42 CFR 
510.620), we proposed to waive the requirements of section 1833(a) of 
the Act to the extent that they would otherwise apply to reconciliation 
payments or repayments from a participant hospital under the CJR model. 
We proposed this policy in the CJR proposed rule (80 FR 41274) and 
received no comments from the public on our proposal; the proposal was 
finalized in the CJR final rule. We refer readers to the CJR final rule 
(80 FR 73460 and 73461) for further discussion.
    We proposed to amend our regulations at Sec.  10.620 to reflect 
this change.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification.
N. SNF 3-Day Waiver Beneficiary Protections
    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. Under 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. In the November 2015 final rule (80 FR 73454 
through 73460), we provided hospitals in the CJR model with additional 
flexibility to attempt to increase quality and decrease costs by 
allowing a waiver of the SNF 3-day rule for beneficiaries in a CJR 
episode beginning in performance year 2. Program requirements for this 
waiver are codified at Sec.  510.610. Specifically, under Sec.  
510.610, for SNFs that meet all specified requirements, we waive the 
requirement in section 1861(i) of the Act for a 3-day inpatient 
hospital stay prior to a Medicare covered post-hospital extended care 
service for eligible beneficiaries in a CJR episode. The CJR SNF waiver 
will only be available to participant hospitals that are active 
participants in the CJR model. If a participant hospital no longer 
participates in the CJR model, due to a merger or other reason, it 
cannot continue to use the CJR SNF waiver. All other provisions of the 
statute and regulations regarding Medicare Part A post-hospital 
extended care services continue to apply.
    We believe that clarity regarding whether a waiver applies to SNF 
services furnished to a particular beneficiary is important to help 
ensure compliance with the conditions of the waiver and also improve 
our ability to monitor waivers for misuse. Therefore, in the CJR final 
rule (80 FR 73454 through 73460), we discussed how the waiver can be 
utilized when a beneficiary is in a CJR episode at the time when the 
waiver is applied. In addition, at Sec.  510.405 we require participant 
hospitals to provide a discharge planning notice to beneficiaries in 
cases where there is potential beneficiary liability for the SNF stay 
(80 FR 73548 through 73549).
    Based on our experiences under BPCI Model 2, the Pioneer ACO Model, 
and other initiatives, we established certain requirements under Sec.  
510.610 for hospitals and SNFs with respect to the SNF 3-day rule 
waiver under the CJR model. As discussed in the CJR final rule, 
commenters expressed concern about beneficiary liability in cases where 
the beneficiary's eligibility status has changed, but the hospital is 
unaware of the change at the time it uses the waiver. We noted that we 
would continue to evaluate the waiver of the SNF 3-day rule, including 
further lessons learned from Innovation Center models in which a waiver 
of the SNF 3-day rule is being tested. We indicated that in the event 
we determine that additional safeguards or protections for 
beneficiaries or other changes were necessary, such as to incorporate 
additional protections for beneficiaries, we would propose the 
necessary changes through future rulemaking.
    In considering additional beneficiary protections that may be 
necessary to ensure proper use of the SNF 3-day waiver under the CJR 
model, we noted that there are existing, well-established payment and 
coverage policies for SNF services based on sections 1861(i), 
1862(a)(1), and 1879 of the Act that include protections for 
beneficiaries from liability for certain non-covered SNF charges. These 
existing payment and coverage policies for SNF services continue to 
apply under the model, including SNF services furnished pursuant to the 
SNF 3-day waiver. (For example, see section 70 in the Medicare Claims 
Processing Manual, Chapter 30--Financial Liability Protections on the 
CMS Web site at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c30.pdf; and Medicare Coverage of Skilled 
Nursing Facility Care at https://www.medicare.gov/Pubs/pdf/10153.pdf;

[[Page 557]]

Medicare Benefit Policy Manual, Chapter 8--Coverage of Extended Care 
(SNF) Services Under Hospital Insurance at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.pdf). In 
general, CMS requires that the SNF inform a beneficiary in writing 
about services and fees before the beneficiary is discharged to the SNF 
(Sec.  483.10(b)(6)); the beneficiary cannot be charged by the SNF for 
items or services that were not requested (Sec.  483.10(c)(8)(iii)(A)); 
a beneficiary cannot be required to request extra services as a 
condition of continued stay (Sec.  483.10(c)(8)(iii)(B)); and the SNF 
must inform a beneficiary that requests an item or service for which a 
charge will be made that there will be a charge for the item or service 
and what the charge will be (Sec.  483.10(c)(8)(iii)(C)). (See also 
section 6 of Medicare Coverage of Skilled Nursing Facility Care at 
https://www.medicare.gov/Pubs/pdf/10153.pdf.)
    As we discussed in the CJR final rule (80 FR 73454 through 73460), 
commenters expressed concern regarding the lag between a CJR 
beneficiary's Medicare coverage or eligibility status change and a 
participant hospital's awareness of that change. There may be cases in 
which a SNF waiver is used by a participant hospital because the 
participant hospital believes that the beneficiary meets the inclusion 
criteria, based on the information available to the hospital and SNF at 
the time of the beneficiary's admission to the SNF, but in fact the 
beneficiary's Medicare coverage has changed and the hospital was 
unaware of it based on available information. We recognize that despite 
good faith efforts by participant hospitals and SNFs to determine a 
beneficiary's Medicare status for the model, it may occur that a 
beneficiary is not eligible to be included in the CJR model at the time 
the SNF waiver is used. In these cases, we will cover services 
furnished under the waiver when the information available to the 
provider at the time the services under the waiver were furnished 
indicated that the beneficiary was included in the model.
    Since publication of our final rule, we have continued to learn 
from implementation and refinement of the SNF 3-day waiver in other 
models and the Shared Savings Program. Based on these experiences, we 
believe there are situations where it would be appropriate to require 
additional beneficiary financial protections under the SNF 3-day waiver 
for the CJR model. Specifically, we are concerned about potential 
beneficiary financial liability for non-covered Part A SNF services 
that might be directly related to use of the SNF 3-day waiver under the 
CJR model. We are concerned that there could be scenarios where a 
beneficiary could be charged for non-covered SNF services that were a 
result of a participant hospital's inappropriate use of the SNF waiver. 
Specifically, we are concerned that a beneficiary could be charged for 
non-covered SNF services if a participant hospital discharges a 
beneficiary to a SNF that does not meet the quality requirement (3 
stars or higher in 7 of the last 12 months), and payment for SNF 
services is denied for lack of a qualifying inpatient hospital stay. We 
recognize that requiring a discharge planning notice (Sec.  510.405) 
will help mitigate concerns about beneficiaries' potential financial 
liability for non-covered services. Nevertheless, we are concerned that 
in this scenario, once the claim is denied, the beneficiary may not be 
protected from financial liability under existing Medicare rules 
because the waiver would not be available, and the beneficiary would 
not have had a qualifying inpatient hospital stay. Thus, the CJR 
beneficiary could be charged by the SNF for non-covered SNF services 
that were a result of an inappropriate attempt to use the waiver. In 
this scenario, Medicare would deny payment of the SNF claim, and the 
beneficiary could potentially be charged by the SNF for these non-
covered SNF services, potentially subjecting such beneficiaries to 
significant financial liability. In this circumstance, we assume the 
participant hospital's intent was to rely upon the SNF 3-day waiver, 
but the waiver requirements were not met. We believe that in this 
scenario, the rejection of the claim could easily have been avoided if 
the hospital had confirmed that the requirements for use of the SNF 3-
day waiver were satisfied or if the beneficiary had been provided the 
discharge planning notice and elected to go to a SNF that met the 
quality requirement.
    Other models have addressed similar issues in which the beneficiary 
may be subject to financial liability for non-covered SNF services 
related to the waiver. The Next Generation ACO Model generally places 
the risk on the SNF, where the SNF did not qualify under the waiver or 
otherwise knew or reasonably could be expected to have known that 
payment would not be made for the non-covered SNF services. In such 
cases, CMS makes no payment for the services, and the SNF may not 
charge the beneficiary for the services and must return any monies 
collected from the beneficiary. Additionally, under the Next Generation 
ACO Model, the ACO must indemnify and hold the beneficiary harmless for 
the services. As we stated in the proposed rule, we believe it was 
appropriate to propose to adopt a similar policy under the CJR model. 
In contrast to the Next Generation ACO Model, however, we believe it is 
most appropriate to hold the participant hospitals financially 
responsible for misusing the waiver in situations where waiver 
requirements are not met, because participant hospitals are required to 
be aware of the 3-day waiver requirements. Participant hospitals are 
the entities financially responsible for episode spending under the 
model and will make the decision as to whether it is appropriate to 
discharge a beneficiary without a 3-day stay. In addition, we clearly 
laid out the requirements for use of the SNF waiver in the CJR final 
rule. Participant hospitals may begin using the waiver for episodes 
that begin in performance year 2, and may only utilize the waiver to 
discharge a beneficiary to a SNF that meets the quality requirements. 
CMS will post on the public Web site a list of qualifying SNFs (those 
with a 3-star or higher rating for 7 of the last 12 months). 
Participant hospitals are required to consult the published list of 
SNFs prior to utilizing the SNF waiver. As described later in this 
section, we proposed that when the hospital provides the beneficiary 
with the discharge notice in accordance with the requirements of Sec.  
510.405(b)(4) (which elsewhere in this final rule we are renumbering as 
Sec.  510.405(b)(3), and therefore will refer to this provision by its 
new number throughout this section), the hospital would not have 
financial liability for non-covered SNF services that result from 
inapplicability of the waiver. In other words, when the participant 
hospital has discharged a beneficiary to a SNF that does not qualify 
under the conditions of the waiver, and has not provided the required 
notice so that the beneficiary is aware that he or she is accepting 
financial liability for non-covered SNF services as a result of not 
having a qualifying inpatient stay, as we stated in the proposed rule, 
we believe it is reasonable that the ultimate responsibility and 
financial liability for the non-covered SNF stay should rest with the 
participant hospital. For this reason, we proposed to require hospitals 
to keep a record of discharge planning notice distribution to CJR 
beneficiaries. We proposed to monitor participant hospitals' use of 
discharge planning notices to assess the potential for their

[[Page 558]]

misuse. We also considered holding the SNF responsible but decided that 
since hospitals, not SNFs, are the CJR model participants, they 
therefore should be held responsible for complying with the 3-day 
waiver conditions for the reasons stated previously in this section.
    To protect CJR beneficiaries from being charged for non-covered SNF 
charges in instances when the waiver was used inappropriately, we 
proposed to add certain beneficiary protection requirements in Sec.  
510.610. These requirements would apply for SNF services that would 
otherwise have been covered except for lack of a qualifying hospital 
stay. Specifically, we proposed that beginning with episodes that are 
initiated on or after January 1, 2017, when the SNF waiver is 
available, if a participant hospital discharged a beneficiary without a 
qualifying 3-day inpatient stay to a SNF that was not on the published 
list of SNFs that meet the CJR SNF waiver quality requirements as of 
the date of admission to the SNF, the hospital would be financially 
liable for the SNF stay if no discharge planning notice was provided to 
the beneficiary, alerting them of potential financial liability. If the 
participant hospital provides a discharge planning notice in compliance 
with the requirements of Sec.  510.405(b)(3), we proposed that the 
participant hospital would not be financially liable for the cost of 
the SNF stay and the normal Medicare FFS rules for coverage of SNF 
services will apply. We proposed that, in cases where the participant 
hospital provides a discharge planning notice in compliance with the 
requirements of Sec.  510.405(b)(3) and the beneficiary chooses to 
obtain care from a non-qualified SNF without a qualifying inpatient 
stay, the beneficiary assumes financial liability for services 
furnished (except those covered by Medicare Part B during a non-covered 
inpatient SNF stay).
    In the event a CJR beneficiary is discharged to a SNF without a 
qualifying 3-day inpatient stay, but the SNF is not on the qualified 
list as of the date of admission to the SNF, and the participant 
hospital has failed to provide a discharge planning notice, as 
specified in Sec.  510.405(b)(3), we proposed that CMS apply the 
following rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services; and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the 
uncovered SNF stay.
    In addition, we proposed to amend our regulations to clarify that 
the SNF 3-day waiver will be available in performance years 2 through 5 
for those episodes beginning on or after January 1, 2017. In the CJR 
final rule, we discussed how the SNF 3-day waiver will be available 
beginning in performance year 2. We proposed to clarify that the waiver 
does begin in performance year 2, but only for those episodes that 
begin on or after January 1, 2017 when the waiver goes into effect.
    We sought comment on these proposals. Specifically, we sought 
comment on whether it is reasonable to--(1) cover services furnished 
under the SNF waiver based on participant hospital knowledge of 
beneficiary eligibility for the CJR model as determined by Medicare 
coverage status at the time the services under the waiver were 
furnished; and (2) to hold the participant hospital financially 
responsible for denied SNF claims if a CJR beneficiary is discharged to 
a SNF without a qualifying 3-day inpatient stay, but the SNF is not on 
the qualified list as of the date of admission to the SNF, and the 
participant hospital has failed to provide a discharge planning notice 
as specified in Sec.  510.405(b)(3). We sought comment on whether SNFs 
instead of, or in addition to, the participant hospital should be held 
liable for such claims and under what circumstances. Finally, we sought 
comment on any other related issues that we should consider in 
connection with the proposal to protect beneficiaries from significant 
financial liability for non-covered SNF services related to the waiver 
of the SNF 3-day rule under the CJR model. We may address those issues 
through future notice and comment rulemaking.
    We proposed to amend our regulations at Sec.  510.610 to reflect 
the change. We also proposed to clarify the language in Sec.  510.610 
to reflect that the CJR SNF waiver will be available for use for 
episodes that begin on or after January 1, 2017.
    We received comments on similar waivers for the EPM, which we 
addressed in III.J of the EPM final rule. The following is a summary of 
the comments received on the CJR SNF 3-day waiver and our responses.
    Comment: Commenters requested clarification discharge planning as 
it relates to application and use of the SNF 3-day waiver.
    Response: CMS requires participant hospitals to provide written 
notice to beneficiaries informing them of potential financial liability 
associated with non-covered services presented as an option as part of 
discharge planning, as outlined at Sec.  510.405(b)(4) of the CJR final 
rule, and amended in this final rule as Sec.  510.405(b)(3). We refer 
readers to the CJR final rule (80 FR 73516-73521) and Sec.  
510.405(b)(3) for further discussion of this requirement.
    Comment: Some commenters proposed that CMS modify the Bundled 
Payments for Care Initiative (BPCI) SNF 3-day waiver to more closely 
align with the CJR model's SNF 3-day waiver.
    Response: We did not make any proposals in this rule with respect 
to BPCI.
    Comment: Some commenters inquired about the process if a hospital 
wishes to utilize the SNF 3-day waiver, but the beneficiary wishes to 
remain in the hospital.
    Response: As stated in 80 FR 73516, the CJR model does not seek to 
limit the beneficiary's ability to choose among Medicare providers or 
the range of services available. Decisions about the length of an 
inpatient stay are not addressed in this rule.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal without modification to cover 
services furnished under the SNF waiver in cases where the beneficiary 
met the criteria at Sec.  510.205 on the date of discharge from the 
anchor hospitalization, based on information available as of that date. 
We are also finalizing the proposal to hold the participant hospital 
financially responsible for denied SNF claims if a CJR beneficiary is 
discharged to a SNF without a qualifying 3-day inpatient stay, but the 
SNF is not on the qualified list as of the date of admission to the 
SNF, and the participant hospital has failed to provide a discharge 
planning notice as specified in Sec.  510.405(b)(3). We are not 
finalizing the proposal to specify that the SNF waiver will be 
available for use for episodes that begin on or after January 1, 2017, 
as the change is no longer necessary given the effective date of this 
final rule. The final policies for financial liability for non-covered 
SNF services provided due to incorrect application of the SNF 3-day 
rule waiver are set forth in Sec.  510.610.

O. Advanced Alternative Payment Model Considerations

1. Overview for CJR
    The MACRA created two paths for eligible clinicians to link quality 
to payments: The MIPS and Advanced APMs. These two paths create a 
flexible payment system called the Quality Payment Program as proposed 
by CMS in the Quality Payment Program

[[Page 559]]

proposed rule (81 FR 28161 through 28586).
    As proposed in the Quality Payment Program proposed rule, an APM 
must meet three criteria to be considered an Advanced APM (81 FR 
28298). First, the APM must provide for payment for covered 
professional services based on quality measures comparable to measures 
described under the performance category described in section 
1848(q)(2)(B)(i) of the Act, which is the MIPS quality performance 
category. We refer to the discussion following our proposals for the 
final criteria required for the APM to be an Advanced APM. Under the 
Quality Payment Program proposed rule, we proposed that the quality 
measures on which the Advanced APM bases payment for covered 
professional services (as that term is defined in section 1848(k)(3)(A) 
of the Act) must include at least one of the following types of 
measures, provided that they have an evidence-based focus and are 
reliable and valid (81 FR 28302):
     Any of the quality measures included on the proposed 
annual list of MIPS quality measures.
     Quality measures that are endorsed by a consensus-based 
entity.
     Quality measures developed under section 1848(s) of the 
Act.
     Quality measures submitted in response to the MIPS Call 
for Quality Measures under section 1848(q)(2)(D)(ii) of the Act.
     Any other quality measures that CMS determines to have an 
evidence-based focus and be reliable and valid.
    As we discussed in the Quality Payment Program proposed rule, 
because the statute identifies outcome measures as a priority measure 
type and we wanted to encourage the use of outcome measures for quality 
performance assessment in APMs, we further proposed in that rule, that 
in addition to the general quality measure requirements, an Advanced 
APM must include at least one outcome measure if an appropriate measure 
is available on the MIPS list of measures for that specific QP 
Performance Period, determined at the time when the APM is first 
established (81 FR 28302 through 28303).
    Second, the APM must either require that participating APM Entities 
bear risk for monetary losses of a more than nominal amount under the 
APM or be a Medical Home Model expanded under section 1115A(c) of the 
Act. Except for Medical Home Models, we proposed in the Quality Payment 
Program proposed rule that, for an Advanced APM to meet the nominal 
amount standard, the specific level of marginal risk must be at least 
30 percent of losses in excess of expected expenditures; a minimum loss 
rate, to the extent applicable, must be no greater than 4 percent of 
expected expenditures; and total potential risk must be at least 4 
percent of expected expenditures (81 FR 28306).
    Third, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals. Specifically, 
where the APM participants are hospitals, the APM must require each 
hospital to use CEHRT (81 FR 28298 through 28299).
    In the proposed rule (81 FR 50794), we proposed to adopt two 
different tracks for CJR--Track 1 in which CJR and its participant 
hospitals would meet the criteria for Advanced APMs as proposed in the 
Quality Payment Program proposed rule, and Track 2 in which CJR and its 
participant hospitals would not meet those proposed criteria. We refer 
to the discussion following our proposals for the final criteria 
required for the APM to be an Advanced APM. The CJR model incorporates 
a pay-for-performance methodology including quality measures that we 
believe would meet the proposed Advanced APM quality measure 
requirements in the Quality Payment Program proposed rule. Both of the 
required quality measures in the CJR model are NQF-endorsed, have an 
evidence-based focus, and are reliable and valid. We believe they would 
meet the proposed Advanced APM general quality measure requirements.
    The CJR pay-for-performance methodology includes one outcome 
measure that is NQF-endorsed, has an evidence-based focus, and is 
reliable and valid. The pay-for-performance methodology incorporates 
the Hospital-level RSCR following elective primary THA and/or TKA (NQF 
#1550) (Hip/Knee Complications) outcome measure. Thus, we believe the 
CJR model would meet the requirement proposed for Advanced APMs in the 
Quality Payment Program proposed rule for use of an outcome measure 
that also meets the general quality measure requirements.
    In terms of the proposed nominal risk criteria for Advanced APMs, 
beginning in performance year 2 for episodes ending between January 1, 
2017 and December 31, 2017, participant hospitals would begin to bear 
downside risk for excess actual CJR episode spending above the quality-
adjusted target price. The marginal risk for excess actual CJR episode 
spending above the quality-adjusted target price would be 100 percent 
over the range of spending up to the stop-loss limit, which would 
exceed 30 percent marginal risk, and there would be no minimum loss 
rate. As a result, we believe the CJR model would meet the marginal 
risk and minimum loss rate elements of the nominal risk criteria for 
Advanced APMs proposed in the Quality Payment Program proposed rule. 
Total potential risk for most CJR participant hospitals is 5 percent of 
expected expenditures in performance year 2, and increasing in 
subsequent performance years. Therefore, we believe the total potential 
risk applicable to most participant hospitals, with the lowest total 
potential risk being 5 percent for CJR episodes ending on or after 
January 1, 2017 in performance year 2, would meet the total potential 
risk element of the nominal risk amount standard for Advanced APMs 
proposed in the Quality Payment Program proposed rule because it is 
greater than the value of at least 4 percent of expected expenditures.
    We note that participant hospitals that are rural hospitals, sole 
community hospitals (SCHs), Medicare Dependent Hospitals (MDHs) and 
Rural Referral Centers (RRCs) will have a stop-loss limit of 3 percent 
in performance year 2. Because 3 percent is less than the proposed 
threshold of at least 4 percent of expected expenditures for total 
potential risk proposed for Advanced APMs in the Quality Payment 
Program proposed rule, those rural hospitals, SCHs, MDHs, and RRCs that 
are CJR participant hospitals subject to special protections would be 
in Track 2 of the CJR model and would not meet the proposed nominal 
risk standard for Advanced APMs for performance year 2. We recognize 
that the proposal might initially limit the ability of rural hospitals, 
SCHs, MDHs, and RRCs to be in an Advanced APM for performance year 2. 
We believe this potential limitation on rural hospitals, SCHs, MDHs, 
and RRCs is appropriate for the following reasons: (1) Greater risk 
protections for these hospitals under the CJR model beginning in 
performance year 2 and subsequent performance years compared to other 
participant hospitals are necessary, regardless of their implications 
regarding Advanced APMs based on the nominal risk standard proposed in 
the Quality Payment Program proposed rule, because these hospitals have 
unique challenges that do not exist for most other hospitals, such as 
being the only source of health care services for beneficiaries or 
certain beneficiaries living in rural areas or being located in

[[Page 560]]

areas with fewer providers, including fewer physicians and post-acute 
care facilities; and (2) under the CJR risk arrangements, these 
hospitals would not bear an amount of risk in performance year 2 that 
we determined to be more than nominal in the Quality Payment Program 
proposed rule. However, we sought comment on whether we should allow 
participant hospitals that are rural hospitals, SCHs, MDHs, or RRCs to 
elect a higher stop-loss limit for performance year 2 where downside 
risk applies in order to permit these hospitals to be in Track 1 of the 
CJR model for performance year 2. We noted that by performance year 3, 
the stop-loss limit for these hospitals with special protections under 
the CJR model would increase to 5 percent under our proposal, so the 
hospitals could be in Track 1 based on the nominal risk standard 
proposed in the Quality Payment Program proposed rule.
    As addressed in the Quality Payment Program proposed rule, it is 
necessary for an APM to require the use of CEHRT in order to meet the 
criteria to be considered to be an Advanced APM. Therefore, according 
to the requirements proposed in the Quality Payment Program proposed 
rule, so that the CJR model may meet the proposed criteria to be an 
Advanced APM, we proposed to require participant hospitals to use CEHRT 
(as defined in section 1848(o)(4) of the Act) to participate in Track 1 
of the CJR model. We proposed that Track 1 participant hospitals must 
use certified health IT functions, in accordance with the definition of 
CEHRT under our regulation at 42 CFR 414.1305, to document and 
communicate clinical care with patients and other health care 
professionals as proposed in the Quality Payment Program proposed rule 
(81 FR 28299). We believe the proposal would allow Track 1 of CJR to be 
able to meet the proposed criteria to be an Advanced APM.
    Without the collection of identifying information on eligible 
clinicians (physicians, non-physician practitioners, physical and 
occupational therapists, and qualified speech-language pathologists) 
who would be considered affiliated practitioners as proposed in the 
Quality Payment program proposed rule under the CJR model, CMS would 
not be able to consider participation in the model in making 
determinations as to whom could be considered a QP (81 FR 28320). As 
detailed in the Quality Payment Program proposed rule, these 
determinations are based on the whether the eligible clinician meets 
the QP threshold under either the Medicare Option starting in payment 
year 2019 or the All-Payer Combination Option, which is available 
starting in payment year 2021 (81 FR 28165). Thus, we made proposals in 
subsequent sections to specifically address these issues that might 
otherwise preclude the CJR model from being considered an Advanced APM, 
or prevent us from operationalizing it as an Advanced APM. Based on the 
proposals for Advanced APM criteria in the Quality Payment Program 
proposed rule, we sought to align the design of the CJR model with the 
proposed Advanced APM criteria and enable CMS to have the necessary 
information on eligible clinicians to make the requisite QP 
determinations.
    Based on the proposals for Advanced APM criteria in the Quality 
Payment Program proposed rule (81 FR 28161), we sought to align the 
design of the CJR model Advanced APM track with the proposed Advanced 
APM criteria and enable CMS to have the necessary information on 
Eligible Clinicians to make the requisite QP determinations. As 
detailed in the Quality Payment Program final rule with comment period, 
QP determinations are based on whether the Eligible Clinician meets the 
QP threshold under either the Medicare Option starting in payment year 
2019 or the All-Payer Combination Option, which is available starting 
in payment year 2021 (81 FR 77013). The three criteria for an Advanced 
APM were finalized in the Quality Payment Program final rule with 
comment period (81 FR 77008), and we continue to align the design of 
the CJR model Advanced APM track with the finalized Advanced APM 
criteria so that the CJR track that meets such criteria may be an 
Advanced APM. To be determined to be an Advanced APM, an APM must meet 
three Advanced APM criteria identified in Sec.  [thinsp]414.1415 and 
discussed specifically later in this section.
    First, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals (81 FR 77406). 
Specifically, where the APM participants are hospitals, the APM must 
require each hospital to use CEHRT. As addressed in the Quality Payment 
Program final rule with comment period, it is necessary for an APM to 
require the use of CEHRT in order to meet the criteria to be considered 
to be an Advanced APM. Therefore, according to the requirements now 
finalized in the Quality Payment Program final rule with comment 
period, so that a track of the CJR model may meet the finalized 
criteria to be an Advanced APM, we proposed that those CJR participant 
hospitals who choose to participate in Track 1 of the CJR model must 
use certified health IT functions, in accordance with the definition of 
CEHRT under our regulation at 42 CFR 414.1305, to document and 
communicate clinical care with patients and other health care 
professionals. We believe that this proposal set forth in the EPM 
proposed rule would allow CJR participant hospitals who use and attest 
to use of CEHRT to be in an APM that meets the first finalized Advanced 
APM criterion.
    Second, the APM must provide for payment to participants based on 
quality measures comparable to measures described under the performance 
category described in section 1848(q)(2)(B)(i) of the Act, which is the 
MIPS quality performance category. We interpret this criterion to 
require the APM to incorporate quality measure results as a factor when 
determining payment to participants under the terms of the APM as 
described in the Quality Payment Program final rule with comment period 
(81 FR 77414). In order to align the CJR model Advanced APM track with 
the Quality Payment Program final rule with comment period, the quality 
measures on which the Advanced APM bases payment to participants must 
include at least one of the following types of measures, provided that 
they have an evidence-based focus and are reliable and valid (81 FR 
77418):
    Any of the quality measures included on the proposed annual list of 
MIPS quality measures.
    Quality measures that are endorsed by a consensus-based entity.
    Quality measures developed under section 1848(s) of the Act.
    Quality measures submitted in response to the MIPS Call for Quality 
Measures under section 1848(q)(2)(D)(ii) of the Act.
    Any other quality measures that CMS determines to have an evidence-
based focus and be reliable and valid.
    As we discussed in the Quality Payment Program final rule with 
comment period, because the statute identifies outcome measures as a 
priority measure type and we want to encourage the use of outcome 
measures for quality performance assessment in APMs, we further 
finalized in that rule that, in addition to the general quality measure 
requirements, an Advanced APM must include at least one outcome measure 
if an appropriate measure is available on the MIPS list of measures

[[Page 561]]

for that specific QP Performance Period, determined at the time when 
the APM is first established (81 FR 77418). Therefore, according to the 
requirements finalized in the Quality Payment Program final rule with 
comment period and the quality measures adopted for the CJR model in 
the CJR Final Rule (80 FR 73375), the CJR model will meet the second 
finalized criterion of the Advanced APM criteria.
    Third, the Quality Payment Program final rule with comment period 
requires that for an APM to meet the Advanced APM criteria, the APM 
must either require that participating APM Entities bear risk for 
monetary losses of a more than nominal amount under the APM or be a 
Medical Home Model expanded under section 1115A(c) of the Act. For the 
purposes of the EPM, the generally applicable nominal amount standard 
for an Advanced APM in the Quality Payment Program final rule with 
comment period (81 FR 77425) means the total amount an APM Entity 
potentially owes CMS or foregoes under an APM must be at least equal to 
3 percent of the expected expenditures for which an APM Entity is 
responsible under the APM. The generally applicable financial risk 
standard (81 FR 77422) means when an APM Entity's actual expenditures 
for which the APM Entity is responsible under the APM exceed expected 
expenditures during a specified QP Performance Period, the APM Entity 
is required to owe payment(s) to CMS. We refer to the Quality Payment 
Program final rule with comment period for a discussion regarding why 
we did not finalize the specific level of marginal risk or minimum loss 
rate (81 FR 77426). However, consistent with the commitments we made to 
adhere to the proposed marginal risk and minimum loss rate requirements 
in the Quality Payment Program proposed rule, we note that the 
financial risk in this final rule when the EPMs involve downside risk 
exceeds the proposed marginal risk and minimum loss rate requirements 
proposed for the Quality Payment Program. As discussed in section 
III.C. of the CJR Final Rule (80 FR 73324 through 73358), the final 
total initial risk of expected expenditures for EPM participants of 5 
percent, except for rural hospitals, SCHs, MDHs, and RRCs subject to 
special protections at 3 percent, beginning in performance year 2 when 
downside risk first applies to all participants would meet the total 
potential risk element of the nominal risk amount standard for Advanced 
APMs finalized in the Quality Payment Program final rule with comment 
period (81 FR 77427) because it is greater than the value of at least 3 
percent of expected expenditures. Therefore, according to the 
requirements finalized in the Quality Payment Program final rule with 
comment period and the payment methodology for CJR participant 
hospitals finalized in the CJR Final Rule (80 FR 73324 through 73358), 
all CJR participant hospitals in performance year 2 will be in an APM 
that meets the third finalized criterion of the Advanced APM criteria.
    Finally, we finalized in the Quality Payment Program final rule 
with comment period (81 FR 77442) that for Advanced APMs, such as 
episode payment models, in which there are some Advanced APM Entities 
that include Eligible Clinicians on a Participation List and other 
Advanced APM Entities that identify Eligible Clinicians only on an 
Affiliated Practitioner List, we will identify Eligible Clinicians for 
QP determinations based on the composition of the Advanced APM Entity. 
In the scenario that applies to the CJR model, which includes only 
hospitals as Advanced APM Entities on the Participation List, for those 
Advanced APM Entities where there is an Affiliated Practitioner List 
that identifies Eligible Clinicians, that Affiliated Practitioner List 
will be used to identify the Eligible Clinicians for purposes of QP 
determinations, and those Eligible Clinicians will be assessed 
individually. Thus, to operationalize the CJR model as an Advanced APM, 
our proposal for the CJR model to identify Eligible Clinicians on a 
clinician financial arrangements list to construct the Affiliated 
Practitioner list would identify those Eligible Clinicians for purposes 
of QP determination, consistent with the policies finalized in the 
Quality Payment Program final rule with comment period.
2. CJR Participant Hospital Tracks
    To be considered an Advanced APM, the APM must require participants 
to use CEHRT (as defined in section 1848(o)(4) of the Act), as 
specified in section 1833(z)(3)(D)(i)(I) of the Act. We proposed that 
all participant hospitals must choose whether to meet the CEHRT use 
requirement. Participant hospitals that do not meet and attest to the 
CEHRT use requirement would be in Track 2 of the CJR model. Participant 
hospitals selecting to meet the CEHRT use requirement would be in Track 
1 of the CJR model and would be required to attest in a form and manner 
specified by CMS to their use of CEHRT that meets the definition in our 
regulation at section 414.1305 to document and communicate clinical 
care with patients and other health professionals, consistent with the 
proposal in the Quality Payment Program proposed rule for the CEHRT 
requirement for Advanced APMs (81 FR 28299). Participant hospitals 
choosing not to meet and attest to the CEHRT use requirement would not 
be required to submit an attestation.
    We believe that the selection by the participant hospital to meet 
and attest to the CEHRT use requirement would create no significant 
additional administrative burden on participant hospitals. Moreover, 
the choice of whether to meet and attest to the CEHRT use requirement 
would not otherwise change any participant hospital's requirements or 
opportunity under the CJR model. However, to the extent the eligible 
clinicians who enter into financial arrangements related to Track 1 CJR 
participant hospitals are considered to furnish services through an 
Advanced APM, those services could be considered for purposes of 
determining whether the eligible clinicians are QPs.
    The proposals for CEHRT use and attestation for participant 
hospitals are included in Sec.  510.120(a). We sought comment on our 
proposals for CJR tracks and participant hospital requirements.
    We received a number of comments on our proposals in this section 
that applied to both the EPMs and the CJR model, and no comments unique 
to the CJR model. We refer to sections III.A.2.a. and b. of this final 
rule for a summary of the comments and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification to use the 
term ``specified'' for consistency with CEHRT attestation in other CMS 
programs, to include in Sec.  510.120(a) the CEHRT use and attestation 
for CJR participant hospitals.
    For performance year 2 through 5, CJR participant hospitals choose 
either of the following:
     CEHRT use. Participant hospitals attest in a form and 
manner specified by CMS to their use of CEHRT as defined in Sec.  
414.1305 of this chapter to document and communicate clinical care with 
patients and other health professionals.
     No CEHRT use. Participant hospitals do not attest in a 
form and manner specified by CMS to their use of CEHRT as defined in 
Sec.  414.1305 of this chapter to document and communicate clinical 
care with patients and other health professionals.

[[Page 562]]

3. Clinician Financial Arrangements Lists Under the CJR Model
    In order for CMS to make determinations as to eligible clinicians 
who could be considered QPs based on services furnished under the CJR 
model (to the extent the model is determined to be an Advanced APM), we 
require accurate information about eligible clinicians who enter into 
financial arrangements under Track 1 of CJR under which the Affiliated 
Practitioners support the participant hospitals' cost or quality goals 
as discussed in section V.J. of this final rule. We note that eligible 
clinicians could be CJR collaborators engaged in sharing arrangements 
with a CJR participant hospital; PGP members who are collaboration 
agents engaged in distribution arrangements with a PGP that is a CJR 
collaborator; or PGP members who are downstream collaboration agents 
engaged in downstream distribution arrangements with a PGP that is also 
an ACO participant in an ACO that is a CJR collaborator. These terms as 
they apply to individuals and entities with financial arrangements 
under CJR are discussed in section V.J. of this final rule. A list of 
physicians and nonphysician practitioners in one of these three types 
of arrangements could be considered an Affiliated Practitioner List of 
eligible clinicians who are affiliated with and support the Advanced 
APM Entity in its participation in the Advanced APM as proposed in the 
Quality Payment Program proposed rule. Therefore, this list could be 
used to make determinations of who would be considered for a QP 
determination based on services furnished under the CJR model (81 FR 
28320).
    Thus, we proposed that each participant hospital that chooses to 
meet and attest to the CEHRT use requirement must submit to CMS a 
clinician financial arrangements list in a form and manner specified by 
CMS on a no more than quarterly basis. The list must include the 
following information for the period of the CJR performance year 
specified by CMS:
     For each CJR collaborator who is a physician, nonphysician 
practitioner, or provider of outpatient therapy services during the 
period of the CJR performance year specified by CMS--
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the CJR collaborator; and
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the CJR participant hospital and the CJR 
collaborator.
     For each collaboration agent who is a physician or 
nonphysician practitioner of a PGP that is a CJR collaborator during 
the period of the CJR performance year specified by CMS--
    ++ The TIN of the PGP that is the CJR collaborator, and the name 
and NPI of the physician or nonphysician practitioner; and
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
     For each downstream collaboration agent who is a physician 
or nonphysician practitioner member of a PGP that is also an ACO 
participant in an ACO that is a CJR collaborator during the period of 
the CJR performance year specified by CMS--
    ++ The TIN of the PGP that is the ACO participant, and the name and 
NPI of the physician or nonphysician practitioner; and
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent that is both 
PGP and an ACO participant and the physician or nonphysician 
practitioner who is a PGP member.
     If there are no individuals that meet the requirements to 
be reported as CJR collaborators, collaboration agents, or downstream 
collaboration agents, the participant hospital must attest in a form 
and manner required by CMS that there are no individuals to report on 
the clinician financial arrangements list.
    As discussed in the Quality Payment program proposed rule, those 
physicians or nonphysician practitioners who are included on the 
Affiliated Practitioner List as of December 31 of a performance period 
would be assessed to determine whether they qualify for APM Incentive 
Payments (81 FR 28320). The Quality Payment Program final rule with 
comment period (81 FR 77444) modified this process to identify eligible 
clinicians on the Affiliated Practitioner List for QP determinations at 
any one of three snapshots. The first snapshot will be on March 31 of 
the QP Performance Period, the second snapshot will be on June 30 of 
the QP Performance Period, and the third snapshot will be on August 31, 
which will be the last day of the QP Performance Period.
    While the submission of this required information may create some 
additional administrative requirements for certain participant 
hospitals, we expect that Track 1 participant hospitals could modify 
their contractual relationships with their CJR collaborators and, 
correspondingly, require those collaborators to include similar 
requirements in their contracts with collaboration agents and in the 
contracts of collaboration agents with downstream collaboration agents.
    The proposal for the submission of a clinician financial 
arrangements list by participant hospitals that meet and attest to the 
CEHRT use requirements for the CJR model is included in Sec.  
510.120(b). We sought comments on the proposal for submission of this 
information. We noted that we were especially interested in comments 
about approaches to information submission, including the periodicity 
and method of submission to CMS that would minimize the reporting 
burden on participant hospitals while providing CMS with sufficient 
information about eligible clinicians in order to facilitate QP 
determinations to the extent the CJR model is considered to be an 
Advanced APM.
    We received a number of comments on our proposals in this section 
that applied to both the EPMs and the CJR model and no comments unique 
to the CJR model. We refer to section III.A.2.c. of this final rule for 
a summary of the comments and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal in Sec.  510.120(b), with 
modification to include on the clinician financial arrangements list 
all individuals with financial arrangements under the CJR model in 2017 
through June 30, 2017 under the existing definitions and provisions of 
Part 510 and from July 1, 2017 and thereafter under the provisions 
effective July 1, 2017 as finalized in section V.J. of this final rule, 
and for CJR participant hospitals that meet and attest to the CEHRT use 
requirement to also submit on a no more than quarterly basis a 
clinician financial arrangements list. While we are finalizing the 
regulations generally as proposed, effective with the effective date of 
this final rule, we are delaying until July 1, 2017 the effective date 
of certain provisions that refer to individuals with financial 
arrangements for which the financial arrangements provisions take 
effect July 1, 2017. The implementation of the reporting requirements 
for the clinician financial arrangements list in two stages in 2017 
will ensure that all physicians, nonphysician practitioners, and 
therapists with financial arrangements in association with CJR hospital 
participants that attest to CEHRT use can be reported on the clinician 
financial arrangements lists during the snapshots in 2017 for the 
Quality Payment Program, regardless of the

[[Page 563]]

changes to the definitions and types of collaborators under the CJR 
model effective July 1, 2017.
    Effective with the effective date of this final rule, each 
participant hospital that chooses CEHRT use must submit to CMS a 
clinician financial arrangements list in a form and manner specified by 
CMS on a no more than quarterly basis. The list must include the 
following information on individuals and entities for the period of the 
CJR performance year specified by CMS:
     CJR collaborators. For each CJR collaborator who is a 
physician, nonphysician practitioner, or therapist in private practice 
during the period of the CJR performance year specified by CMS:
    ++ The name, TIN, and NPI of the CJR collaborator.
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the CJR participant hospital and the CJR 
collaborator.
     Practice collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a CJR practice 
collaboration agent during the period of the CJR performance year 
specified by CMS:
    ++ The name and TIN of the CJR collaborator and the name, TIN, and 
NPI of the practice collaboration agent.
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator and the practice 
collaboration agent.
     Attestation to no individuals. If there are no individuals 
that meet the requirements to be reported, the participant hospital 
must attest in a form and manner required by CMS that there are no 
individuals to report on the clinician financial arrangements list.
    Effective July 1, 2017, the provisions for practice collaboration 
agents on the clinician financial arrangements list will be revised to 
use the term collaboration agent instead, stating:
     Collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a collaboration agent during the 
period of the CJR performance year specified by CMS:
    ++ The name and TIN of the CJR collaborator and the name, TIN, and 
NPI of the collaboration agent.
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator and the 
collaboration agent.
    Effective July 1, 2017, new provisions for downstream collaboration 
agents on the clinician financial arrangements list will be added, 
stating:
     Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the period of the CJR performance year 
specified by CMS--
    ++ The name and TIN of the CJR collaborator and the name and TIN of 
the collaboration agent and the name, TIN, and NPI of the downstream 
collaboration agent.
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent and the 
downstream collaboration agent.
4. Documentation Requirements
    For each participant hospital that chooses to meet and attest to 
CEHRT use, we proposed that the participant hospital must maintain 
documentation of its attestation to CEHRT use and clinician financial 
arrangements lists submitted to CMS. These documents would be necessary 
to assess the completeness and accuracy of materials submitted by a 
participant hospital in Track 1 of CJR and to facilitate monitoring and 
audits. For the same reason, we further proposed that the participant 
hospital must retain and provide access to the required documentation 
in accordance with Sec.  510.110.
    The proposal for documentation of attestation to CEHRT use and 
clinician financial arrangements lists submitted to CMS is included in 
Sec.  510.120(c). We sought comment on this proposal for required 
documentation.
    Final Decision: We did not receive comments pertaining to Sec.  
510.120(c). Therefore, we are finalizing the proposal for CJR 
participant hospital documentation of attestation to CEHRT use and 
clinician financial arrangements lists submitted to CMS, with 
modification to implement the documentation provisions in two stages.
    The following documentation requirements apply to CJR participant 
hospitals choosing CEHRT use. We note that while the requirement for 
CJR participant hospitals to maintain documentation of attestation to 
CEHRT use and clinician financial arrangements lists will be effective 
on the effective date of this final rule, the effective date of the 
provision for retention and the provision of access to the required 
documentation will delayed until July 1, 2017 to correspond to the 
similar delay in the effective date of Sec.  510.110 to July 1, 2017, 
for reasons described elsewhere in this final rule.
     Each participant hospital that chooses CEHRT use must 
maintain documentation of their attestation to CEHRT use and clinician 
financial arrangements lists.
     The participant hospital must retain and provide access to 
the required documentation in accordance with Sec.  510.110.

VI. Cardiac Rehabilitation Incentive Payment Model

A. Background

    For patients with coronary and other atherosclerotic vascular 
disease, the American Heart Association and the American College of 
Cardiology Foundation's 2011 practice guideline for secondary 
prevention and risk reduction therapy specifically highlights health 
care treatment strategies following AMI or CABG.\137\ These strategies 
include smoking cessation, close monitoring of blood pressure and 
cholesterol, and the use of certain medications.
---------------------------------------------------------------------------

    \137\ Smith SC et al. AHA/ACCF secondary prevention and risk 
reduction therapy for patients with coronary and other 
atherosclerotic vascular disease: 2011 update: A guideline from the 
American Heart Association and American College of Cardiology 
Foundation endorsed by the World Heart Federation and the Preventive 
Cardiovascular Nurses Association. J Am Coll Cardiol. 
2011;58(23):2432-2446.
---------------------------------------------------------------------------

    The medical literature further indicates that cardiac 
rehabilitation (CR) and intensive cardiac rehabilitation (ICR) 
services, which incorporate the strategies discussed previously, are 
capable of achieving significant improvements in long-term patient 
outcomes. A January 2016 Cochrane Database of Systematic Reviews 
article reviewed 63 trials randomizing almost 15,000 patients and found 
that in long-term follow up (median 12 months), exercise-based CR 
services reduced cardiovascular mortality (but not total mortality), 
improved health-related quality of life, and reduced the risk of 
hospital admission.\138\
---------------------------------------------------------------------------

    \138\ Anderson L et al. Exercise-based cardiac rehabilitation 
for coronary heart disease. Cochrane Database Syst Rev. 2016 Jan 
5;1:CD001800.
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    Despite the evidence from multiple studies that CR services improve 
health outcomes, the literature also indicates that these services are 
underutilized, estimating that only about 35 percent of AMI patients 
receive this indicated treatment.\139\ Recent analysis confirms a 
similar pattern of underutilization for Medicare beneficiaries who are 
eligible for and could benefit from CR. This pattern is virtually 
unchanged over the past 2 decades, despite clinical practice guidelines 
for CR that were published in 1995 and subsequently endorsed by a 
number of professional associations and

[[Page 564]]

CMS.140 141 142 Among beneficiaries hospitalized with a 
diagnosis of AMI in 2013, only about 15 percent had at least one claim 
for CR services, and of those who received CR services, slightly more 
than half received 25 or more CR sessions. Among beneficiaries 
hospitalized with an ICD-9-CM procedure code for percutaneous 
transluminal coronary angioplasty or coronary stenting in 2013, the 
findings on CR use were similar to those for AMI beneficiaries, with 
only about 23 percent having at least one claim for CR services, and of 
those who received CR services, slightly more than half received 25 or 
more CR sessions. Finally, among beneficiaries hospitalized in 2013 
with ICD-9-CM procedure codes for coronary artery bypass surgery, about 
45 percent had at least one claim for CR services, and slightly over 60 
percent of those beneficiaries received 25 CR sessions or more, 
indicating slightly higher rates for utilization for these 
beneficiaries.\143\ Barriers to CR utilization include low beneficiary 
referral rates (particularly of women, older adults, and ethnic 
minorities); lack of strong physician endorsement of CR to their 
patients; lack of awareness of CR; the financial burden on 
beneficiaries due to coinsurance and lost work; lack of accessibility 
of CR program sites; the Medicare requirement for physician supervision 
of CR; and inadequate insurance payment.144 145 146 147
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    \139\ Receipt of outpatient cardiac rehabilitation among heart 
attack survivors--United States, 2005. MMWR Morbidity and mortality 
weekly report. 2008 Feb 1;57(4):89-94.
    \140\ Suaya, J.A., Shepard, D.S., Normand, S.L., Ades, P.A., 
Prottas, J., Stason, W.B.. Use of cardiac rehabilitation by Medicare 
beneficiaries after myocardial infarction or coronary bypass 
surgery. Circulation. 2007;116:1653-1662.
    \141\ Wenger, N., Froelicher, E., Smith, L., Wenger, N., 
Froelicher, E., Smith, L., Ades, P., Berra, K., Blumenthal, J., 
Certo, C., Dattilo, A., Davis, D., DeBusk, R., Drozda, J., Fletcher, 
B., Franklin, B., Gaston, H., Greenland, P., McBride, P., McGregor, 
C., Oldridge, N., Piscatella, J., Rogers, F. Cardiac Rehabilitation 
as Secondary Prevention: Clinical Practice Guideline, No. 17. 
Rockville, Md: U.S. Dept of Health and Human Services, Public Health 
Service, Agency for Health Care Policy and Research and National 
Heart, Lung, and Blood Institute; 1995. Publication AHCPR 96-0673.
    \142\ Centers for Medicare and Medicaid Services (CMS). Cardiac 
rehabilitation programs. In: Medicare National Coverage 
Determinations Manual, chapter 1, part 1, section 20.10.
    \143\ Medicare Part A and B claims from 2013 through 12 month 
follow-up, Chronic Conditions Warehouse.
    \144\ Balady, G.J., Ades, P.A., Bittner, V.A., et al; Referral, 
enrollment, and delivery of cardiac rehabilitation/secondary 
prevention programs at clinical centers and beyond: A presidential 
advisory from the American Heart Association. Circulation. 2011;124: 
2951-2960.
    \145\ Suaya, J.A., Shepard, D.S., Normand, S.L., Ades, P.A., 
Prottas, J., Stason, W.B. Use of cardiac rehabilitation by Medicare 
beneficiaries after myocardial infarction or coronary bypass 
surgery. Circulation. 2007;116:1653-1662.
    \146\ Wenger, N.K. Current State of Cardiac Rehabilitation. J Am 
Coll Cardiol 2008;51:1619-31.
    \147\ Arena, R., et al. Increasing Referral and Participation 
Rates to Outpatient Cardiac Rehabilitation: The Valuable Role of 
Healthcare Professionals in the Inpatient and Home Health Settings. 
AHA Scientific Advisory. 2012;125:1321-1329.
---------------------------------------------------------------------------

    Moreover, beneficiaries with CAD often receive care in many 
different settings from multiple providers and suppliers over the long-
term and subsequently commonly experience care that is fragmented and 
uncoordinated. For example, inpatient hospitals, physicians, and CR 
programs currently are paid separately for the services they provide, 
with limited financial incentives for providing care management and 
preventive services, limiting overuse of tests and procedures, and 
coordinating across care settings. Lack of coordination, of both care 
and financial incentives, across the continuum of CAD care, results in 
higher than necessary rates of adverse drug events, hospital 
readmissions, diagnostic errors, and other adverse outcomes, as well as 
lower than appropriate utilization of evidence-based treatments.
    Medicare Part B generally covers CR/ICR services for all Medicare 
beneficiaries who are referred by their physician after having an AMI 
or CABG.\148\ As specified in section 1861(eee) of the Act, CR/ICR 
programs must include all of the following: (1) Physician-prescribed 
exercise; (2) cardiac risk factor modification, including education, 
counseling, and behavioral intervention, tailored to the patient's 
individual needs; (3) psychosocial assessment; (4) outcomes assessment; 
and (5) an individualized treatment plan established, reviewed, and 
signed by a physician every 30 days that details how components are 
utilized for each patient. The CR/ICR services must be provided in a 
physician's office or a hospital outpatient setting, and a physician 
must be immediately available and accessible to furnish assistance and 
direction at all times when cardiac rehabilitation services are being 
furnished under the program.\149\
---------------------------------------------------------------------------

    \148\ https://www.medicare.gov/coverage/cardiac-rehab-programs.html.
    \149\ Section 1861(eee)(1) of the Act.
---------------------------------------------------------------------------

    The number of CR program sessions are limited to a maximum of 2 
one-hour sessions per day for up to 36 sessions over up to 36 weeks 
with the option for an additional 36 sessions over an extended period 
of time if approved by the Medicare Administrative Contractor under 
section 1862(a)(1)(A) of the Act.\150\ ICR program sessions are limited 
to 72 one-hour sessions, up to 6 sessions per day, over a period of up 
to 18 weeks.\151\ To be approved as an ICR program, a program must 
demonstrate through peer-reviewed published research that it has 
accomplished at least one of the following: (1) Positively affecting 
the progression of coronary heart disease; (2) reducing the need for 
coronary bypass surgery; or (3) reducing the need for PCI.\152\
---------------------------------------------------------------------------

    \150\ 42 CFR 410.49(b)(1)(vii).
    \151\ Section 1861(eee)(1) of the Act.
    \152\ A list of ICR programs, approved through the national 
coverage determination process, is posted to the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-General-Information/MedicareApprovedFacilitie/ICR.html and listed in the Federal 
Register at 42 CFR 410.49(c)(3).
---------------------------------------------------------------------------

B. Overview of the CR Incentive Payment Model

1. Rationale for the CR Incentive Payment Model
    Considering the evidence demonstrating that CR/ICR services improve 
long-term patient outcomes, the room for improvement in CR/ICR service 
utilization for beneficiaries eligible for this benefit, and the need 
for ongoing, chronic treatment for underlying CAD among beneficiaries 
that have had an AMI or a CABG, we believe that there is a need for 
improved long-term care management and care coordination for 
beneficiaries that have had an AMI or a CABG and that incentivizing the 
use of CR/ICR services is an important component of meeting this need. 
We want to reduce barriers to high-value care by testing a financial 
incentive for hospitals that encourages the management of beneficiaries 
that have had an AMI or a CABG in ways that may contribute to long-term 
improvements in quality and reductions in Medicare spending.
    We believed that there were important advantages to proposing such 
an incentive in conjunction with the proposed EPMs that are also 
discussed in this final rule. First, we wish to understand whether and 
how the effects of a financial incentive for the use of CR/ICR services 
differ depending upon whether a beneficiary's care is covered under an 
EPM or the Medicare FFS program. The proposed AMI and CABG models could 
be effective to provide the foundation for beneficiaries to receive 
improved coordination, care management, and secondary risk reduction 
during the model episodes through greater use of medically necessary 
CR/ICR services, even if accountability for beneficiary care ultimately 
transitions to other entities, such as ACOs or PCMHs, after the AMI or 
CABG model episode ends. Therefore, the AMI and CABG models

[[Page 565]]

could make the proposed CR incentive payment more effective (if it is 
amplified by the broader care coordination infrastructure encouraged by 
the EPM in comparison with its effect in the Medicare FFS payment 
methodology) or less effective (if the care coordination infrastructure 
encouraged by the EPM is itself sufficient to ensure appropriate use of 
CR/ICR services such that the CR incentive payment itself has less 
effect than in the Medicare FFS payment methodology). Second, we wish 
to be able to examine each intervention's separate effects on the 
quality and efficiency of the care beneficiaries receive. We believe 
that coordinating the design, implementation, and evaluation of the 
EPMs and the CR incentive payment model is the best way to ensure that 
we accomplish both of these goals.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters encouraged the implementation of this 
incentive payment model and reminded CMS that they believe timely 
referral of beneficiaries that have had an AMI or a CABG to CR programs 
promotes better adherence to CR service protocols, which will yield 
improved coordination, care management, and secondary risk reduction 
during the episode of care for the beneficiary. Other commenters stated 
their support for the proposed testing of an incentive payment was 
based on the compelling evidence in the proposed rule that the 
completion of a CR/ICR program can significantly reduce the risk of 
subsequent heart attacks and cardiac-related mortality. A commenter 
suggested that if these incentives for hospitals to increase the use of 
cardiac rehabilitation are implemented, CMS must educate physicians and 
other health care providers about the value of cardiac rehabilitation 
in improving patient outcomes, reducing hospital readmission rates, and 
lowering health care costs to increase referrals and ensure enrollment.
    Response: We appreciate the recognition from commenters that 
evidence from multiple studies show that CR services improve health 
outcomes, but also that these services are underutilized. Considering 
the evidence demonstrating that CR/ICR services improve long-term 
patient outcomes, the room for improvement in CR/ICR service 
utilization for beneficiaries eligible for this benefit, and the need 
for ongoing treatment among beneficiaries that have had an AMI or a 
CABG, we believe that incentivizing the use of CR/ICR services is an 
important component of meeting this need. We continue to believe the 
proposed approach will permit CMS to appropriately evaluate this model 
and support testing the proposed hypotheses--to understand whether and 
how the effects of a financial incentive for the use of CR/ICR services 
differ depending upon whether a beneficiary's care is covered under an 
EPM or the Medicare FFS program and to examine each intervention's 
separate effects on the quality and efficiency of the care 
beneficiaries receive--with the strongest available evidence. We 
recognize that education programs about the value of CR/ICR services, 
including The Million Hearts national initiative to focus clinical 
attention on the prevention of heart attack and stroke, could 
complement these incentive payments.
2. General Design of the CR Incentive Payment Model
    We proposed the CR incentive payment model to test the effects on 
quality of care and Medicare expenditures of providing explicit 
financial incentives to hospitals (hereinafter CR participants) for 
beneficiaries hospitalized for treatment of AMI or CABG to encourage 
care coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
Under the EPMs, we proposed in general that the hospital where the 
anchor hospitalization for AMI or CABG treatment occurs that begins the 
AMI or CABG model episode as discussed in section III.C.4.a. of this 
final rule would be financially accountable for the AMI or CABG model 
episode. Thus, we expected that EPM participants would be highly 
engaged in care management of beneficiaries for the 90-day post-
discharge duration included in the episode and could be able to 
capitalize on that engagement to encourage greater use of medically 
appropriate CR/ICR services if they were also selected for 
participation in the CR incentive payment model. Therefore, under the 
CR incentive payment model, we proposed to provide a CR incentive 
payment specifically to selected hospitals with financial 
responsibility for AMI or CABG model episodes (hereinafter EPM-CR 
participants) because they are already engaged in managing the AMI or 
CABG model beneficiary's overall care for a period of time following 
hospital discharge.
    Similarly, we believe there are opportunities to test the same 
financial incentives for hospitals where the beneficiary's overall care 
is paid under the Medicare FFS program. Thus, we also proposed to 
provide a CR incentive payment specifically to selected hospitals that 
are not AMI or CABG model participants (hereinafter FFS-CR 
participants). The design of the CR incentive payment model would 
enable us to test and improve our understanding of the effects of the 
CR incentive payment within the context of an EPM and the Medicare FFS 
program, as well as identify potential interactions between the 
proposed CR incentive payment and the underlying EPM and FFS payment 
methodologies. We understand that there may be providers and suppliers 
other than hospitals caring for beneficiaries with AMI or CABG whose 
care is paid under the Medicare FFS program and that could assume 
responsibility for encouraging greater utilization of CR/ICR services 
under the CR incentive payment model. However, for comparability to the 
roles and responsibilities of the hospitals that are the EPM 
participants selected for CR incentive payment model participation, we 
proposed to identify hospitals as the participants in the CR incentive 
payment model for beneficiaries whose care is paid under the Medicare 
FFS program. Hospitals provide over 95 percent of CR/ICR services to 
Medicare beneficiaries and the beneficiaries in the CR incentive 
payment model are identified based on a hospitalization for AMI or 
CABG.\153\ Thus, we believe that hospitals are an appropriate entity to 
take on care coordination responsibility for increasing the utilization 
of medically necessary CR/ICR services for those beneficiaries 
following AMI or CABG who are in the CR incentive payment model but 
that are not in an EPM.
---------------------------------------------------------------------------

    \153\ Analysis of cardiac rehabilitation utilization in care 
periods for AMI and CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    To test strategies to encourage CR participants to prioritize 
referring beneficiaries following an AMI or CABG for important CR/ICR 
services, monitoring for beneficiary adherence to the treatment plan, 
and coordinating care, we proposed to establish a per-service CR 
incentive amount for beneficiary CR use at two levels that would 
initially incentivize the use of any CR/ICR services and that would 
increase once a beneficiary meets or exceeds the proposed CR/ICR 
service utilization benchmark. We believe that encouraging timely 
referral of beneficiaries that have had an AMI or a CABG to CR/ICR 
programs would promote better adherence to CR/ICR

[[Page 566]]

service protocols, an expectation that is supported by data showing 
that patients who are referred early to CR were more likely to 
enroll.\154\
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    \154\ Grace, S.L. et al. Effectiveness of inpatient and 
outpatient strategies in increasing referral and utilization of 
cardiac rehabilitation: A prospective, multi-site study. Implement 
Sci. 2012: 7:120.
---------------------------------------------------------------------------

    Historical claims data show that more than half of beneficiaries 
who receive one CR session go on to complete at least 25 sessions.\155\ 
Thus, providing a CR incentive payment to reward increased referrals to 
CR/ICR programs, as well as monitoring for beneficiary adherence with 
the referral and participation in the sessions, may encourage better 
CAD-specific care management and care coordination for beneficiaries 
that have had an AMI or a CABG and, ultimately, improve quality and 
reduce spending long-term for these beneficiaries with CAD. CR 
participants that would be eligible for these CR incentive payments 
could further reduce potential beneficiary barriers to CR/ICR services 
by utilizing other flexibilities we proposed for the AMI and CABG 
models and the CR incentive payment model, such as beneficiary 
engagement incentives as discussed in sections III.I.9. and VI.F.6. of 
this final rule for EPM-CR participants and FFS-CR participants, 
respectively. Furthermore, we refer to section III.J.8. of this final 
rule for a discussion of the proposal to provide greater CR/ICR program 
flexibility that may increase the availability of CR/ICR services for 
AMI and CABG model beneficiaries by providing a waiver of the 
definition of a physician to include a physician or nonphysician 
practitioner (defined for the purposes of this waiver as a physician 
assistant, nurse practitioner, or clinical nurse specialist) in 
performing specific physician functions. We also refer to section 
VI.F.7. of this final rule for discussion of the proposal for a similar 
waiver of the physician definition to provide greater CR/ICR program 
flexibility to increase the availability of these services for 
beneficiaries in a FFS-CR participant, as defined later in this 
section.
---------------------------------------------------------------------------

    \155\ Analysis of CR/ICR services utilization in 2013 Medicare 
FFS Parts A and B claims.
---------------------------------------------------------------------------

    While we recognize there are other services focused on secondary 
prevention for beneficiaries with CAD such as diabetes self-management 
training, as well as treatments including drugs for blood pressure and 
cholesterol control, we believe that CR/ICR services are unique as an 
underutilized Medicare-covered benefit with a strong evidence-base of 
improved health outcomes for beneficiaries who have had an AMI or a 
CABG. Therefore, we believe that CR/ICR services are uniquely 
appropriate for CR incentive payments to selected AMI and CABG model 
participants as well as selected hospitals that would not be 
participating in these models in order to reward their efforts where we 
observe increased CR/ICR service utilization for CR incentive payment 
model beneficiaries. By proposing to provide CR incentive payments to 
encourage CR/ICR service utilization, we maximized our opportunity to 
positively affect the quality of care and reduce the cost-of-care for 
beneficiaries that have had an AMI or a CABG both within the short- and 
long-term. Like under other Innovation Center models, beneficiaries in 
the CR incentive payment model would retain freedom of choice to choose 
providers and services, although the proposed model provides financial 
incentives to CR participants to specifically encourage and support 
beneficiaries in adhering to a prescribed CR treatment plan following 
AMI or CABG.
    By making CR incentive payments available to selected EPM-CR and 
FFS-CR participants and comparing them to EPM participants and 
hospitals paid under the Medicare FFS program for AMI and CABG care who 
are not CR participants, we would be able to observe the effects of the 
proposed CR incentive payments on utilization of CR/ICR services and 
short-term (within the episode or care period) and longer-term 
outcomes, including mortality, hospitalizations, complications, and 
other clinically relevant events, as well as on Medicare expenditures. 
In testing the effects of a CR incentive payment, we wanted to account 
for a range of factors and interactions that could potentially affect 
the outcomes we observed. We believe our proposed methodology would 
enable us to test and improve our understanding of the effects of the 
CR incentive payment within the context of an EPM and the Medicare FFS 
program, as well as examine potential interactions between the proposed 
CR incentive payment and the underlying EPM and FFS payment 
methodologies.
    The following is a summary of the comments received and our 
responses.
    Comment: MedPAC commented that, while there are many barriers to 
enrollment for CR/ICR services, it is not clear which barriers create 
the biggest hurdles to effective care, and this lack of clarity makes 
the determination of the best corrective action difficult. MedPAC noted 
in comment that, for example, if one of the most significant barriers 
is low referral rates, CMS could encourage greater referral to CR/ICR 
by creating claims-based physician or hospital quality measures for all 
providers who care for beneficiaries with AMI and CABG. These measures 
could gauge the share of beneficiaries who receive CR/ICR services and 
the share who receive some minimum number of CR/ICR services. However, 
MedPAC also noted that tackling these barriers may require a 
multifaceted approach. Finally, MedPAC recommended that CMS not move 
forward with the proposed CR/ICR incentive payment model if CMS elects 
to implement the AMI and CABG EPMs, as they believe the proposed 
approach may be unnecessarily costly for the Medicare program, and 
seems overly complex.
    Response: While we acknowledge that many barriers to CR/ICR 
services exist, multiple provider types furnish CR/ICR services, and 
services are provided for many indications, it would be unreasonable to 
test multiple proposals to address these concerns simultaneously, as 
such tests would make the assignment of appropriate controls difficult 
and assessment of impacts and outcomes from such proposals challenging 
to attribute to just one proposal. CMS proposed that EPM-CR 
participants be defined as hospitals that are AMI or CABG model 
participants located in the MSAs selected for the EPM-CR participation, 
and similarly proposed that FFS-CR participants are hospitals located 
in the MSAs selected for FFS-CR participation. We continue to believe 
the proposed approach will permit CMS to appropriately evaluate this 
model and support testing the proposed hypotheses--to understand 
whether and how the effects of a financial incentive for the use of CR/
ICR services differ depending upon whether a beneficiary's care is 
covered under an EPM or the Medicare FFS program and to examine each 
intervention's separate effects on the quality and efficiency of the 
care beneficiaries receive--with the strongest available evidence. We 
proposed the CR incentive payment model to test the effects on quality 
of care and Medicare expenditures of providing explicit financial 
incentives in addition to, rather than in lieu of, current Medicare 
expenditures to CR participants for beneficiaries hospitalized for 
treatment of AMI or CABG to encourage care coordination and greater 
utilization of medically necessary CR/ICR services for 90 days post-
hospital discharge where the beneficiary's overall care is paid under 
either an EPM or the Medicare FFS program. We continue to expect that 
EPM participants would be highly engaged in care management of

[[Page 567]]

beneficiaries for the 90-day post-discharge duration included in the 
episode and could be able to capitalize on that engagement to encourage 
greater use of medically appropriate CR/ICR services if they were also 
selected for participation in the CR incentive payment model. 
Therefore, we are finalizing the proposal to implement the CR/ICR 
incentive payment model simultaneously with the EPMs, rather than test 
multiple incentives for the provision of CR/ICR services.
    Comment: A commenter referencing the CR incentive payment model 
expressed concern that this voluntary program may become be required in 
the future and encouraged CMS to utilize this model to identify the 
patient population for whom this service improves outcomes.
    Response: We appreciate the commenter's concern however the design 
of this model will not identify additional populations of beneficiaries 
who might show improved health outcomes beyond those undergoing AMI or 
CABG. Furthermore, we believe there is strong evidence already 
identifying those patient populations for whom CR/ICR services improve 
health outcomes.\156\
---------------------------------------------------------------------------

    \156\ Anderson, L. et al. Exercise-based cardiac rehabilitation 
for coronary heart disease. Cochrane Database Syst Rev. 2016 Jan 
5;1:CD001800.
---------------------------------------------------------------------------

    Comment: Several commenters stated support for the concept of 
cardiac rehabilitation incentive payments as proposed, whether or not 
these payments are tied to episode payments. A few commenters noted 
that CMS does not expressly define the proposed CR/ICR incentive 
payment model as separate and distinct from the EPMs. Given the 
similarities in patient populations and the proposed overlap of certain 
MSAs, these commenters expressed concern that there could be some 
confusion as to whether or not these models are in fact separate and 
distinct, and requested that CMS clarify in expressed terms what the 
case may be.
    Response: In the proposed rule, we describe the proposed CR/ICR 
incentive payments as separate and distinct from reconciliation 
payments and Medicare repayments for EPM-CR participants determined 
under Sec.  512.305(d). The proposed CR/ICR incentive payment under the 
CR/ICR incentive payment model is a more specific payment designed to 
financially incentivize increased utilization of CR/ICR services which 
may improve quality and reduce costs for AMI and CABG model 
beneficiaries.

C. CR Incentive Payment Model Participants

    The selection of MSAs for participation in the CABG and AMI EPMs is 
described in section III.B.5. of this final rule. The selection process 
would identify the 98 EPM MSAs from the 294 MSAs eligible for selection 
for the AMI and CABG models under the proposed rule. We proposed that 
45 MSAs be selected from within the pool of the 98 EPM MSAs for the CR 
incentive payment model (hereinafter EPM-CR MSAs). An additional 45 
MSAs would be selected for the CR incentive payment model from the pool 
of MSAs who were eligible but not selected for EPM (hereinafter FFS-CR 
MSAs). The approach for both selections is discussed in the following 
paragraphs.
    We are interested in identifying control group MSAs that are 
similar to the treatment MSAs in ways that might impact the nature of 
their response to the CR incentive payment model. Having well-matched 
MSAs in the four types of MSAs (FFS-CR, FFS-non CR, EPM-CR and EPM-non 
CR) is important to our ability to assess the specific impact of the CR 
incentive payment while holding other considerations constant. We were 
concerned that a simple random selection of FFS-CR and EPM-CR areas 
would have a large probability of selecting MSAs that are 
insufficiently similar to the EPM-non CR areas due to the small number 
of MSAs from which to choose. As such, we proposed the selection of the 
EPM-CR MSAs to balance the incidence of key characteristics between the 
EPM-CR and EPM-non CR MSAs and the selection of FFS-CR MSAs to be based 
on similarity to the randomly selected EPM MSAs.
    The 294 MSAs originally eligible for selection would be classified 
into groups based on combinations of several key dimensions related to 
CR or ICR service provision within the MSA in the reference year 
including--
     Percent Starting CR/ICR services: Percent of eligible 
cases in the MSA who received one or more CR or ICR services in the 
reference year. CMS considered dividing MSAs through alternative cut 
points of this metric including 20 percent and 30 percent;
     Percent Completing CR/ICR services: Percent of eligible 
cases in the MSA who completed 25 or more CR or ICR services in the 
reference year. CMS considered dividing MSAs through alternative cut 
points including 50 percent, 60 percent and 70 percent of this metric; 
and.
     Number of CR/ICR providers: The number of providers who 
billed for CR/ICR services in the MSA during the reference year. CMS 
considered dividing MSAs according to whether they had one hospital who 
billed for CR services or more than one hospital.
    MSAs would be assigned into a group based on combinations of these 
measures. An example of a possible group would be a group of MSAs that 
are ``low starters, high users.'' Such a group might be defined as MSAs 
in which--(1) less than 20 percent of eligible patients start CR/ICR 
services; (2) more than 60 percent of individuals who start CR/ICR 
complete 25 or more sessions; and (3) more than one hospital bills for 
CR services.
    We proposed the selection of CR MSAs via a modified stratified 
random selection algorithm in which these groups serve as the selection 
strata. Specifically, we proposed that the number of EPM-CR and FFS-CR 
MSAs selected from each group equals the number of EPM MSAs in the 
group multiplied by 0.46. This rate was chosen with the goal of 
selecting 45 EPM-CR MSAs out of 98 EPM MSAs (45/98 is approximately 
equal to 0.46). As an example of this approach to selection, consider a 
hypothetical group with 16 EPM MSAs and 28 FFS MSAs. We would randomly 
select 7 EPM-CR MSAs from the 16 EPM MSAs (7 is equal to 0.46 x 16 with 
rounding). The remaining 9 would be EPM-non CR. We would also randomly 
select 7 FFS-CR MSAs from the 28 FFS MSAs. The remaining 21 MSAs would 
be FFS-non CR MSAs. This approach would ensure balance with respect to 
group membership between EPM-CR MSAs and EPM-non-CR MSAs, as well as 
between EPM-CR MSAs and FFS-CR MSAs; it would not necessarily achieve 
balance with respect to group membership for other comparisons among 
model arms.
    We also considered other approaches to selection. Under one 
alternative approach, we would select a number of EPM-CR MSAs from each 
group equal to the number of EPM MSAs in the group multiplied by 0.46 
and a number of FFS-CR MSAs from each group equal to the number of FFS 
MSAs in the group multiplied by 0.23. As previously discussed, the rate 
0.46 was chosen with the goal of selecting 45 EPM-CR MSAs out of 98 EPM 
MSAs. The rate 0.23 is based on the goal of selecting 45 FFS-CR MSAs 
out of 196 FFS MSAs (45/196 is approximately equal to 0.23). As in our 
proposed approach, the calculated number of MSAs to be selected from 
each group would be rounded to the nearest integer as necessary. This

[[Page 568]]

approach would ensure balance with respect to group membership between 
EPM-CR MSAs and EPM-non-CR MSAs, as well as between FFS-CR MSAs and 
FFS-non-CR MSAs; it would not necessarily achieve balance with respect 
to group membership for other comparisons among model arms.
    Under another alternative approach, we would use a stratified 
random assignment approach to determine both EPM participation and CR 
participation. Specifically, under this approach, the number of EPM-CRs 
and FFS-CR MSAs selected from each group would each be equal to the 
total number of MSAs in that group multiplied by 0.15, the number of 
EPM-non-CR MSAs selected from each group would be equal to the total 
number of MSAs in the group multiplied by 0.18, and the remaining MSAs 
in each group would be assigned to be FFS-non-CR MSAs. The rate 0.15 
was chosen with the goal of selecting 45 EPM-CR MSAs and 45 FFS-CR MSAs 
out of 294 total MSAs (45/294 is approximately equal to 0.15), and the 
rate 0.18 was chosen with the goal of selecting 53 EPM-non-CR MSAs out 
of 294 total MSAs (53/294 is approximately equal to 0.18). As in our 
proposed approach, the calculated number of MSAs to be selected into 
each arm would be rounded to the nearest integer as necessary. This 
approach would ensure balance with respect to group membership for all 
comparisons across the four arms--EPM-CR, FFS-CR, EPM-non-CR, and FFS-
non-CR--but would forgo the simplicity of simple random assignment for 
the selection of EPM MSAs.
    For the purposes of being able to evaluate the CR incentive payment 
model as a whole, we proposed to implement it in a consistent manner 
between the EPM-CR areas and the FFS-CR areas. As such, we proposed to 
use similar approaches to identifying CR participants in each while 
also coordinating with the specifications and requirements of the AMI 
and CABG models. We proposed that EPM-CR participants are hospitals 
that are AMI or CABG model participants located in the MSAs selected 
for the EPM-CR participation based on the methodology previously 
described in section VI.C. of this final rule. We similarly proposed 
that FFS-CR participants are hospitals located in the MSAs selected for 
FFS-CR participation based on the methodology previously described in 
section VI.C. of this final rule and that meet all provisions in 
sections III.B.2. through III.B.4. of this final rule to be an EPM 
participant if the hospital were located in an MSA selected for the AMI 
or CABG model. We believe that requiring FFS-CR participants to meet 
all provisions in sections III.B.2. through III.B.4. of this final rule 
would ensure that FFS-CR participants resemble EPM-CR participants as 
closely as possible, which would contribute to our ability to test and 
evaluate the effect of the CR incentive payment and specifically 
whether there are differential effects of the CR incentive payment in 
the underlying EPM and FFS payment methodologies.
    The proposal to select MSAs for the CR incentive payment model and 
to identify CR participants is included in Sec.  512.703. We sought 
comments on our proposed approach to selecting MSAs and identifying CR 
participants.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters questioned the emphasis on hospitals for 
testing the model. These commenters noted that if this incentive 
program were limited to hospitals only, it would be highly unlikely to 
optimize physician engagement, leaving patient referral rates low. 
Other commenters noted that without including practice-based CR/ICR 
programs in the proposal, they believe the CR/ICR incentive payment 
model, despite its excellent intentions, would be unlikely to achieve 
its intended goal of driving better long-term quality cardiovascular 
care at lower cost. Other commenters urged CMS to expand the CR/ICR 
incentive payment model participants to permit physician practice-based 
ICR programs to be included to promote the underlying goal of 
increasing access to these services.
    Response: While we acknowledge that many barriers to CR/ICR 
services exist, and multiple provider types furnish CR/ICR services, it 
would be unreasonable to test multiple proposals to address these 
concerns simultaneously, as such tests would make the assignment of 
appropriate controls difficult and assessment of impacts and outcomes 
from such proposals challenging to attribute to just one proposal. CMS 
proposed that EPM-CR participants be defined as hospitals that are AMI 
or CABG model participants located in the MSAs selected for the EPM-CR 
participation, and similarly proposed that FFS-CR participants are 
hospitals located in the MSAs selected for FFS-CR participation. We 
continue to believe the proposed approach will permit CMS to 
appropriately evaluate this model and support testing the proposed 
hypotheses--to understand whether and how the effects of a financial 
incentive for the use of CR/ICR services differ depending upon whether 
a beneficiary's care is covered under an EPM or the Medicare FFS 
program and to examine each intervention's separate effects on the 
quality and efficiency of the care beneficiaries receive--with the 
strongest available evidence. We continue to believe it is in the 
interest of the Medicare program and its beneficiaries for us to 
identify new models that maintain beneficiary choice, and disagree that 
the design of the CR/ICR incentive payment model will limit access to 
CR/ICR services for Medicare beneficiaries, as the payment model does 
not limit a beneficiary's ability to choose among Medicare providers 
and suppliers or the range of services that are available to them. 
Beneficiaries may continue to choose any Medicare enrolled provider or 
supplier, or any physician or practitioner who has opted out of 
Medicare, with the same costs, copayments and responsibilities as they 
have with other Medicare services.
    We continue to expect that EPM participants would be highly engaged 
in care management of beneficiaries for the 90-day post-discharge 
duration included in the episode and could be able to capitalize on 
that engagement to encourage greater use of medically appropriate CR/
ICR services if they were also selected for participation in the CR 
incentive payment model. Therefore, we are finalizing the proposal to 
determine CR incentive payment model participants to include EPM-CR 
participants because they are already engaged in managing the AMI or 
CABG model beneficiary's overall care for a period of time following 
hospital discharge and will compare these participants to FFS-CR 
participants. We understand that there may be providers and suppliers 
other than hospitals caring for beneficiaries with AMI or CABG whose 
care is paid under the Medicare FFS program and that could assume 
responsibility for encouraging greater utilization of CR/ICR services 
under the CR incentive payment model. However, for comparability to the 
roles and responsibilities of the hospitals that are the EPM 
participants selected for CR incentive payment model participation, we 
proposed to identify hospitals as the participants in the CR incentive 
payment model for beneficiaries whose care is paid under the Medicare 
FFS program. Hospitals provide over 95 percent of CR/ICR services to 
Medicare beneficiaries and the beneficiaries in the CR incentive 
payment model are identified based on a hospitalization for AMI or 
CABG. Thus, we believe that hospitals are an appropriate entity to take 
on care coordination responsibility for increasing the utilization of 
medically necessary CR/ICR services for those beneficiaries following 
AMI or

[[Page 569]]

CABG who are in the CR incentive payment model but that are not in an 
EPM.
    Comment: Several commenters suggested that the CR incentive payment 
model be expanded beyond what was proposed. A commenter requested that 
all providers involved in any cardiac episode payment model be able to 
access the CR payment incentive. A commenter believed that the CR 
incentives should be available to all 98 cardiac EPM MSAs and thought 
it unfair that these would not be made universally available to all 
cardiac EPM participant providers. A commenter suggested that all 98 
cardiac EPM-MSAs be enrolled in the CR incentive payment model as well 
as an additional 98 FFS-MSAs. Another commenter recommended that all 
cardiac EPM participant MSAs and an equal number of random eligible 
non-participant MSAs be enrolled in this model.
    Similarly, another commenter urged that similar CR incentive 
payments be made available to BPCI Model 2 PGP episode initiators in 
order to compare and contrast physician-led cardiac episodes and 
hospital-led episodes.
    Response: CMS is encouraged by the positive reception to the CR 
Incentive Payment Model and the belief that it is immediately suitable 
for expansion. At the same time, the incentive payments represent an 
additional outlay of funds beyond the current payment systems. In its 
role as a prudent steward of financial resources, CMS is committed to 
assessing the impact of this additional expenditure prior to a wider 
scale implementation. CMS is interested in conducting a test of the CR 
incentive payment model in order to assess the impact it has on both 
utilization and outcomes.
    CMS initially considered providing access to the CR incentive to 
the 98 cardiac EPM MSAs only. However, after consideration, CMS decided 
that it was important to be able to assess the performance of EPM-CR 
areas relative to EPM-non CR areas, as well as the performance of EPM-
CR MSAs versus FFS-CR areas and FFS-CR compared to FFS-non CR areas. 
The examination of all these combinations will provide insight into 
what factors are associated with the impacts observed.
    Comment: A commenter requested additional details regarding any 
characteristics used in the selection of MSAs for the CR model.
    Response: The characteristics for selection of the MSAs as stated 
in the proposed rule will include 3 dimensions of starting and 
completing CR services and number of CR/ICR providers and we refer the 
reader to section VI.C. for further details. Groupings within an MSA 
based on these dimensions will be created and then a stratified random 
selection process will be used to select participant MSAs. There will 
be an equal number of MSAs for eligible MSAs (EPM-CR MSAs) and those 
eligible but not selected for EPM (FFS-CR).
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to 
define CR incentive payment model participants in Sec.  512.703, and 
specifically include both EPM-CR MSAs and FFS-CR MSA participants as 
being located in the selected MSAs meeting all requirements in Sec.  
512.100(b) to be an AMI or CABG model participant if the hospital were 
located in an MSA selected for the AMI and CABG EPM.
    If a participant changes their eligibility status during the period 
of performance, they will become eligible for the CR incentive payment 
model. This may occur through concluding their participation as a BPCI 
initiating hospital or other means such as a new hospital being opened. 
The re-assessment and updating of hospital eligibility status will be 
performed on an ongoing periodic basis as frequently as quarterly if 
needed.
    The selection of the CR areas will proceed as proposed with a two-
step process in which 98 cardiac EPM MSAs would be chosen first and 
then the EPM-CR and the FFS-CR would be chosen from within CR selection 
groups. Seven CR selection groups were created using information about 
the utilization of CR in the MSA in the reference year. The groups were 
defined based on combinations of the following: (1) Whether there was 
more than one hospital provider who billed for CR services in the MSA 
in the reference year, (2) whether the percent of eligible Medicare FFS 
beneficiaries who received CR services was less than 20 percent, 20 to 
30 percent or more than 30 percent, and (3) whether at least 60 percent 
of eligible patients who start CR services complete at least 25 
sessions. The definition of seven groups used in the selection is shown 
in Table 52. The number of EPM-CR MSAs and the number of FFS-CR MSAs to 
be selected from each group is also shown in Table 52 and is 
proportional to the number of selected cardiac EPM MSAs in each group.

                                      Table 52--CR MSA Selection Group Definition and Number of MSAs To Be Selected
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                          Number of EPM-
                                                                                    Percent of patients                                    CR and FFS-CR
                                      Number of hospitals    Percent of eligible        starting CR          Number of       Number of      MSAs to be
       CR selection group No.            billing for CR     Medicare FFS patients      completing 25         selection      cardiac EPM    selected from
                                                                 starting CR              sessions         eligible MSAs       MSAs        group (0.46 x
                                                                                                                                              # EPM)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................  1....................  <20%.................  Any..................              40               4               2
2..................................  1....................  20% +................  Any..................              35              16               7
3..................................  2 +..................  <20%.................  Any..................              67              17               8
4..................................  2 +..................  20-30%...............  <60%.................              34              13               6
5..................................  2 +..................  20-30%...............  60% +................              52              19               9
6..................................  2 +..................  30% +................  <60%.................              37              15               7
7..................................  2 +..................  30% +................  60% +................              28              14               6
                                                                                                         -----------------------------------------------
    Total..........................  .....................  .....................  .....................             293              98              45
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown in Table 52, we are randomly selecting 2 EPM-CR and 2 FFS-
CR MSAs from CR Selection Group 1 where the number two is derived by 
multiplying the number of cardiac EPM MSAs in the group by the 
selection percent and then rounding (round (4 x 0.46) = 2). The number 
of MSAs to be selected within the 7 CR Selection

[[Page 570]]

groups are, in order, 2, 7, 8, 6, 9, 7, and 6.
    We selected the participating FFS-CR and EPM-CR MSAs through random 
selection within groups. We selected 45 MSAs via stratified random 
sample from both AMI and CABG EPM participant MSAs and traditional fee 
for service MSAs (those not selected to participate in the AMI and CABG 
EPMs). EPM-CR MSAs were randomly selected from the EPM MSAs in the same 
selection group. Similarly, the same number of FFS-CR MSAs were 
randomly selected from within the MSAs in the CR selection group who 
were eligible for but not chosen as a cardiac EPM area.
    Based on our sampling methodology, SAS for Windows Version 9.4 
software was used to run a computer algorithm designed to randomly 
select MSAs. SAS for Windows Version 9.4 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 desired random 
sampling as the sample selection method. A random number seed was 
generated for each of the fourteen strata by using fourteen number 
seeds corresponding to birthdates and anniversary dates of parties 
present in the room. The random number seeds for stratum one through 
fourteen were as follows: 19851201, 20151024, 19841124, 20120827, 
19590625, 19650907, 19870213, 19850714, 20090712, 20091024, 19800919, 
19781023, 20120807, and 20140928. 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/.
    Table 53 shows the list of EPM-CR MSAs. Table 54 shows the list of 
FFS-CR MSAs.

                 Table 53--EPM-CR MSAS. Cardiac EPM MSAS Selected for CR Incentive Payment Model
----------------------------------------------------------------------------------------------------------------
                                                                           CR selection
              CBSA OMB No.                           MSA name                  group              CJR MSA
----------------------------------------------------------------------------------------------------------------
10180..................................  Abilene, TX....................               7
10780..................................  Alexandria, LA.................               5
10900..................................  Allentown-Bethlehem-Easton, PA-               5
                                          NJ.
12220..................................  Auburn-Opelika, AL.............               2
13380..................................  Bellingham, WA.................               2
14020..................................  Bloomington, IN................               2
14460..................................  Boston-Cambridge-Newton, MA-NH.               4
15940..................................  Canton-Massillon, OH...........               4
15980..................................  Cape Coral-Fort Myers, FL......               3
16700..................................  Charleston-North Charleston, SC               5
16860..................................  Chattanooga, TN-GA.............               5
17980..................................  Columbus, GA-AL................               1
19100..................................  Dallas-Fort Worth-Arlington, TX               5
19300..................................  Daphne-Fairhope-Foley, AL......               7
20500..................................  Durham-Chapel Hill, NC.........               5  yes.
21060..................................  Elizabethtown-Fort Knox, KY....               4
21660..................................  Eugene, OR.....................               6
22520..................................  Florence-Muscle Shoals, AL.....               5
24300..................................  Grand Junction, CO.............               2
25940..................................  Hilton Head Island-Bluffton-                  7
                                          Beaufort, SC.
26580..................................  Huntington-Ashland, WV-KY-OH...               3
26820..................................  Idaho Falls, ID................               2
27860..................................  Jonesboro, AR..................               4
27900..................................  Joplin, MO.....................               4
30620..................................  Lima, OH.......................               3
30780..................................  Little Rock-North Little Rock-                3
                                          Conway, AR.
31540..................................  Madison, WI....................               6  yes.
33340..................................  Milwaukee-Waukesha-West Allis,                6  yes.
                                          WI.
33540..................................  Missoula, MT...................               7
35100..................................  New Bern, NC...................               2
35660..................................  Niles-Benton Harbor, MI........               2  ......................
36540..................................  Omaha-Council Bluffs, NE-IA....               6
39140..................................  Prescott, AZ...................               7
39380..................................  Pueblo, CO.....................               3
39740..................................  Reading, PA....................               3  yes.
40220..................................  Roanoke, VA....................               5
41100..................................  St. George, UT.................               3
41140..................................  St. Joseph, MO-KS..............               7
41420..................................  Salem, OR......................               6
44100..................................  Springfield, IL................               6
46060..................................  Tucson, AZ.....................               4
46140..................................  Tulsa, OK......................               5
46220..................................  Tuscaloosa, AL.................               1  yes.
47940..................................  Waterloo-Cedar Falls, IA.......               6
48620..................................  Wichita, KS....................               3  yes.
----------------------------------------------------------------------------------------------------------------


[[Page 571]]


                     TABLE 54--FFS-CR MSAS. FFS MSAS Selected for CR Incentive Payment Model
----------------------------------------------------------------------------------------------------------------
                                                                     CR selection
          CBSA OMB No.                        MSA name                   group                 CJR MSA
----------------------------------------------------------------------------------------------------------------
11540..........................  Appleton, WI.....................               6
12700..........................  Barnstable Town, MA..............               1
13020..........................  Bay City, MI.....................               2
14010..........................  Bloomington, IL..................               7
15260..........................  Brunswick, GA....................               1
16180..........................  Carson City, NV..................               2  yes.
16580..........................  Champaign-Urbana, IL.............               7
16940..........................  Cheyenne, WY.....................               2
17460..........................  Cleveland-Elyria, OH.............               5
18020..........................  Columbus, IN.....................               2
18580..........................  Corpus Christi, TX...............               3  yes.
19340..........................  Davenport-Moline-Rock Island, IA-               6
                                  IL.
20260..........................  Duluth, MN-WI....................               6
21780..........................  Evansville, IN-KY................               4
22220..........................  Fayetteville-Springdale-Rogers,                 5
                                  AR-MO.
22500..........................  Florence, SC.....................               5  yes.
24660..........................  Greensboro-High Point, NC........               5
25060..........................  Gulfport-Biloxi-Pascagoula, MS...               4
25420..........................  Harrisburg-Carlisle, PA..........               4  yes.
25620..........................  Hattiesburg, MS..................               4
28940..........................  Knoxville, TN....................               7
30700..........................  Lincoln, NE......................               7  yes.
33740..........................  Monroe, LA.......................               3  yes.
34060..........................  Morgantown, WV...................               3
34620..........................  Muncie, IN.......................               2
34940..........................  Naples-Immokalee-Marco Island, FL               2  yes.
37340..........................  Palm Bay-Melbourne-Titusville, FL               3
37860..........................  Pensacola-Ferry Pass-Brent, FL...               3  yes.
38060..........................  Phoenix-Mesa-Scottsdale, AZ......               5
38940..........................  Port St. Lucie, FL...............               4  yes.
39460..........................  Punta Gorda, FL..................               7
40140..........................  Riverside-San Bernardino-Ontario,               3
                                  CA.
40340..........................  Rochester, MN....................               6
40420..........................  Rockford, IL.....................               6
40660..........................  Rome, GA.........................               5
41180..........................  St. Louis, MO-IL.................               7  yes.
41860..........................  San Francisco-Oakland-Hayward, CA               5  yes.
42140..........................  Santa Fe, NM.....................               3
42200..........................  Santa Maria-Santa Barbara, CA....               3
42540..........................  Scranton-Wilkes-Barre-Hazleton,                 2
                                  PA.
42660..........................  Seattle-Tacoma-Bellevue, WA......               6
42700..........................  Sebring, FL......................               5  yes.
44180..........................  Springfield, MO..................               6
45780..........................  Toledo, OH.......................               5  yes.
47380..........................  Waco, TX.........................               4
----------------------------------------------------------------------------------------------------------------

D. CR/ICR Services That Count Towards CR Incentive Payments

    We proposed to identify CR/ICR services that count towards CR 
incentive payments on the basis of the presence of the HCPCS codes on 
PFS and OPPS claims that report CR/ICR services as displayed in Table 
55. These HCPCS codes have been active since prior to 2013 through the 
present. We note that CMS specifies the CR/ICR service HCPCS codes in 
implementing the statutory coverage provisions for CR and ICR programs, 
and we would update this list of HCPCS codes for CR/ICR services for 
the CR incentive payment model in future CR performance years should 
CMS adopt different or additional HCPCS codes for reporting these 
services.157 158
---------------------------------------------------------------------------

    \157\ 42 CFR 410.49.
    \158\ MLN Matters[supreg] Number: MM6850 Revised. Related Change 
Request #: 6850; Related CR Release Date: May 21, 2010. Effective 
Date: January 1, 2010. Related CR Transmittal #: R1974CP, R126BP, 
R339PI, and R170FM. Implementation Date: October 4, 2010.

 Table 55--HCPCS Codes for Cardiac Rehabilitation and Intensive Cardiac
                         Rehabilitation Services
------------------------------------------------------------------------
          HCPCS Code                           Descriptor
------------------------------------------------------------------------
93797........................  Physician services for outpatient cardiac
                                rehabilitation; without continuous ECG
                                monitoring (per session).
93798........................  Physician services for outpatient cardiac
                                rehabilitation; with continuous ECG
                                monitoring (per session).
G0422........................  Intensive cardiac rehabilitation; with or
                                without continuous ECG monitoring with
                                exercise, per session.
G0423........................  Intensive cardiac rehabilitation; with or
                                without continuous ECG monitoring;
                                without exercise, per session.
------------------------------------------------------------------------


[[Page 572]]

    We proposed that within the AMI and CABG models, CR/ICR services 
paid by Medicare to any provider or supplier for AMI and CABG model 
beneficiaries during AMI and CABG model episodes would result in EPM-CR 
participant eligibility for CR incentive payments. For FFS-CR 
participants, we proposed to use the terms ``AMI care period'' and 
``CABG care period'' to refer to a period of AMI or CABG care, 
respectively, that would meet the requirements to be an AMI or CABG 
model episode in accordance with all provisions in subpart B if the 
FFS-CR participant were an AMI or CABG model participant. CR/ICR 
services paid by Medicare to any provider or supplier for beneficiaries 
during AMI care periods and CABG care periods would result in FFS-CR 
participant eligibility for CR incentive payments. Defining AMI care 
periods and CABG care periods using the AMI and CABG model episode 
definitions ensures that the care covered under AMI care periods and 
CABG care periods is comparable to AMI and CABG model episodes in terms 
of the criteria that must be met to start an AMI care period or CABG 
care period or an AMI or CABG model episode, as well as the duration of 
AMI care periods and CABG care periods and AMI and CABG model episodes. 
This comparability would contribute to our ability to test and evaluate 
the effects of the CR incentive payment and specifically to assess 
whether there are differential effects of the CR incentive payment in 
the underlying EPM and FFS payment methodologies.
    We also proposed that AMI and CABG model episodes take precedence 
over AMI care periods and CABG care periods. That is, an AMI care 
period or CABG care period would not begin if the beneficiary is in an 
AMI or CABG model episode when the AMI care period or CABG care period 
would otherwise begin. Similarly, an AMI care period or CABG care 
period would be canceled if at any time during the AMI care period or 
CABG care period the beneficiary initiates an AMI or CABG model 
episode. We believe that this is appropriate because AMI and CABG model 
participants would have ultimate responsibility for care coordination 
and the quality and cost of a beneficiary's care during an AMI or CABG 
model episode. Giving precedence to AMI and CABG model episodes would 
also ensure that Medicare does not make duplicative CR incentive 
payments for a beneficiary and that a single beneficiary is not in an 
AMI or CABG model episode and an AMI care period or CABG care period at 
the same time.
    We proposed that for the purposes of the CR incentive payment, all 
AMI and CABG model episodes and all AMI care periods and CABG care 
periods must begin on or after July 1, 2017 and end on or before 
December 31, 2021. Thus, the CR performance years would be the same as 
the performance years proposed for the EPMs in section III.D.2.a. of 
this final rule. Given that the CR incentive payment model seeks to 
determine whether there are differential effects of the CR incentive 
payment in the underlying EPM and FFS payment methodologies, it is 
important the EPM and CR performance years be aligned for EPM-CR 
participants.
    The proposal to establish which CR/ICR services count towards CR 
incentive payments is included in Sec.  512.705. We sought comments on 
our proposal to establish which CR/ICR services count towards CR 
incentive payments.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter suggested that EPM beneficiaries be offered 
the opportunity to participate in an independent CR program, as it has 
been the experience of this commenter that many patients see positive 
outcomes similar to those of patients who participate in more 
traditional CR programs. However, the commenter offering this 
suggestion also raised the concern that such programs may inadvertently 
be financially penalized because they do not follow the proposed 
structure of CR visits. Another commenter referenced exposure to 
numerous studies on and examples of integrated, remote CR programs, 
with reported similar efficacy, higher enrollment, and higher 
completion rates compared to traditional CR, and recommended CMS 
support these alternative models with the belief that such alternatives 
will foster innovation, enable cost-effective and tailored options for 
CR.
    Response: While we appreciate all suggestions for considered 
improvements to the range and type of services offered, we are limited 
by the scope of this model to testing the provision of services that 
can be recognized through HCPCS coding procedures and therefore will 
finalize provision of incentive payments for services described by 
HCPCS codes for CR/ICR services in Table 55.
    Comment: Commenters generally agreed with the proposed CR/ICR 
services that should count towards CR incentive payments. There were 
additional recommendations from commenters to align incentive payments 
with other aspects of a CR/ICR program, such as duration or frequency 
of sessions, while other commenters proposed alternative programs 
including examples such as physical and occupational therapy, pulmonary 
rehabilitation, home health therapy, and construction of a new program 
termed virtual cardiac rehabilitation to take place in the patient's 
home.
    Response: We proposed to identify CR and ICR services that count 
towards CR incentive payments on the basis of the presence of the HCPCS 
codes on PFS and OPPS claims that report CR/ICR services as displayed 
in Table 55. These HCPCS codes have been active since prior to 2013 
through the present. We note that CMS specifies the CR/ICR HCPCS codes 
in implementing the statutory coverage provisions for CR and ICR 
programs, and we would update this list of HCPCS codes for CR/ICR 
services for the CR incentive payment model in future CR performance 
years should CMS adopt different or additional HCPCS codes for 
reporting these services. We continue to believe that CR/ICR services 
are unique as an underutilized Medicare-covered benefit with a strong 
evidence base of improved health outcomes for beneficiaries who have 
had an AMI or a CABG. Therefore, we believe that CR/ICR services are 
uniquely appropriate for CR incentive payments to selected AMI and CABG 
model participants as well as selected hospitals that would not be 
participating in these models in order to reward their efforts where we 
observe increased CR/ICR service utilization for CR incentive payment 
model beneficiaries. As a result, we are finalizing this proposal 
because we continue to believe this structured approach will contribute 
to our ability to test and evaluate the effects of the CR incentive 
payment and specifically whether there are differential effects of the 
CR incentive payment in the underlying EPM and FFS payment 
methodologies.
    Comment: Some commenters expressed confusion regarding the process 
by which ICR programs are approved by CMS. Others suggested the need 
for clarification as to how individual sites wishing to furnish ICR 
services be able to participate. A commenter was concerned that EPM 
participant hospitals that do not have their own CR/ICR programs will 
not be eligible for payments under the CR Incentive Payment Model. A 
commenter requested that CMS clarify that all ICR programs covered 
under the CR incentive payment model receive approval under the NCD 
process, as this commenter believes the NCD process serves an important 
function in

[[Page 573]]

ensuring that these programs meet the underlying statutory 
requirements.
    Response: Approved ICR programs will continue to be required to 
meet the statutory requirements set forth in section 1861(eee)(4) of 
the Act. The NCD process, as authorized by section 1862(l) of the Act 
will continue to be used to determine whether an ICR program falls 
within the scope of this Part B benefit. An ICR program will continue 
to be evaluated in an open, transparent, and publicly engaging process. 
The standards for an ICR program are included in Section 410.49(c) of 
this subpart. CR participants without their own CR/ICR programs will 
receive the CR incentive payment based on the CR/ICR service 
utilization of beneficiaries attributed to them, regardless of the 
specific provider or supplier that furnished the CR/ICR services to the 
beneficiary during the episode or care period.
    Comment: A commenter believes a significant majority of PFS claims 
for CR services are misleading. This commenter submitted an analysis of 
Medicare PFS claims for HCPCS code 93798 by specialty and identified 
the top five most frequently occurring specialties to be cardiology, 
internal medicine, family practice, cardiac electrophysiology, and 
emergency medicine. Based on these data, the commenter strongly 
questioned the appropriateness of the physician's office for the 
provision of CR services, and urged CMS to scrutinize PFS claims paid 
for delivery of CR services, as the commenter believes these claims are 
simple coding errors, or possible fraud/abuse. The commenter 
recommended that OPPS claims for CR/ICR services would be the accurate 
source to track for the CR incentive payment model.
    Response: We thank the commenter for providing their analysis. 
While most CR/ICR services are billed and paid under the OPPS because 
they are furnished in the hospital outpatient department, CR/ICR 
services are also covered under Medicare when furnished in a 
physician's office where they are paid under the PFS.\159\ PFS claims 
for CR/ICR services furnished in the physician's office report place of 
service code 11 (office). Our analysis showed that more than 95 percent 
of CR/ICR services for beneficiaries with AMI or CABG were billed under 
the OPPS. In addition, for CR/ICR services billed under the PFS, the 
physician's office was more frequently reported than the hospital 
outpatient department. In some cases, there were OPPS and PFS claims 
for the same beneficiary for the same day and the same CR/ICR service 
HCPCS code, but it was extremely rare for the PFS claim to have a place 
of service code for the physician's office in these cases, occurring in 
only 0.01 percent of AMI care periods and 0.02 percent of CABG care 
periods. These uncommon circumstances could either reflect incorrect 
billing or an actual care pattern where the same beneficiary received 
CR/ICR services on the same day in both the hospital outpatient 
department and physician's office. Nevertheless, our analysis of 
historical claims data showed no concerning patterns about coding 
errors on claims for CR/ICR services.
---------------------------------------------------------------------------

    \159\ Analysis of cardiac rehabilitation utilization in care 
periods for AMI and CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    As discussed in the CY 2010 PFS Final Rule (74 FR 61879), we note 
that when a CR/ICR service is furnished in a hospital outpatient 
department, a physician cannot bill the Medicare contractor for CR/ICR 
unless the physician personally performs the CR/ICR service. To 
personally perform the CR/ICR service, the physician would provide 
direct care to a single patient for the entire session of CR/ICR that 
is being reported. The hospital would report the CR/ICR service and be 
paid the OPPS payment amount for the facility services associated with 
the CR/ICR services. The physician would report place of service code 
19 or 22 (Off Campus-Outpatient Hospital or On Campus-Outpatient 
Hospital, respectively) on the PFS claim. A physician cannot bill under 
the PFS for CR/ICR services furnished in a hospital for which the 
physician furnishes only supervision or for services furnished in part 
by others. If the physician furnishes no direct CR/ICR services for a 
given session on a given day or provides direct CR/ICR services for 
less than the full session, then only the hospital would report the CR/
ICR services and these services would be paid only under the OPPS. 
Thus, to be sure that we are capturing all unique sessions of CR/ICR 
services furnished in the hospital outpatient department or physician's 
office, without duplication in counting those services, we will include 
all CR/ICR services paid under the OPPS but only those CR/ICR services 
that report place of service code 11 on PFS claims in the CR/ICR 
services that count toward CR incentive payments.
    We note that CR/ICR services will be continue to be paid by the 
Medicare program under the OPPS and the PFS throughout the CR incentive 
payment model performance years for CR beneficiaries and are subject to 
all applicable rules governing the submission of claims for services 
for payment by Medicare. We refer to sections III.J.8. and VI.F.7. of 
this final rule for our discussion of the waiver of the physician 
definition to allow, in addition to a physician, a nonphysician 
practitioner to perform the functions of supervisory physician; 
prescribing exercise; and establishing, reviewing, and signing an 
individualized treatment plan for a provider or supplier of CR/ICR 
services furnished to an EPM-CR or FFS-CR beneficiary during an AMI or 
CABG episode or AMI care period or CABG care period, respectively. We 
will rely upon the CR/ICR services paid by Medicare under the OPPS or 
to any supplier reporting place of service code 11 on the PFS claim for 
determining the CR/ICR services furnished to EPM-CR and FFS-CR 
participants. All CR/ICR services billed to Medicare must also meet the 
billing requirements outlined in the Medicare Claims Processing 
Manual.\160\ CR/ICR services billed to Medicare outside the episode 
must continue to meet coverage requirements described in 42 CFR 410.94 
and any applicable National Coverage Determinations.\161\
---------------------------------------------------------------------------

    \160\ Claims Processing Requirements for Cardiac Rehabilitation 
(CR) and Intensive Cardiac Rehabilitation (ICR) Services Furnished 
on or After January 1, 2010. Chapter 32, Section 140.2.2. Medicare 
Claims Processing Manual.
    \161\ Intensive Cardiac Rehabilitation (ICR) Programs. Chapter 
1, Part 1, Section 20.31.1-3. Medicare National Coverage 
Determinations (NCD) Manual.
---------------------------------------------------------------------------

    We will monitor throughout the CR incentive payment model the 
utilization of CR/ICR services, including the place of service. If this 
monitoring raises concerns about erroneous claims or potential fraud 
and abuse based on significant changes in the distribution of CR/ICR 
services being billed and paid for CR beneficiaries in the physician's 
office and the hospital outpatient department compared to historical 
patterns and current patterns of CR/ICR services furnished to Medicare 
beneficiaries not in the CR incentive payment model, we may more 
closely examine the claims for these services and/or refer these 
circumstances to Medicare contractors for further investigation.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification, to 
establish which CR/ICR services count towards CR incentive payments in 
Sec.  512.705 as CR/ICR services identified by the HCPCS codes for CR/
ICR services in the CR performance year when those CR/ICR services are 
paid under the OPPS or to

[[Page 574]]

any supplier reporting place of service code 11 on a PFS claim. This 
modification to limit CR/ICR services from suppliers to those reporting 
place of service code 11 on the PFS claim, rather than all CR/ICR 
services from suppliers, ensures that we can establish a unique, 
unduplicated count of CR/ICR services furnished in the hospital 
outpatient department and in the physician's office to a CR beneficiary 
for purposes of the CR incentive payment to CR participants.
    Table 56 displays the HCPCS codes currently used for reporting CR/
ICR services and that will be used counting CR/ICR services under the 
CR incentive payment model.

 Table 56--HCPCS Codes for Cardiac Rehabilitation and Intensive Cardiac
                         Rehabilitation Services
------------------------------------------------------------------------
          HCPCS Code                           Descriptor
------------------------------------------------------------------------
93797........................  Physician services for outpatient cardiac
                                rehabilitation; without continuous ECG
                                monitoring (per session).
93798........................  Physician services for outpatient cardiac
                                rehabilitation; with continuous ECG
                                monitoring (per session).
G0422........................  Intensive cardiac rehabilitation; with or
                                without continuous ECG monitoring with
                                exercise, per session.
G0423........................  Intensive cardiac rehabilitation; with or
                                without continuous ECG monitoring;
                                without exercise, per session.
------------------------------------------------------------------------

E. Determination of CR Incentive Payments

1. Determination of CR Amounts That Sum To Determine a CR Incentive 
Payment
    Given the potential benefits of CR/ICR services, in conjunction 
with the low adoption of these services, we sought to propose an 
incentive for CR participants that was sufficient to encourage them to 
increase clinically appropriate CR/ICR service referrals for 
beneficiaries; reduce barriers to beneficiary adherence to a CR/ICR 
service treatment plan by making additional resources available for 
transportation to and from CR/ICR services; and incentivize CR 
participant monitoring and support of beneficiary adherence to all 
prescribed sessions of the CR/ICR program. As such, in addition to the 
usual payments that Medicare makes to providers and suppliers that 
furnish CR/ICR services, we proposed to establish a two-level per-
service CR incentive amount that would initially incentivize the use of 
any CR/ICR services and that would increase once a beneficiary meets or 
exceeds the proposed CR/ICR service utilization benchmark. The CR 
amount would be the dollar amount determined by the two-level per-
service CR incentive amounts that apply to the number of CR/ICR 
services paid by Medicare to any provider or supplier for a beneficiary 
in an AMI or CABG model episode or AMI care period or CABG care period. 
CR amounts across all of a CR participant's beneficiaries that received 
CR/ICR services would be summed for the CR performance year to 
determine the CR incentive payment for a CR participant. CMS would pay 
the CR incentive payment from the Part B Trust Fund to the CR 
participant after the end of each CR performance year, and the 
beneficiary-specific CR amounts would be submitted to the CMS Master 
Database Management (MDM) System.
    For the purpose of determining the CR incentive payment, we 
proposed to count the number of CR/ICR services for the relevant time 
periods under the OPPS and PFS on the basis of the presence on paid 
claims of the HCPCS codes that report CR/ICR services as displayed in 
Table 55 and the units of service billed.
    The initial level of the per-service CR incentive amount that would 
count toward the CR amount would be $25 per CR/ICR service for each of 
the first 11 CR/ICR services paid for by Medicare during an AMI or CABG 
model episode or AMI care period or CABG care period. We believe that 
$25 is an appropriate amount to account for the additional resources 
that CR participants would expend to reduce beneficiary barriers to 
utilizing any CR/ICR services and to support beneficiary adherence to 
all prescribed services in the CR/ICR program.
    After 11 CR/ICR services are paid for by Medicare for a 
beneficiary, the level of the per-service CR incentive amount would 
increase to $175 per CR/ICR service for each additional CR/ICR service 
paid for by Medicare during the AMI or CABG model episode or AMI care 
period or CABG care period. This higher payment would account for the 
additional resources that CR participants expend to reduce beneficiary 
barriers to CR/ICR service utilization and also would reward CR 
participants for AMI or CABG model episodes or AMI care periods or CABG 
care periods in which beneficiaries meet or exceed the service 
utilization benchmark of 12 CR/ICR services.
    We set the proposed service utilization benchmark based on evidence 
from the literature that shows reduced mortality for Medicare 
beneficiaries that complete at least 12 CR sessions relative to 
Medicare beneficiaries who complete 1-11 CR sessions. A study by 
Hammill et al found that over a 4-year follow-up period beneficiaries 
who completed 12-23 CR sessions had lower mortality compared to 
beneficiaries who completed 1-11 CR sessions and that beneficiaries who 
completed 24 or more CR sessions had lower mortality compared to 
beneficiaries that completed 12-23 sessions.\162\ Figure 6 replicates 
Figure 2 from that study.
---------------------------------------------------------------------------

    \162\ Hammill BG, Curtis LH, Schulman KA, Whellan DJ. 
Relationship between cardiac rehabilitation and long-term risks of 
mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70.

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[[Page 575]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.015

    Another study by Suaya et al. showed that over a 5-year period 
beneficiaries who were hospitalized for coronary conditions or cardiac 
revascularization procedures and completed 1-24 CR sessions had lower 
mortality compared to beneficiaries who were probable candidates for CR 
but completed 0 CR sessions and that beneficiaries who completed 25 or 
more CR sessions had lower mortality compared to beneficiaries who 
completed 1-24 CR sessions.\164\ Figure 7 replicates Figure 1 from that 
study.
---------------------------------------------------------------------------

    \163\ Figure 2 of Hammill BG, Curtis LH, Schulman KA, Whellan 
DJ. Relationship between cardiac rehabilitation and long-term risks 
of mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70. Note that the 30,161 
overall beneficiaries in the table contained in the figure refers to 
the number of Medicare beneficiaries that initiated cardiac 
rehabilitation services between January 1, 2000 and December 31, 
2005 in the national 5 percent sample used by Hammill et al.
    \164\ Suaya JA, Stason WB, Ades PA, Normand ST, Shephard DS. 
Cardiac rehabilitation and survival in older coronary patients. 
Journal of the American College of Cardiology 2009; 54:25-33.

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

[[Page 576]]

[GRAPHIC] [TIFF OMITTED] TR03JA17.016

    We did not propose to set a cap on the number of CR/ICR services 
that would count toward the CR amount during an AMI or CABG model 
episode or AMI care period or CABG care period because the literature 
showed incremental improvements in outcomes associated with more CR/ICR 
services through 36 or more sessions. The duration of AMI and CABG 
model episodes and AMI care periods and CABG care periods is only 90 
days post-discharge from the hospitalization that begins the episode or 
care period, or roughly 13 weeks, and Medicare already limits the 
number of covered CR/ICR services for a beneficiary. The number of CR 
program sessions are limited to a maximum of 2 one-hour sessions per 
day for up to 36 sessions over up to 36 weeks, with the option for an 
additional 36 sessions over an extended period of time if approved by 
the Medicare Administrative Contractor under section 1862(a)(1)(A) of 
the Act.\166\ ICR program sessions are limited to 72 one-hour sessions, 
up to 6 sessions per day, over a period of up to 18 weeks.\167\
---------------------------------------------------------------------------

    \165\ Figure 1 of Suaya JA, Stason WB, Ades PA, Normand ST, 
Shephard DS. Cardiac rehabilitation and survival in older coronary 
patients. Journal of the American College of Cardiology 2009; 54:25-
33.
    \166\ 42 CFR 410.49(b)(1)(vii).
    \167\ Section 1861(eee)(1) of the Act.
---------------------------------------------------------------------------

    We believe that the higher per-service CR incentive amount that 
would count toward the CR amount when CR/ICR services paid by Medicare 
to any provider or supplier for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period meet or exceed the 
evidence-based service utilization benchmark would strengthen the 
financial incentive for CR participants to ensure beneficiary adherence 
to all prescribed CR/ICR services beyond the initial $25 per-service CR 
incentive amount for the first 11 CR/ICR services. Moreover, the higher 
level of the per-service CR incentive amount when a beneficiary 
completes at least 12 CR/ICR services provides a strong incentive for 
CR participants to expand CR referrals and to increase the likelihood 
that beneficiaries complete a clinically meaningful number of CR 
services. The proposal creates a continuous, significant incentive for 
increased CR/ICR service utilization that provides value beyond the 
service utilization benchmark of 12 CR/ICR services, consistent with 
the literature that shows a decrease in mortality for beneficiaries 
that complete more CR sessions relative to beneficiaries that complete 
fewer CR sessions.
    The CR amount for a beneficiary in a CR participant's AMI and CABG 
model episodes or AMI care periods and CABG care periods in a CR 
performance year would be the sum of the $25 per-service CR incentive 
amount for each of the first 11 CR/ICR services and the $175 per-
service CR incentive amount for each additional CR/ICR service paid by 
Medicare beyond the first 11. The CR participant's CR incentive payment 
for a CR performance year would be determined based on the sum of the 
CR amounts across all of its beneficiaries for that CR performance 
year.
    We believe that this comprehensive CR incentive payment methodology 
would be appropriate because it would create an explicit, strong 
incentive for CR participants to expand the utilization of CR/ICR 
services to achieve at least the evidence-based service utilization 
benchmark of 12 ICR/CR services and then significantly and continuously 
incentivize the provision of additional CR/ICR services that provide 
additional value, even if the full benefit of CR/ICR services for 
beneficiaries that have had an AMI or a CABG is not realized until 
after an episode or care period ends. Moreover, the CR incentive 
payment could offset resource costs incurred by CR participants that 
successfully increase utilization of CR/ICR services, such as FFS-CR 
participants providing transportation or EPM-CR participants providing 
beneficiary engagement incentives as discussed in sections III.I.9. and 
VI.F.6. of this final rule for EPM-CR and FFS-CR participants, 
respectively.
    Because the CR incentive payment would be made to the CR 
participant

[[Page 577]]

retrospectively after the end of a CR performance year as discussed in 
section VI.E.4. of this final rule, the CR incentive payment would 
represent the totality of financial reward to the CR participant based 
on the proposed methodology for determining the payment based on CR/ICR 
service utilization during the CR performance year. The CR 
participant's resources required to support the increased utilization 
of CR/ICR services are likely to vary among beneficiaries. For example, 
it is possible that greater CR participant resources may be required to 
encourage and support the utilization of a beneficiary's first CR/ICR 
services during an AMI or CABG model episode or AMI care period or CABG 
care period, in comparison with promoting adherence to additional 
prescribed CR/ICR services once the care pattern is well-established 
for that beneficiary. The proposed retrospective payment approach means 
CR participants would have the flexibility to redesign care to meet the 
needs of their beneficiaries regarding increased utilization of CR/ICR 
services, even though the CR incentive payment methodology only 
provides the higher level per-service CR incentive amount when CR/ICR 
service utilization achieves levels associated with improved outcomes. 
The approach is consistent with the model payment methodology that is 
designed to reward the value and not the volume of services by 
providing a higher total financial reward for utilization of services 
that has been shown to result in improved outcomes.
    The proposals for determining the amount of the CR incentive 
payments were proposed in Sec.  512.710(a) and (b). We would also note 
that we expect to revisit the levels of the CR incentive payment and 
the service utilization benchmark over the CR performance years as we 
observe the effects of the model policies on CR/ICR service utilization 
and the long-term outcomes and Medicare expenditures for CR incentive 
payment model beneficiaries under the EPMs and Medicare FFS program 
payment methodologies for overall care. For example, it is possible 
that the proposed CR incentive payment methodology could lead to 
substantial increases in CR/ICR service utilization such that the 
proposed CR incentive payment model policies may no longer be necessary 
or appropriate once new care patterns are well-established.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters requested CMS consider the feasibility of 
expanding the number of CR/ICR incentive payment model beneficiaries to 
include all diagnoses eligible for CR coverage through Medicare and/or 
enable all EPM participants which are selected for the AMI/CABG model 
to be eligible for participation in the CR program.
    Response: While we acknowledge that CR/ICR services are provided 
for many indications, it would be unreasonable to test multiple 
proposals to address these concerns simultaneously, as such tests would 
make the assignment of appropriate controls difficult and assessment of 
impacts and outcomes from such proposals challenging to attribute to 
just one proposal. CMS proposed that EPM-CR participants be defined as 
hospitals that are AMI or CABG model participants located in the MSAs 
selected for the EPM-CR participation, and similarly proposed that FFS-
CR participants are hospitals located in the MSAs selected for FFS-CR 
participation. We proposed the CR incentive payment model to test the 
effects on quality of care and Medicare expenditures of providing 
explicit financial incentives in addition to, rather than in lieu of, 
current Medicare expenditures to CR participants for beneficiaries 
hospitalized for treatment of AMI or CABG to encourage care 
coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
We continue to expect that EPM participants would be highly engaged in 
care management of beneficiaries for the 90-day post-discharge duration 
included in the episode and could be able to capitalize on that 
engagement to encourage greater use of medically appropriate CR/ICR 
services if they were also selected for participation in the CR 
incentive payment model.
    Comment: Commenters offered a variety of perspectives on the 
duration of the period of time for which the CR/ICR incentive payment 
would be made. A commenter suggested that the incentives as stated 
should be sufficient to encourage the timely enrollment of patients in 
to CR but noted that the 90-day period will likely not be sufficient to 
maximize their full effect on improving adherence if they are only in 
effect for 90 days after index event. A few commenters further 
encouraged CMS to consider the option of having the incentives 
maintained beyond the 90-day period. In contrast, one commenter noted 
that the timing of the payments as proposed may serve as an incentive 
to enroll patients as soon as possible and make program adjustments to 
allow for more active participation during the 90-day time period. 
Therefore, the commenter reasoned, it would be incumbent on the CR/ICR 
programs to implement strategies that would result in immediate 
referral to get patients enrolled within seven days of hospital 
discharge and remove barriers to more active participation to fully 
complete the 36 sessions during the 90-day period. A few other 
commenters expressed uncertainty around the structure of the CR 
incentive payment and requested that CMS confirm that CR/ICR incentive 
payments will persist for EPM beneficiaries after their 90-day EPM 
episode ends, citing their experiences of a lag in time before which a 
referral for CR/ICR services is made and their experience with the 
period of time over which a CR/ICR course of treatment takes place. 
Similarly, several commenters requested that CMS confirm that CR/ICR 
incentive payments will be made in addition to, rather than in lieu of, 
the underlying Medicare FFS payments to providers for CR/ICR services.
    Response: While we acknowledge that CR/ICR services often continue 
beyond the 90- day post-discharge duration we proposed for the CR 
incentive payment model, it would be unreasonable to test multiple 
proposals to address these concerns simultaneously, as such tests would 
make the assignment of appropriate controls difficult and assessment of 
impacts and outcomes from such proposals challenging to attribute to 
just one proposal. We proposed the CR incentive payment model to test 
the effects on quality of care and Medicare expenditures of providing 
explicit financial incentives in addition to, rather than in lieu of, 
current Medicare expenditures to CR participants for beneficiaries 
hospitalized for treatment of AMI or CABG to encourage care 
coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
We continue to expect that EPM participants would be highly engaged in 
care management of beneficiaries for the 90-day post-discharge duration 
included in the episode and could be able to capitalize on that 
engagement to encourage greater use of medically appropriate CR/ICR 
services if they were also selected for participation in the CR 
incentive payment model. Therefore, we are not extending incentive 
payments at this time as we believe the proposal to provide a CR 
incentive payment specifically to EPM-CR participants is

[[Page 578]]

reasonable when it aligns with the AMI or CABG episode of care because 
these participants are already engaged in managing the AMI or CABG 
model beneficiary's overall care for a period of time following 
hospital discharge and will compare these participants to FFS-CR 
participants.
    Comment: Commenters raised concern that the proposed timing of the 
CR incentive payment model did not align with the panoply of patient 
experiences. A commenter stated that not all patients need the full 
complement of CR/ICR sessions, and another stated that not all cardiac 
patients are candidates for cardiac rehabilitation services. To this 
end, commenters submitted alternative proposals, including combining 
payments for CR/ICR services into the bundled payment for AMI and CABG.
    Response: While we agree that improved outcomes have been 
demonstrated in patients who participate in as little as one CR session 
per week over 36 weeks (74 FR 61875), the proposed general design of 
the CR incentive payment model is consistent with the belief that 
encouraging timely referral of beneficiaries that have had an AMI or a 
CABG to CR/ICR programs would promote better adherence to CR/ICR 
service protocols, an expectation that is supported by data showing 
that patients who are referred early to CR were more likely to 
enroll.\168\ We believe this model may yield improved coordination, 
care management, and secondary risk reduction during the episode of 
care after AMI or CABG for the beneficiary. Additionally, CMS proposed 
the CR incentive payment model to test the effects on quality of care 
and Medicare expenditures of providing explicit financial incentives to 
CR participants for beneficiaries hospitalized for treatment of AMI or 
CABG to encourage care coordination and greater utilization of 
medically necessary CR/ICR services for 90 days post-hospital discharge 
where the beneficiary's overall care is paid under either an EPM or the 
Medicare FFS program, and believe that extending CR/ICR incentive 
payments beyond the 90-day episode is not aligned with the proposed 
rationale. We remind all commenters that section 410.49(f) includes 
coverage for a maximum of two 1-hour CR sessions per day for up to 36 
sessions over up to 36 weeks with the option for an additional 36 
sessions over an extended period of time if approved by the Medicare 
Administrative Contractor under section 1862(a)(1)(A) of the Act.
---------------------------------------------------------------------------

    \168\ Grace SL et al. Effectiveness of inpatient and outpatient 
strategies in increasing referral and utilization of cardiac 
rehabilitation: A prospective, multi-site study. Implement Sci. 
2012: 7:120.
---------------------------------------------------------------------------

    Comment: Many commenters expressed support for the CR/ICR incentive 
payments as proposed, and encouraged implementation, as they believe 
the result will show support of its broader use. A commenter noted that 
the incentive payments are in the right amounts and appropriately 
tiered for the initial demonstration program. Several commenters 
expressed opposing viewpoints as to the sufficiency of the CR/ICR 
incentive payment, and MedPAC questioned whether such a large amount 
would be necessary to induce changes in provider behavior. A commenter 
noted that it does not have the expertise to determine whether the 
proposed monetary payment is sufficient to achieve the stated goal, and 
encouraged CMS to seriously consider comments from hospitals and the 
community of cardiology professionals to ensure the sufficiency of the 
incentive payment. Another commenter encouraged CMS to revisit the 
amount of the incentive payments after 6 months to observe the effects 
of the model policies on service utilization, long-term outcomes, and 
Medicare expenditures to assess if they are sufficiently high to 
encourage plan participants to identify and remove beneficiary barriers 
to provision of CR/ICR services. A commenter noted that despite the CR/
ICR incentive payment, even participant hospitals that share CMS' goal 
of increasing clinically appropriate services may be unlikely to be 
able to devote staff and financial resources to encourage beneficiary 
participation in programs such as CR/ICR whose benefits, while 
important, primarily affect the cost of services needed by 
beneficiaries long after the AMI or CABG episode ends. Many commenters 
questioned the extent to which CMS provided sufficient evidence 
supporting the sufficiency of the CR incentive payment amount.
    Several other commenters submitted both general and specific 
concerns with the proposed CR/ICR incentive payment amount. MedPAC 
commented that the proposed incentive payment of $175 per CR/ICR 
service once a beneficiary exceeds 11 CR/ICR services considerably 
exceeds the amount Medicare pays for each service itself, could add up 
to a substantial amount per beneficiary, and expressed uncertainty as 
to how CMS determined the level of the proposed payment incentive 
amount. Several commenters proposed alternative amounts for CR/ICR 
incentive payments, including (1) bundled payment for all CR/ICR 
services, which could be divided into the following four categories: 5 
or less sessions, $500 allowed; 6-12 sessions, $1000; 13-24 sessions, 
$2000; 25-36 sessions, $3000; (2) offer of a higher level of per-
service CR/ICR incentive amount or adding a tier for increasing the 
number of enrollees from an underserved group; (3) make interim 
incentive payments during the year; and (4) increase in payment for the 
initial session of CR/ICR services provided to the patient from $25 to 
$175 as this first session is fundamental to enrolling the patient, 
beginning the rehabilitation process, and reflecting the intense 
resources necessary in the initial evaluation, enrollment, and 
education of the patient.
    Response: We understand the commenters' concerns and appreciate 
alternative proposals that are in the spirit of testing the outcomes of 
the proposed model. We set the proposed service utilization benchmark 
based on evidence from the literature that shows reduced mortality for 
Medicare beneficiaries that complete at least 12 CR sessions relative 
to Medicare beneficiaries who complete 1-11 CR sessions 
169 170 and evidence that beneficiaries who completed 25 or 
more CR sessions had lower mortality compared to beneficiaries who 
completed 1-24 CR sessions.171 172 Furthermore, we did not 
propose to set a cap on the number of CR/ICR services that would count 
toward the CR payment amount during an AMI or CABG model episode or AMI 
care period or CABG care period. We believe the proposed approach, 
rather than the alternative recommendations of the commenters, is 
consistent with the model payment methodology that is designed to 
reward the value and not the volume of services by providing a higher 
total financial reward for

[[Page 579]]

utilization of services that has been shown to result in improved 
outcomes.
---------------------------------------------------------------------------

    \169\ Intensive Cardiac Rehabilitation (ICR) Programs. Chapter 
1, Part 1, Section 20.31.1-3. Medicare National Coverage 
Determinations (NCD) Manual.
    \170\ Hammill BG, Curtis LH, Schulman KA, Whellan DJ. 
Relationship between cardiac rehabilitation and long-term risks of 
mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70.
    \171\ Figure 2 of Hammill BG, Curtis LH, Schulman KA, Whellan 
DJ. Relationship between cardiac rehabilitation and long-term risks 
of mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70. Note that the 30,161 
overall beneficiaries in the table contained in the figure refers to 
the number of Medicare beneficiaries that initiated cardiac 
rehabilitation services between January 1, 2000 and December 31, 
2005 in the national 5 percent sample used by Hammill et al.
    \172\ Suaya JA, Stason WB, Ades PA, Normand ST, Shephard DS. 
Cardiac rehabilitation and survival in older coronary patients. 
Journal of the American College of Cardiology 2009; 54:25-33.
---------------------------------------------------------------------------

    Since such incentive payments specific to the provision of CR/ICR 
services have not previously been tested in this way, we will test to 
determine whether there are sufficient payment amounts applicable and 
available to increase utilization of CR/ICR services. We do know that 
an important design element of any incentive payment model is the 
threshold or benchmark \173\ used to determine which CR participants 
will receive incentive payments. For this design element, we believe we 
have presented strong evidence in support of proposed benchmarks that 
are clear, transparent, and for which CR participants can attain 
meaningful improvements. Therefore, the proposed incentive payment 
amount provides a strong incentive for CR participants to expand CR 
referrals and to increase the likelihood that beneficiaries complete a 
clinically meaningful number of CR services.
---------------------------------------------------------------------------

    \173\ Damberg CL, et al. (2014) Measuring Success in Health Care 
Value-Based Purchasing Programs. Retrieved October 31, 2016, from 
the RAND Corporation Web site: http://www.rand.org/pubs/research_reports/RR306.html.
---------------------------------------------------------------------------

    We may revisit the levels of the CR incentive payment and the 
service utilization benchmark over the CR performance years as we 
observe the effects of the model policies on CR/ICR service utilization 
and the long-term outcomes and Medicare expenditures for CR incentive 
payment model beneficiaries under the EPMs and Medicare FFS program 
payment methodologies for overall care.
    Comment: A minority of commenters stated confusion as to the extent 
to which CR incentive payments would be made in addition to or in lieu 
of payments to providers for CR/ICR services.
    Response: We reiterate that under the CR incentive payment model, a 
CR incentive payment to EPM-CR and FFS-CR participants would be made 
under the model. Regular Medicare program payments would continue to be 
made to providers and suppliers that furnish and bill for CR/ICR 
services to beneficiaries in AMI or CABG episodes or AMI care periods 
or CABG care periods.
    Comment: A few commenters raised concern as to the means to 
implement a value-based incentive design for a CR/ICR model, as these 
commenters believe the proposed CR/ICR incentive payment model to be a 
utilization-based model. Such alternative proposals included a general 
focus on outcomes associated with use of CR/ICR services and a specific 
focus on outcome metrics (for example, 30-day mortality, re-
hospitalization rates) as well as process metrics (referral to CR, 
statin use) for those processes that are well established and evidence-
based. To this end, a few commenters requested that CMS work with the 
healthcare community to determine appropriate patient-reported outcomes 
measures for CR/ICR services prior to finalizing the proposed EPMs. 
Without specific outcome measures attributed to this model, commenters 
suggested that some policy makers might incorrectly conclude that CR/
ICR services are not important. Furthermore, commenters stated that 
these quality measures would permit alignment with tracks for Advanced 
APMs and MIPS APMs. Several commenters suggested inclusion of patient-
reported outcome (PRO) metrics, and requested that CMS work with the 
healthcare community to determine appropriate PRO metric(s). It was 
suggested by these commenters that such outcomes may identify 
appropriate length of rehabilitation. Additionally, MedPAC recommended 
creating claims-based physician or hospital measures for all providers 
who care for beneficiaries with AMI and CABG, and then such measures 
could gauge the share of beneficiaries who receive CR/ICR services.
    Response: The CR incentive payment for EPM-CR participants is 
specifically tied to increased utilization of CR/ICR services within 
AMI and CABG model episodes and, the rationale for utilization of such 
services is built on a strong evidence base of improved health outcomes 
for beneficiaries who have had an AMI or a CABG. Therefore, this model 
is designed to reward increased EPM-CR participant referral of AMI and 
CABG model beneficiaries to CR/ICR programs. Additionally, we remind 
all commenters that historical claims data show that more than half of 
beneficiaries who receive one CR session go on to complete at least 25 
sessions.\174\ Furthermore, we note that an outcomes assessment is part 
of the CR benefit established by Congress in section 144(a) of the 
MIPPA, which is designed to ensure CR programs enhance the patient's 
clinical outcomes. Section 410.49 of this subpart further describes the 
assessment of outcomes. While we appreciate the remark that quality 
measures are required for an APM to qualify as an Advanced APM under 
the QPP final rule, we remind all commenters that an APM must also 
require participants to bear financial risk (or be a Medical Home Model 
expanded under section 1115A(c) of the Act) and utilize CEHRT, which 
CMS did not propose for the CR/ICR incentive payment model. Thus, we 
are finalizing our CR incentive payment model without including 
separate and distinct quality measures.
---------------------------------------------------------------------------

    \174\ Analysis of CR/ICR services utilization in 2013 Medicare 
FFS Parts A and B claims.
---------------------------------------------------------------------------

    Comment: MedPAC commented that the same outcomes could be 
accomplished by simply carving out payment for CR/ICR services from the 
EPM bundled payment and continuing to pay for these services 
separately, without incentive payments for EPM participants.
    Response: CMS proposed the CR incentive payment model to test the 
effects on quality of care and Medicare expenditures of providing 
explicit financial incentives to CR participants for beneficiaries 
hospitalized for treatment of AMI or CABG to encourage care 
coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
Therefore, we disagree that the same test could be accomplished by 
simply carving out CR/ICR services from a bundled payment for a broadly 
defined cardiac episode-of-care. The CR incentive payment is not a 
payment for the CR/ICR services themselves. Rather, it is for the CR 
participant work to coordinate and increase the utilization of the 
beneficiary's participation in CR/ICR services following hospital 
discharge. A carve-out of the payments for CR/ICR services from the EPM 
episode would also not allow us to examine the effects of a CR 
incentive payment in the context of an underlying episode or FFS 
payment methodology for overall care. We will continue to monitor the 
effects of this model on EPM-CR and FFS-CR participants.
    Comment: Most commenters agreed that the primary goal of an 
incentive payment model should be to recruit the vast majority of 
prospective patients into cardiac rehabilitation, with much less 
emphasis on how many sessions they attend. A commenter shared their 
experience that for patients who have been diligent in performing an 
exercise program prior to cardiac event and/or performing a home 
exercise program since cardiac event, only one or several sessions may 
be all that is necessary to insure that these patients will obtain the 
documented benefits of regular exercise. Another commenter shared their 
experience, particularly in the past 5-10 years, that most cardiac 
rehabilitation participants, particularly those who have not been very 
active pre- and post- cardiac event, can achieve reasonable 
improvements in exercise skills and

[[Page 580]]

confidence with just 6 to 24 sessions of cardiac rehabilitation 
exercise. To this end, many commenters expressed concern that they 
believe there is a lack of standardization around CR programs, and it 
may be unclear which number of sessions be tied to CR/ICR incentive 
payments. A commenter encouraged CMS to study the appropriate length of 
these programs.
    Response: We disagree, and refer the commenters to research 
demonstrating that beneficiaries who completed more CR sessions had 
lower mortality compared to beneficiaries that completed fewer 
sessions.175 176 We believe that the CR incentive payment 
model has an evidence-based focus on payment of the CR incentive 
payment based on the number of sessions beneficiaries attend. The 
proposed model is also focused in scope so as to best understand the 
effects on quality of care and Medicare expenditures for providing 
explicit financial incentives to CR participants to increase CR/ICR 
utilization for beneficiaries following hospitalization for treatment 
of AMI or CABG. Therefore, we believe that such research and 
development of a standardized CR program is outside the scope of the 
proposed rule.
---------------------------------------------------------------------------

    \175\ Hammill BG, Curtis LH, Schulman KA, Whellan DJ. 
Relationship between cardiac rehabilitation and long-term risks of 
mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70.
    \176\ Suaya JA, Stason WB, Ades PA, Normand ST, Shephard DS. 
Cardiac rehabilitation and survival in older coronary patients. 
Journal of the American College of Cardiology 2009; 54:25-33.
---------------------------------------------------------------------------

    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, with modification as 
discussed in the previous section, for determining the amount of the CR 
incentive payments in Sec.  512.710(a) based on CR/ICR services paid by 
Medicare to any provider or any supplier reporting place of service 
code 11 on the claim for CR beneficiaries. We are finalizing the 
proposal, without modification, in Sec.  512.710(b) for determination 
of the CR incentive payment. However, we are revising our proposed 
definitions of the terms CR amount and CR service count used in Sec.  
512.710(b) to incorporate the same limitation to include only those CR/
ICR services on supplier claims that report place of service code 11 as 
previously discussed. Therefore, CR amount means the dollar amount 
determined by the number of CR/ICR services paid by Medicare to any 
provider or to any supplier reporting place of service code 11 on the 
claim for a beneficiary in an AMI or CABG model episode or AMI care 
period or CABG care period. Similarly, CR service count means the 
number of CR/ICR services paid by Medicare to any provider or to any 
supplier reporting place of service code 11 on the claim for a 
beneficiary in an AMI or CABG model episode or AMI care period or CABG 
care period.
    As we proposed, we will determine the CR amount for a beneficiary 
in an AMI or CABG model episode or AMI care period or CABG care period 
with a CR service count less than 12 by multiplying the CR service 
count by $25. We will determine the CR amount for a beneficiary in an 
AMI or CABG model episode or AMI care period or CABG care period with a 
CR service count of 12 or more as the sum of $275 ($25 multiplied by 11 
for the first 11 CR/ICR services paid for by Medicare) and $175 
multiplied by the difference between the CR service count and 11. 
Finally, we will sum the CR amounts determined previously across the CR 
participant's beneficiaries in AMI and CABG model episodes or AMI care 
periods and CABG care periods for a given CR performance year to 
determine the CR incentive payment for the CR performance year. The 
determination of the CR incentive payment occurs at the same time that 
CMS carries out the reconciliation process for an EPM performance year.
2. Relation of CR Incentive Payments to EPM Pricing and Payment 
Policies and Sharing Arrangements for EPM-CR Participants
    We view the proposed CR incentive payments as separate and distinct 
from reconciliation payments and Medicare repayments for EPM-CR 
participants determined under Sec.  512.305(d). The determination of 
these latter payments is based on an assessment of actual episode 
payments and quality of the totality of episode services and 
coordination of those services during AMI and CABG model episodes 
within a performance year, consistent with the goals of improving 
quality and reducing costs within the model episode itself. In 
contrast, the proposed CR incentive payment under the CR incentive 
payment model is a more circumscribed and specific payment designed to 
financially incentivize increased utilization of CR/ICR services which 
may improve quality and reduce costs for AMI and CABG model 
beneficiaries in the long-term, after the episodes end. Thus, we 
proposed to determine and apply the CR incentive payment separately 
from the determination and application of reconciliation payments and 
Medicare repayments for EPM-CR participants. Moreover, we would also 
note that we proposed to make CR incentive payments to EPM-CR 
participants without application of the limitation on gains as 
specified in Sec.  512.305(c)(2)(iii)(B). This is because the 
limitation on gains is designed to mitigate potential excessive 
reductions in utilization under the EPMs, and by construction, the CR 
incentive payment would only be made when an EPM-CR participant 
increases utilization of CR/ICR services. Therefore, the CR incentive 
payment is unrelated to the comparison of actual EPM episode payment to 
the quality-adjusted target price in calculating the NPRA, to which the 
limitation on gains applies and that may ultimately result in a 
reconciliation payment to an EPM-CR participant.
    Consistent with the aforementioned proposal and for the 
aforementioned reasons, in contrast to reconciliation payments, we 
proposed to not permit the inclusion of CR incentive payments in 
sharing arrangements for EPM-CR participants specified in Sec.  
512.500. As discussed in section III.I.1. of this final rule, we 
believe that EPM participants may wish to enter into financial 
arrangements with providers and suppliers caring for EPM beneficiaries 
to share financial risks and rewards under the EPM, in order to align 
the financial incentives of those providers, suppliers, and Medicare 
ACOs with the EPM goals of improving quality and efficiency for EPM 
episodes. In contrast, the CR incentive payment for EPM-CR participants 
is specifically tied to increased utilization of CR/ICR services within 
AMI and CABG model episodes and, therefore, is designed to reward 
increased EPM-CR participant referral of AMI and CABG model 
beneficiaries to CR/ICR programs, as well as supporting beneficiary 
adherence to the referral and participation in CR/ICR services, rather 
than the quality and efficiency of EPM episodes themselves. Thus, we 
did not propose to allow CR incentive payments to be included in 
sharing arrangements, and the CR incentive payments may be shared with 
other individual and entities only under circumstances which comply 
with all existing laws and regulations, including fraud and abuse laws. 
Similarly, we did not propose that CR incentive payments be allowed to 
be shared by FFS-CR participants with other individuals and entities 
other than under circumstances which comply with all existing laws and 
regulations, including fraud and abuse laws. We refer to section VI.G. 
of this final rule for further discussion of considerations regarding 
financial arrangements under the CR incentive payment model.
    Likewise, we proposed to exclude CR incentive payments when 
updating

[[Page 581]]

quality-adjusted target prices for EPM-CR participants for performance 
years 3-5 of the EPMs because payments for CR/ICR services already 
would be captured in the claims used to update those quality-adjusted 
target prices. Therefore, we believe that including the CR incentive 
payments would result in double counting expenditures for CR/ICR 
services when updating quality-adjusted target prices. We note that 
while the CR incentive payments would not be included in the 
calculation of actual EPM episode spending or when updating quality-
adjusted target prices for EPM-CR participants, the claims for those 
CR/ICR services upon which the CR incentive payment was determined 
would be included in both calculations.
    The proposals for keeping CR incentive payments, if any, separate 
from reconciliation payments and Medicare repayments as well as 
excluding them from sharing arrangements and updating quality adjusted 
target prices for EPM-CR participants are included in Sec.  512.710(c) 
through (e). We sought comments on our proposals to keep CR incentive 
payments separate and exclusive.
    The following is a summary of the comments received and our 
responses. We refer to section VI.G of this final rule for a summary of 
the comments and our response on our discussion in the proposed rule of 
financial arrangements under the CR incentive payment model.
    Comment: A commenter raised concern that while CMS proposed to 
exclude CR incentive payments from the calculation of episode spending 
and quality-adjusted target prices for AMI and CABG episodes, the 
actual FFS payments to providers of CR/ICR services will be included in 
both calculations. To this end, another commenter suggested that if 
efforts to increase CR utilization are successful, many EPM 
participants will not be eligible for reconciliation payments; in 
addition, this commenter believes that EPM participant hospitals that 
do not have their own CR/ICR programs will not be eligible for CR 
incentive payments under the CR incentive payment model.
    Response: We acknowledge that FFS payments for CR/ICR services will 
be included in the calculation of AMI and CABG actual episode spending 
because these services are related and included in AMI and CABG 
episodes. We proposed that the CR incentive payment itself be separate 
and excluded from AMI and CABG episodes because this incentive payment 
is a more circumscribed and specific payment designed to financially 
incentivize increased utilization of CR/ICR services which may improve 
quality and reduce costs for AMI and CABG model beneficiaries in the 
long-term, after the episodes end. However, we also believe that there 
is potential for CR/ICR services to improve the quality of care and 
reduce spending during the AMI and CABG episodes themselves. For 
example, CR/ICR services for which a CR incentive payment may 
ultimately be made under the CR incentive payment model may provide 
additional transferable benefits on cost and quality to beneficiaries 
during EPM episodes, including the potential benefit experienced by 
beneficiaries simply by virtue of their participation in CR/ICR 
programs, increased interaction with the health care delivery system, 
and frequent follow-up. Furthermore, EPM-CR participants may see 
benefit from the patient's own behavior change as a result of being 
under supervision, as such interactions through CR/ICR services could 
impact, for example, adherence to medication therapies after discharge, 
and/or seeking of follow-up care from a primary care physician or 
appropriate specialist. Therefore, any increased spending for CR/ICR 
services for beneficiaries in AMI and CABG episodes attributable to 
EPM-CR participants may be offset by reductions in spending for other 
episode services, such as readmissions or emergency care. We disagree 
with the assumption that EPM-CR participants cannot achieve savings in 
the EPMs that result in reconciliation payments due to reduced spending 
on other episode service after referring EPM beneficiaries for an 
increased number of CR/ICR services over historical CR/ICR utilization. 
We also reiterate that EPM-CR participants that do not have their own 
CR/ICR programs will be eligible for CR incentive payments under the CR 
incentive payment model based on the CR/ICR utilization of AMI and CABG 
model beneficiaries attributed to them, regardless of where those 
beneficiaries receive CR/ICR services. Finally, as we stated 
previously, the design of the CR incentive payment model will enable us 
to test and improve our understanding of the effects of the CR 
incentive payment within the context of an EPM and the Medicare FFS 
program, as well as identify potential interactions between the CR 
incentive payment and the underlying EPM and FFS payment methodologies.
    Comment: A commenter recommended that the cardiac rehabilitation 
payment should be included in the bundled payment for AMI and CABG.
    Response: We assume that this comment refers to the CR incentive 
payment, and we disagree with such a recommendation as this model 
proposed a specific payment designed to financially incentivize 
increased utilization of CR/ICR services which may improve quality and 
reduce costs for AMI and CABG model beneficiaries. FFS payments for CR/
ICR services themselves are included in EPM episode spending. Thus, we 
proposed and are finalizing that the CR incentive payment be separate 
for EPM-CR participants.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, to keep 
CR incentive payments, if any, separate from reconciliation payments 
and Medicare repayments, as well as excluding them from sharing 
arrangements and updating quality-adjusted target prices for EPM-CR 
participants in Sec.  512.710(c) through (e).
3. CR Incentive Payment Report
    For CR participants to receive timely and meaningful feedback on 
their performance with respect to the proposed CR incentive payments, 
we proposed to annually issue to CR participants a report containing at 
a minimum--
     1--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 11 or fewer CR/ICR services for a beneficiary during 
the CR performance year, if any;
     2--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     3--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     4--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 12 or more CR/ICR services for a beneficiary during 
the CR performance year, if any;
     5--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4);
     6--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4); and
     7--The total amount of the CR incentive payment.

[[Page 582]]

    We also considered including additional information in the CR 
incentive payment report, including information on the number of CR/ICR 
services paid for by Medicare during each AMI or CABG model episode or 
AMI care period or CABG care period attributed to the CR participant 
during the CR performance year. However, because EPM-CR participants 
and FFS-CR participants can request more specific beneficiary-level 
data that would contain information on CR/ICR services paid for by 
Medicare for each AMI or CABG model episode or AMI care period or CABG 
care period attributed to the CR participant during the CR performance 
year, as discussed in sections III.K.2. and VI.F.3. of this final rule, 
we did not include such additional information in the CR incentive 
payment report.
    For EPM-CR participants, we proposed to issue this annual report at 
the same time we issue the reconciliation report specified in Sec.  
512.305(f). For FFS-CR participants, we proposed to issue this report 
at the same time proposed for EPM-CR participants.
    The proposal to issue a CR incentive payment report is included in 
Sec.  512.710(f). We sought comments on our proposal to issue a CR 
incentive payment report to CR participants and what other information, 
if any, would be helpful to include in the CR incentive payment report.
    We received no comments specific to our proposals for the CR 
incentive payment report.
    Final Decision: We are finalizing our proposal, without 
modification, in Sec.  512.710(f) to issue a CR incentive payment 
report for each CR performance year to EPM-CR and FFS-CR participants 
to include at a minimum --
     1--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 11 or fewer CR/ICR services for a beneficiary during 
the CR performance year, if any;
     2--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     3--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     4--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 12 or more CR/ICR services for a beneficiary during 
the CR performance year, if any;
     5--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4);
     6--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4); and
     7--The total amount of the CR incentive payment.
4. Timing for Making CR Incentive Payments
    We proposed to make CR incentive payments on a retrospective basis. 
In the case of an EPM-CR participant, these payments would occur 
concurrently with EPM reconciliation payments or repayment amounts 
assessed for a specific CR performance year which is the same as the 
performance year for the EPM, subject to the relation of the CR 
incentive payment described in section VI.E.2. of this final rule and 
the appeals process for EPM participants described in section III.D.8. 
of this final rule. In the case of a FFS-CR participant, these payments 
would occur at the same time as was proposed for EPM-CR participants, 
subject to the appeals process described in section VI.F.2. of this 
final rule.
    The proposed timing for making CR incentive payments is included in 
Sec.  512.710(g). We sought comments on our proposed timing for making 
CR incentive payments.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter stated support for the proposal to establish 
an incentive payment that would be paid retrospectively, as this 
commenter believes that cardiac rehabilitation is very important in 
improving patient health outcomes and reducing hospital readmissions. 
In contrast, another commenter offered an alternative proposal for the 
timing of CR incentive payments, and recommended CMS make interim 
incentive payments during the year so as to monitor take-up rates to 
see if the incentive level needs to be adjusted.
    Response: We appreciate the comments on the proposed timing for 
making CR incentive payments. However, we will not make interim CR 
incentive payments through the performance year based on claims for CR/
ICR services furnished to CR beneficiaries that reflect less than a 
full model performance year. Given the lag in claims submission and 
payment in the Medicare FFS program for Part B services, we are not 
confident that we could gather sufficient reliable information in a 
period of less than a year that would cause us to reconsider the CR 
incentive payment methodology, including the amount, based on accurate 
observations of complete CR/ICR service utilization for model 
beneficiaries. In addition, changing the CR incentive payment 
methodology, including the amount, would require rulemaking, for which 
we would need sufficient information on true utilization changes and 
evaluation findings to propose a revised methodology.
    Therefore, we believe that the proposed retrospective methodology 
that provides the CR incentive payment once per year to each CR 
participant after the end of the CR performance year is 
administratively straightforward for CMS and CR participants and will 
allow us to provide accurate CR incentive payments based on the CR/ICR 
utilization for CR beneficiaries. It will be possible with this payment 
methodology to monitor utilization of CR/ICR services for beneficiaries 
attributable to EPM-CR and FFS-CR participants, and we will continue to 
consider whether future proposals to change the CR incentive payment 
methodology are warranted based on our monitoring and early model 
implementation experience. Thus we are finalizing our proposed timing 
for the CR incentive payment.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for the 
timing of making CR incentive payments in Sec.  512.710(g). CMS makes 
CR incentive payments on a retrospective basis subject to the appeals 
process for EPM participants in Sec.  512.310 and makes the CR 
incentive payments, if any, at the same time as for EPM-CR 
participants, subject to the provisions in Sec.  512.720.

F. Provisions for FFS-CR Participants

1. Access to Records and Retention for FFS-CR participants
    In section III.H. of this final rule, we discuss our proposals for 
record access and retention under the EPM. The proposals describe the 
access to records and retention requirements for all EPM participants, 
including EPM-CR participants and other individuals and entities with 
respect to the EPM and CR incentive payment model, if the latter is 
applicable to the EPM participant. Two of the six categories of 
information subject to the requirements, specifically compliance with 
the requirements of the CR incentive payment model and the obligation 
to repay any CR incentive

[[Page 583]]

payments owed to CMS, are relevant only to the CR incentive payment 
model. Thus, we proposed to establish CR incentive payment model access 
to records and retention requirements for FFS-CR participants and any 
other individuals or entities providing items or services to a FFS-CR 
beneficiary that are the same as we proposed for EPM-CR participants 
and other individuals and entities but only for the two categories of 
information that are applicable to the CR incentive payment model. The 
other four categories of information proposed for records access and 
retention under the EPM, specifically the calculation, distribution, 
receipt, or recoupment of gainsharing payments, alignment payments, 
distribution payments, and downstream distribution payments; the 
quality of the services furnished; the sufficiency of beneficiary 
notifications; and the accuracy of the EPM participant's submissions 
under CEHRT use requirements, are not relevant to the CR incentive 
payment model for FFS-CR participants and other individuals and 
entities providing items and services to FFS-CR beneficiaries because 
the CR incentive payment model includes no policies that relate 
directly to these categories of information.
    The proposals for access to records and record retention for FFS-CR 
participants and other individuals and entities providing items and 
services to FFS-CR beneficiaries are included in Sec.  512.715. We 
sought comment on our proposals, including whether it is necessary, 
reasonable and appropriate to impose these access and retention 
obligations on the FFS-CR participant and other individuals and 
entities providing items and services to FFS-CR beneficiaries for the 
proposed categories of information to be retained and made accessible. 
In addition, we sought comment on whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the CR incentive payment model are 
met.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter requested that CMS lower the duration of 
record retention requirement for the CR incentive payment model from 
ten years, as this commenter believes ten years is an excessive amount 
of time for participating hospitals, collaborators, collaboration 
agents, and downstream collaboration agents to maintain documentation 
on this model.
    Response: While we appreciate the commenter's concern that ten 
years may seem excessive, we note that, once initiated, appeals and 
recalculation disputes can be lengthy processes and believe that 
maintaining this requirement as proposed would give both the 
participant and CMS, as well as those completing any audit, evaluation, 
inspection, or investigation, the resources to prepare and respond to 
issues that may take several years to surface. We continue to believe 
that these record retention requirements can be applied to categories 
of information that are broader than those solely related to financial 
arrangements, and therefore will consider requesting access to records 
that will assist in evaluating and measuring the CR incentive payment 
model goals.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification, for 
access to records and record retention for FFS-CR participants and 
other individuals and entities providing items and services to FFS-CR 
beneficiaries in Sec.  512.715.
2. Appeals Process for FFS-CR Participants
a. Overview
    In section III.D.8. (81 FR 50877 through 50880) of the proposed 
rule, we discuss our proposals for the appeals process under the EPMs. 
The proposal outlines the appeals process requirements for all EPM 
participants, including EPM-CR participants, with respect to the EPM 
and CR incentive payment model, if the latter is applicable to the EPM 
participant. CR incentive payments as well as non-payment related 
issues, such as enforcement matters, are relevant only to the CR 
incentive payment model. Thus, we proposed to establish CR incentive 
payment model appeals process for FFS-CR participants that have the 
same requirements as we proposed for the EPM but based on only the CR 
incentive payment and non-payment related issues, such as enforcement 
matters. All other appealable items under the EPM, specifically related 
to payment, reconciliation amounts, repayment amounts, determinations 
associated with quality measures affecting payment are not relevant to 
the CR incentive payment model for any FFS-CR participants because the 
CR incentive payment model includes no policies that relate directly to 
these categories of information.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
b. Notice of Calculation Error (First Level Appeal)
    We proposed the following calculation error process for the CR 
incentive payment model to contest matters related to the calculation 
of the FFS-CR participant's CR incentive payment as reflected in the CR 
incentive payment report. FFS-CR participants would review their CR 
incentive payment 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 FFS-CR participant provides 
such notice, the CR incentive payment report would be deemed final 
within 45 calendar days after it is issued, and CMS would proceed with 
payment. 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. We proposed that if a FFS-CR participant does not submit 
timely notice of a calculation error, which is notice within 45 
calendar days of the issuance of the CR incentive payment report, the 
FFS-CR participant would be precluded from later contesting the CR 
incentive payment report for that CR performance year.
    In summary, we proposed the following requirements in Sec.  
512.720(a) for notice of calculation error:
     Subject to the limitations on review in subpart H of this 
part, if a FFS-CR participant wishes to dispute calculations involving 
a matter related to a CR incentive payment, the FFS-CR participant is 
required to provide written notice of the calculation error, in a form 
and manner specified by CMS.
     Unless the FFS-CR participant provides such notice, CMS 
deems final the applicable CR incentive payment report 45 calendar days 
after the applicable CR incentive payment report is issued and proceeds 
with the payment as applicable.
     If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the applicable CR incentive payment 
report, CMS responds in writing within 30 calendar days to either 
confirm that there was an error in the calculation or verify that the 
calculation is correct, although CMS reserves the right to an extension 
upon written notice to the FFS-CR participant.
     Only FFS-CR participants may use the notice of calculation 
error process described in this subpart.

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    We sought comment on the proposed notice of calculation error 
requirements.
    Final Decision: We did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
c. Dispute Resolution Process (Second Level of Appeal)
    We proposed the following dispute resolution process. First, we 
proposed that only a FFS-CR participant may utilize this dispute 
resolution process. Second, in order to access the dispute resolution 
process a FFS-CR participant must have timely submitted a calculation 
error form, as previously discussed, regarding the CR incentive 
payment. We proposed these matters would include any amount or 
calculation indicated on a CR incentive payment report, including 
calculations not specifically reflected on a CR incentive payment 
report but which generated figures or amounts reflected on a CR 
incentive payment report. We proposed calculation of CR incentive 
payment amounts would need to be first adjudicated by the calculation 
error process as previously detailed. If a FFS-CR participant wants to 
engage in the dispute resolution process with regard to the calculation 
of a CR incentive payment amount, we proposed it would first need to 
submit a calculation error form. Where the FFS-CR participant does not 
timely submit a calculation error form, we proposed the dispute 
resolution process would not be available to the FFS-CR participant 
with regard to the CR incentive payment report for that CR performance 
year.
    If the FFS-CR participant did timely submit a calculation error 
form and the FFS-CR participant is dissatisfied with CMS' response to 
the FFS-CR participant's notice of calculation error, the FFS-CR 
participant 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 FFS-CR participant's assertion that 
CMS or its representatives did not accurately calculate CR incentive 
payment in accordance with CR incentive payment model rules.
    Where the matter is unrelated to payment, such as termination from 
the CR incentive payment model, the FFS-CR participant need not submit 
a calculation error form. We proposed to require the FFS-CR participant 
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 proposed CMS would process the request as discussed later in this 
section.
    We proposed 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 
FFS-CR participant in writing within 15 calendar days of receiving the 
FFS-CR participant'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 view 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 final rule) would apply to reviews conducted pursuant to the 
reconsideration review process for the CR incentive payment model. 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.
    In summary, we proposed the following requirements in Sec.  512.720 
(b) for the reconsideration process:
     If the FFS-CR participant is dissatisfied with CMS' 
response to the notice of a calculation error, the FFS-CR participant 
may request a reconsideration review in a form and manner as specified 
by CMS.
     The reconsideration request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the FFS-CR participant's assertion that CMS or its 
representatives did not accurately calculate the CR incentive payment 
in accordance with subpart H of this part.
     If CMS does not receive a request for reconsideration from 
the FFS-CR participant within 10 calendar days of the issue date of 
CMS' response to the FFS-CR participant's notice of calculation error, 
then CMS' response to the calculation error is deemed final and CMS 
proceeds with the applicable processes, as described in subpart H of 
this part.
     The CMS reconsideration official notifies the FFS-CR 
participant in writing within 15 calendar days of receiving the FFS-CR 
participant's review request of the following:
    ++ The date, time, and location of the review.
    ++ The issues in dispute.
    ++ The review procedures.
    ++ The procedures (including format and deadlines) for submission 
of evidence. 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 notification.
     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 the FFS-CR participant.
     The CMS reconsideration official issues a written 
determination within 30 days of the review. The determination is final 
and binding.
     Only a FFS-CR participant may utilize the dispute 
resolution process described in this subpart. We sought comment on the 
proposed reconsideration process for the CR incentive payment model.
    Final Decision: We did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
d. Exception to the Notice of Calculation Error Process and Notice of 
Termination
    If the FFS-CR participant contests a matter that does not involve 
an issue contained in, or a calculation which contributes to a CR 
incentive payment report, a notice of calculation error is not 
required. In instances where a notice of calculation error is not 
required, for example a FFS-CR participant's termination from the CR 
incentive payment model, we proposed the FFS-CR participant provide a 
written notice to CMS requesting review within 10 calendar days of the 
notice. CMS has 30 days to respond to the FFS-CR participant's request 
for review. If the FFS-CR participant fails to notify CMS, the decision 
is deemed final.
    In summary, we proposed the following requirements in Sec.  512.720 
(c) for an exception to the notice of calculation error process:
     If the FFS-CR participant contests a matter that does not 
involve an issue contained in, or a calculation which contributes to a 
CR incentive payment report a notice of calculation error is not 
required. In these instances, if CMS does not receive a request for 
reconsideration from the FFS-CR participant within 10 calendar days of 
the notice of the initial determination, the initial determination is 
deemed final and CMS proceeds with the action indicated in the initial 
determination. This does not apply to the limitations on review in sub-
paragraph (e).

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    In summary, we proposed the following requirements in Sec.  512.720 
(d) for notice of termination:
     If an FFS-CR participant receives notification that it has 
been terminated from the CR incentive payment model, it must provide a 
written request for reconsideration to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the FFS-CR participant's request for review. If the FFS-CR 
participant fails to notify CMS, the termination is deemed final.
    We sought comment on the proposed exception to the process and 
notice of termination.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
e. Limitations on Review
    In summary, we proposed the following requirements in Sec.  
512.720(e) for 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:
    ++ 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 section 
1115A(b)(3) of Act.
    ++ The termination or modification of the design and implementation 
of a model under section 1115A(b)(3)(B) of Act.
    ++ Decisions to expand 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.
    We sought comment on the proposed limitations on review.
    The proposals for the appeals process for FFS-CR participants are 
included in Sec.  512.720. We sought comment on our proposals for the 
appeals process as it related to FFS-CR participants. The two-step 
appeal process for payment matters--(1) calculation error form, and (2) 
reconsideration review--is used broadly in other CMS models. We sought 
comment on whether we should develop an alternative appeal process. In 
addition, we sought comment on whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the CR incentive payment model are 
met.
    Final Decision: CMS did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
3. Data Sharing for FFS-CR Participants
a. Overview
    Section III.K. of the proposed rule (81 FR 50945 through 50948) 
discussed our proposed policies for the types and formats of financial 
data that we would make available to EPM participants, the frequency 
with which we would make these data available, and the authority for 
making these data available to EPM participants. Specifically, in 
section III.K.2. of the proposed rule (81 FR 50946), we proposed to 
provide certain financial data in two formats. First, we proposed to 
make summary beneficiary claims data reports on beneficiaries' use of 
health care services during the baseline and performance periods upon 
request and in accordance with applicable privacy and security laws and 
established privacy and security protections. These data would consist 
of summary claims data reports that would contain payment information 
such as episode counts, total average spending for each episode, based 
upon categories, including, inpatient services, outpatient services, 
skilled nursing facility services, and carrier/Part B services. 
Alternatively, for EPM participants with the capacity to analyze raw 
claims data, we proposed to make more detailed beneficiary-level 
information available upon request and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. In addition to these more detailed data, we proposed to 
include episode summaries, indicators for excluded episodes, diagnosis 
and procedure codes, and enrollment and dual eligibility information 
for beneficiaries that initiate EPM episodes. In section III.K.2. of 
the proposed rule (81 FR 50945 through 50947), we also noted our view 
that making this information available to EPM participants would 
provide the participants with tools to monitor, understand, and manage 
utilization and expenditure patterns as well as to develop, target, and 
implement quality improvement programs and initiatives.
    In addition to the aforementioned data, we proposed in section 
III.K.3. of the proposed rule (81 FR 50945) to provide comparable 
aggregate regional data to EPM participants. Our proposal to make these 
regional data available was based on our proposal to use regional 
pricing data to determine benchmark and quality-adjusted target prices 
for EPM participants, and these aggregate regional data would assist 
participants in better understanding the basis of these prices. In 
section III.K.4. of the proposed rule (81 FR 50946), we proposed to 
make 3 years of baseline data available to EPM participants prior to 
the models' start date, which we believe would help the participants 
assess their practice patterns, identify cost drivers, and ultimately 
redesign their care practices to improve efficiency and quality. In 
section III.K.5. of the proposed rule (81 FR 50946), we proposed to 
provide to EPM participants, upon request and in accordance with the 
HIPAA Privacy Rule, up to 6 quarters of claims data as frequently as on 
a quarterly basis throughout the EPM participant's participation or 
until they notify CMS that they no longer wish to receive these data.
    As we stated in section III.K.6 of the proposed rule (81 FR 50946 
through 50947), we believe our proposals are consistent with and 
authorized under 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 would 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). As we stated in 
section III.K.6. of the proposed rule (81 FR 50944 through 50945), EPM 
participants would be using the data on their patients to evaluate the 
performance of the participant 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

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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, we noted our view that 
this provision covers the uses we would expect under the proposed EPMs. 
We also noted our view that, in proposing to make available the 
``minimum necessary'' data to accomplish the intended purpose of the 
use, our proposal was consistent with 45 CFR 164.502(b). Last, we 
stated our belief that our proposed data disclosures are consistent 
with the purpose for which the data discussed in the proposed rule was 
collected and may be disclosed in accordance with the routine uses 
exception to the Privacy Act, which would otherwise prohibit 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)). For a more detailed discussion of our proposals and 
authority for sharing data with EPM participants, please see section 
III.K. of this final rule.
b. Data Sharing With CR Participants
    As is the case with the proposed EPMs, we believe that making 
certain beneficiary-identifiable claims information available, upon 
request and in accordance with applicable privacy and security laws and 
established privacy and security protections, is necessary for CR 
participants to best improve their performance with respect to 
increasing utilization of CR/ICR services, which we believe should 
result in improved health care outcomes and reduced health care costs. 
However, we believe that a more limited set of data would be needed for 
purposes of testing the CR incentive payment model than would be made 
available under the proposed EPMs. This is because the purposes and 
processes related to the proposed CR incentive payment model are 
narrower in focus than under the proposed EPMs where hospitals must 
coordinate care across a broader array of providers and services to 
improve health care quality across a broader range of dimensions. Also, 
unlike the EPMs where a participant's performance each performance year 
is compared against historical spending, the CR incentive payments are 
based only on a CR participant's CR/ICR service utilization performance 
within a given CR performance year. Further, CR incentive payments are 
tied only to the CR participant's performance and are unrelated to 
performance within a region.
    Thus, upon request and in accordance with applicable privacy and 
security laws and established privacy and security protections, we 
proposed to make the following data available to FFS-CR participants:
     Inpatient claims--containing potential admissions for CABG 
and AMI MS-DRGs (and PCI DRGs with an AMI ICD-CM diagnosis code in the 
principal or any secondary diagnosis code position).
     Carrier and Outpatient claims--containing CR/ICR services 
that occurred in the 90- day period after discharge (called the AMI 
care period or CABG care period).
    We would note that our proposal pertains only to FFS-CR 
participants and not to EPM-CR participants. This is because an EPM-CR 
participant that has requested data under the EPM would already have 
had the data previously described made available to them under their 
broader data sharing request. As such, we believe that also making 
these data separately available to EPM-CR participants would be 
duplicative and could create confusion for participants. We also note 
that we did not propose to make historical payment or aggregate 
regional payment data available to FFS-CR participants. This is 
because, as previously discussed, neither historical nor regional CR/
ICR service utilization performance would be factors considered when 
determining their eligibility for or the amount of a CR incentive 
payment.
    As is the case for our proposed data sharing with EPM participants, 
we proposed to make these data available in either summary or claims-
level format, depending on the FFS-CR participant's request. Also, we 
proposed to make these data available consistent with the same schedule 
we proposed to use for making data available to EPM participants and to 
make available up to 6 quarters of claims data as frequently as on a 
quarterly basis throughout the FFS-CR participant's participation or 
until they notify CMS that they no longer wish to receive these data. 
As is the case with the EPMs, we proposed that the data files would be 
packaged and sent to a data portal (to which the FFS-CR participants 
must request and be granted access) in a ``flat'' or binary format for 
the FFS-CR participant to retrieve.
    The proposal to share data with FFS-CR participants is included in 
Sec.  512.725. We sought comments on our data sharing proposals.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters were supportive of CMS' efforts to provide 
beneficiary-level and summary claims data available to selected FFS 
hospitals selected for the CR incentive payment model upon request. 
Commenters also were supportive of our proposal to make this data 
available as frequently as monthly, and encouraged us to follow a 
monthly data release schedule for FFS-CR participants as soon as the 
EPMs are implemented, instead of sending the FFS-CR data quarterly 
since more frequent data updates would be useful in managing care under 
EPMs.
    Response: We appreciate these comments and realize that more 
frequent data releases will assist many hospitals that are selected for 
the CR incentive payment model in understanding care patterns and 
identifying opportunities for improved efficiencies in care delivery. 
Accordingly, we are modifying our proposal to make these data available 
on a quarterly basis to make these data available ``no less 
frequently'' than on a quarterly basis with the goal of making these 
data available on a monthly basis as soon as we have the operational 
capabilities needed for monthly distribution.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal at Sec.  512.725(b)(2) to no 
longer limit the availability of updated CR data to a frequency ``as 
frequently as on a quarterly basis throughout the FFS-CR participant's 
participation'' to instead ``no less frequently than on a quarterly 
basis throughout the FFS-CR participant's participation'' with the goal 
of making these data available as frequently as on a monthly basis if 
practicable.
4. Compliance Enforcement for FFS-CR Participants and Termination of 
the CR Incentive Payment Model
    In section III.F. (81 FR 50911 through 50914) of the proposed rule, 
we discuss our proposals for compliance enforcement under the EPM. The 
proposal outlines the non-compliance by EPM participants, including 
EPM-CR participants with respect to the EPMs and CR incentive payment 
model, if the latter is applicable to the EPM participant that may 
trigger compliance enforcement by CMS and the enforcement mechanisms 
available to CMS. Four out of the seven remedial actions, specifically 
issuing a warning letter to the EPM participant, requiring the EPM 
participant to develop a corrective action plan, commonly referred to 
as a CAP, reducing or eliminating the EPM participant's CR incentive 
payment, and terminating the EPM participant from the CR incentive 
payment model, are relevant to the CR incentive payment model. Thus, we

[[Page 587]]

proposed to establish compliance enforcement for the CR incentive 
payment model for FFS-CR participants that is substantively similar to 
the requirements as we proposed for the EPM but that the CMS 
enforcement mechanisms may use with FFS-CR participants be the four 
remedial actions previously listed in this section. All other types of 
enforcement mechanisms under the EPMs, specifically, reducing or 
eliminating the EPM participant's reconciliation payment, requiring the 
EPM participant to terminate a sharing arrangement with an EPM 
collaborator and prohibiting the EPM collaborator from further 
engagement in sharing arrangements with the EPM participant, and 
allowing CMS to add 25 percent to a repayment amount on an EPM 
participant's reconciliation report under certain circumstances, are 
not relevant to the CR incentive payment model for any FFS-CR 
participants because the CR incentive payment model includes no 
policies that relate directly to these categories of activity.
    Another distinction between the policies proposed under the EPMs 
and the CR incentive payment model is regarding prevention of EPM-CR 
participants from avoiding the high cost and high severity patients and 
targeting low cost and low severity patients. Under the EPMs, we 
prohibit EPM participants from avoiding both potentially high cost or 
high severity patients and targeting both potentially low cost or low 
severity patients. Under the CR incentive payment model we are only 
concerned with FFS-CR participants avoiding high severity patients and 
targeting low severity patients. The goal of EPMs is to maintain or 
improve quality and coordination of care while reducing program 
expenditures. In contrast, the goals of the CR incentive payment model 
are to reduce cardiovascular mortality, improve health-related quality 
of life, and reduce the risk of hospital admission. The EPMs explicit 
prohibition of avoiding high cost and targeting low cost patients is 
not included for the FFS-CR participants as cost savings are not a goal 
for participants under the CR incentive payment model.
    We proposed that CMS would have the remedial actions detailed in 
this section available for use against FFS-CR participants where such 
FFS-CR participant furnishing CR services to a beneficiary during the 
CR incentive payment model is not compliant in a matter listed in Sec.  
512.730(b)(1). These mechanisms would support CMS' goal for the CR 
incentive payment model to prevent overutilization of CR services that 
are not medically necessary, prevent FFS-CR participants from avoiding 
high severity patients and seeking out low severity patients, safeguard 
program integrity, protect against fraud and abuse, and deter 
noncompliance with CR incentive payment model requirements.
    Upon discovering an instance of noncompliance by a FFS-CR 
participant with the requirements of the CR incentive payment model, 
CMS, HHS, or a designee of such Agencies may take remedial action 
against such FFS-CR participant. Any information collected by CMS in 
relation to termination of a participant from the model would be shared 
with our program-integrity colleagues at HHS, the Department of 
Justice, and their respective designees. Should such participant, or 
one of its EPM collaborators, collaboration agents, or downstream 
collaboration agents, be noncompliant with the requirements of the EPMs 
or engage in unlawful behavior related to participation in the EPMs, we 
note that such information could be used in proceedings unrelated to 
the enforcement mechanisms in this section. FFS-CR participants also 
would be subject to all applicable requirements and conditions for 
Medicare participation not otherwise waived under section 1115A(d)(1) 
of the Act.
    In summary, we proposed in Sec.  512.730 that FFS-CR participants 
must comply with all requirements outlined in subpart H. Except as 
specifically noted subpart H, the regulations under this part must not 
be construed to affect the payment, coverage, program integrity, or 
other requirements (such as those in parts 412 and 482 of this chapter) 
that apply to providers and suppliers under this chapter.
    Further, we proposed in Sec.  512.730 that CMS may take the 
remedial actions later discussed in this section, if a FFS-CR 
participant--
     Fails to comply with any requirements of this subpart or 
is identified as noncompliant through monitoring by HHS (including CMS 
and OIG) of the CR incentive payment model, including but not limited 
to--
    ++ Avoiding potentially high-severity patients;
    ++ Targeting potentially low-severity patients;
    ++ Failing to provide medically appropriate services or 
systematically engaging in the over or under-delivery of appropriate 
care;
    ++ Failing to provide beneficiaries with complete and accurate 
information; or
     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 of this chapter;
     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 of this subpart;
     Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CR incentive payment model, 
or fails to take any action that CMS determines for program integrity 
reasons should have been taken to further the best interests of the CR 
incentive payment 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; or
     Is subject to action involving violations of the physician 
self-referral law, civil monetary penalties law, federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the CR incentive payment model.
    We proposed the remedial actions to include the following:
     Issuing a warning letter to the FFS-CR participant.
     Requiring the FFS-CR participant to develop a corrective 
action plan, commonly referred to as a CAP.
     Reducing or eliminating the FFS-CR participant's CR 
incentive payment.
     Terminating the FFS-CR participant from the CR incentive 
payment model.
    The proposals for compliance enforcement for FFS-CR participants 
are included in Sec.  512.730. We sought comment on our proposals for 
compliance enforcement as it is related to FFS-CR participants. In 
addition, we sought comment on whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the CR incentive payment model are 
met.
    We further proposed under Sec.  512.905, CMS may terminate the CR 
incentive payment model for reasons including but not limited to--
     CMS no longer has the funds to support the CR incentive 
payment model; or
     CMS terminates the applicable model in accordance with 
section

[[Page 588]]

1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) of the 
Act, termination of the model is not subject to administrative or 
judicial review.
    Final Decision: We did not receive any comments on this section. 
Therefore, we are finalizing the proposal without modification.
5. Enforcement Authority for FFS-CR Participants
    OIG authority is not limited or restricted by the provisions of the 
CR incentive payment model, including the authority to audit, evaluate, 
investigate, or inspect the FFS-CR participants. Additionally, no CR 
incentive payment model provisions limit or restrict the authority of 
any other Government Agency to do the same.
    The proposals for enforcement authority for FFS-CR participants in 
the CR incentive payment model were included in proposed Sec.  512.735. 
We sought comment 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 CR incentive payment model are 
met.
    We received no comments on the proposals for enforcement authority 
for FFS-CR participants in the CR incentive payment model.
    Final Decision: We are finalizing the proposals in Sec.  512.735 
for the enforcement authority for FFS-CR participants, without 
modification. In the final provisions:
     OIG authority is not limited or restricted by the 
provisions of the CR incentive payment model, including the authority 
to audit, evaluate, investigate, or inspect the FFS-CR participant, or 
any other person or entity or their records, data, or information, 
without limitation.
     None of the provisions of the CR incentive payment model 
limits or restricts the authority of any other government agency 
permitted by law to audit, evaluate, investigate, or inspect the FFS-CR 
participant or any other person or entity or their records, data, or 
information, without limitation.
6. Beneficiary Engagement Incentives for FFS-CR Participants
    We proposed to allow EPM participants to provide beneficiary 
engagement incentives under certain conditions as discussed in section 
III.I.9. of the proposed rule (81 FR 50929 through 50931) based on the 
goals of the EPM to improve EPM episode quality and efficiency. The 
goals of the CR incentive payment model in which some EPM participants 
would also participate are to increase CR/ICR service care coordination 
and the medically necessary utilization of CR/ICR services in AMI and 
CABG model episodes for EPM-CR participants and in AMI care periods and 
CABG care periods for FFS-CR participants. In the proposed rule, we 
discussed our belief that one mechanism that may be useful to CR 
participants in achieving this goal would be the provision of 
transportation to CR/ICR services as in-kind patient engagement 
incentives to AMI and CABG model beneficiaries and beneficiaries in AMI 
care periods and CABG care periods (hereinafter FFS-CR beneficiaries). 
As discussed earlier in this section, lack of accessibility of CR 
program sites can be a significant barrier to beneficiary adherence to 
a CR treatment plan. We did not believe there were beneficiary 
engagement incentives other than transportation that would be important 
for achieving the CR incentive payment model goals of increasing CR/ICR 
service care coordination and the medically necessary utilization of 
CR/ICR services. However, we believed that EPM-CR and FFS-CR 
participants should generally have the same regulatory flexibilities 
that are directly relevant to advancing the CR incentive payment model 
goals so that we could evaluate the CR incentive payment model under 
the two different underlying payment methodologies for AMI and CABG 
care (episode or FFS) and draw conclusions about the relationship 
between the CR incentive payment model and the underlying payment 
methodology for care.
    Under the proposed beneficiary engagement incentive policies for 
the EPM, EPM-CR participants would be able to provide beneficiary 
transportation to CR/ICR services in order to achieve the clinical goal 
of the EPM of beneficiary adherence to a care plan, subject to certain 
conditions on these incentives that are necessary to ensure that their 
provision is solely for the purpose of achieving the EPM goals of 
improvements in episode quality and efficiency. When transportation is 
provided by an EPM-CR participant as a beneficiary engagement incentive 
for CR/ICR services, its use would also be aligned with the CR 
incentive payment model goals of increasing CR/ICR service care 
coordination and the medically necessary utilization of CR/ICR 
services. Thus, our proposal for beneficiary engagement incentives 
under the EPM met the potential need for transportation to CR/ICR 
services for AMI and CABG model beneficiaries under an EPM-CR 
participant.
    We proposed to allow FFS-CR participants to provide transportation 
to CR/ICR services as a beneficiary engagement incentive for FFS-CR 
beneficiaries during AMI care periods and CABG care periods to allow 
these participants similar use of beneficiary engagement incentives to 
achieve the CR incentive payment model goals as would be available to 
EPM-CR participants for that purpose. We proposed the same conditions 
on beneficiary engagement incentives provided by FFS-CR participants as 
would be applicable to EPM beneficiary engagement incentives when those 
beneficiary incentives are transportation.
    The proposed conditions for transportation when provided as a 
beneficiary engagement incentive by FFS-CR participants were--
     The incentive must be provided directly by the FFS-CR 
participant or by an agent of the FFS-CR participant under the FFS-CR 
participant's direction and control to the FFS-CR beneficiary during an 
AMI care period or CABG care period;
     Transportation must not be tied to the receipt of items or 
services other than CR/ICR services during AMI care periods or CABG 
care periods;
     Transportation must not be tied to the receipt of items or 
services from a particular provider or supplier;
     The availability of transportation must not be advertised 
or promoted except that a beneficiary may be made aware of the 
availability of transportation at the time the beneficiary could 
reasonably benefit from it;
     The cost of transportation must not be shifted to another 
federal health care program, as defined at section 1128B(f) of the Act.
    In addition, as we would apply to transportation as a beneficiary 
engagement incentive under the EPMs, we proposed the same documentation 
requirements for beneficiary engagement incentives provided by FFS-CR 
participants;
     FFS-CR participants must maintain documentation of 
transportation furnished as a beneficiary engagement incentive that 
exceeds $25 in retail value;
     The documentation established contemporaneously with the 
provision of transportation must include at least the following:
    ++ The date the transportation is provided.
    ++ The identity of the beneficiary to whom the transportation was 
provided.

[[Page 589]]

     The FFS-CR participant must retain and provide access to 
the required documentation in accordance with Sec.  512.715.
    Our proposals for beneficiary engagement incentives provided by 
FFS-CR participants were included in proposed Sec.  512.740. We sought 
comment on our proposed provisions for beneficiary engagement 
incentives for FFS-CR participants and welcomed comment on additional 
or alternative program integrity safeguards. We also sought comment 
about beneficiary engagement incentives other than transportation that 
could advance the CR incentive payment model goals of increased CR/ICR 
service care coordination and the medically necessary utilization of 
CR/ICR services in AMI care periods and CABG care periods.
    The following is a summary of the comments received and our 
responses.
    Comment: Multiple commenters claimed that a significant barrier to 
CR/ICR program participation is beneficiary cost-sharing due to the 
high cumulative costs associated with completion of multi-session CR/
ICR treatment, although the evidence is largely anecdotal. A commenter 
referenced a recent study that found that in a multiracial population, 
low socioeconomic status, lack of insurance and copayment were 
independent risk factors of poor adherence to CR after adjusting for 
race. They stated that additional research in this area would be 
helpful in addressing cost as a barrier to participation in CR/ICR 
services. The commenters urged CMS to lower or eliminate beneficiary 
copayments under the CR incentive payment model. A commenter suggested 
that a tiered-copayment structure could be applied that would provide 
successive reductions in copayments the longer the beneficiary remains 
in the program. In this example, the first six sessions would be a full 
copayment, followed by a percentage reduction for the next six and an 
additional percentage reduction for the remaining sessions. Another 
commenter requested that CMS allow CR incentive payment model 
participants to use the CR incentive payment to decrease the cumulative 
copayment for CR services and claims that this would assist in 
increasing the utilization of CR/ICR services.
    Response: We appreciate the interest of the commenters in 
additional strategies that could assist in beneficiary adherence to the 
recommended CR/ICR treatment plan for those who are included in the CR/
ICR incentive payment model. We note that most beneficiaries in 
traditional Medicare have supplemental coverage, specifically employer-
sponsored, Medicaid, and Medigap in descending order of 
prevalence.\177\ In 2011, only 19 percent of beneficiaries in 
traditional Medicare did not have supplemental coverage. Thus, while we 
recognize that without supplemental coverage the cumulative copayments 
associated with multiple sessions of CR/ICR services could be 
significant and discourage beneficiary participation, most of the 
beneficiaries in the CR/ICR incentive payment model would not 
experience significant out-of-pocket costs for the services themselves 
because their supplemental coverage would help to cover those costs. 
Thus, we do not believe it is necessary to lower or eliminate 
beneficiary copayments in order to test the CR incentive payment model 
under Medicare FFS, and we have concerns that such provisions could 
result in program integrity issues such as patient steering toward a 
particular provider.
---------------------------------------------------------------------------

    \177\ The Henry J. Kaiser Family Foundation. An Overview of 
Medicare. April 1, 2016. http://kff.org/medicare/issue-brief/an-overview-of-medicare.
---------------------------------------------------------------------------

    Comment: A number of commenters expressed support for CMS' proposal 
to allow transportation to be provided as a beneficiary engagement 
incentive under the CR incentive payment model by FFS-CR participants. 
The commenters agreed that transportation is a fundamental beneficiary 
engagement incentive that will increase access to CR/ICR services by 
removing barriers to enrollment and attendance. Several commenters 
requested clarification about whether specific types of support would 
qualify as transportation under the proposed beneficiary engagement 
incentives policy, including parking fees, rebates, or waivers; taxi 
services; gasoline for mileage traveled to CR/ICR services; a gas card; 
and public transportation card. With regard to the specific types of 
potential transportation support listed, a commenter urged CMS to 
clarify that FFS-CR participants have flexibility in how they offer the 
benefit. Another commenter recommended that CMS allow a higher amount 
of transportation incentives for beneficiaries residing in rural MSAs 
for whom accessibility of the CR/ICR program is a greater challenge. A 
commenter who favored allowing FFS-CR participants greater flexibility 
beyond transportation to provide beneficiary engagement incentives 
nevertheless requested that should CMS not create parity in the 
beneficiary engagement incentives that can be offered by EPM-CR and 
FFS-CR participants, CMS should revise the proposal to clarify that 
transportation both to and from CR/ICR services would be permitted. 
Finally, the same commenter requested that CMS clarify the requirement 
that transportation must not be tied to the receipt of items or 
services from a particular provider or supplier other than the FFS-CR 
participant. As proposed, the commenter believes a FFS-CR participant 
would be prohibited from furnishing transportation to its site in order 
for a Medicare beneficiary to receive CR or ICR services from that FFS-
CR participant.
    While many commenters expressed appreciation for CMS' proposal to 
allow FFS-CR participants to offer transportation as a beneficiary 
engagement incentive, the commenters urged CMS to broaden the types of 
beneficiary engagement incentives that can be provided by FFS-CR 
participants to model beneficiaries beyond transportation. A commenter 
pointed out that the proposal would allow EPM-CR participants to 
provide the broader set of beneficiary engagement incentives available 
under the EPM to EPM-CR beneficiaries, allowing EPM-CR participants the 
flexibility to choose the most appropriate incentives, as long as the 
requirements for providing them under the EPM are met. The commenter 
reiterated CMS' stated intent in the proposed rule to create parity 
between EPM-CR and FFS-CR participants regarding the available 
regulatory flexibilities directly relevant to advancing the CR 
incentive payment model goals and disagreed that CMS' proposal for 
beneficiary engagement incentives that could be offered by FFS-CR 
participants would meet that objective. The commenter urged CMS to 
apply the EPM beneficiary engagement incentive provisions to both EPM-
CR and FFS-CR participants. The commenter reasoned that doing so would 
enable all CR participants to develop innovative methods of increasing 
beneficiary utilization of CR/ICR programs and improving beneficiary 
adherence to CR/ICR program regimens. The commenter further 
acknowledged that even if in practice the vast majority of CR/ICR 
programs ultimately relied exclusively on providing transportation as a 
beneficiary engagement incentive, CMS would nevertheless have created 
the opportunity for both EPM-CR and FFS-CR participants to explore 
alternatives.
    Other commenters provided specific examples of items and services 
that could be provided as beneficiary engagement incentives that would 
assist in increasing CR/ICR program enrollment and adherence to the CR/
ICR

[[Page 590]]

treatment plan, including mobile applications for phones to text health 
messages between sessions; activity devices to track calories and 
steps; and evidence-based support/counseling weight management services 
or programs. A commenter asserted that these items and services would 
be allowed as beneficiary engagement incentives in the EPM and have 
been shown to improve adherence and foster self-management behaviors in 
the CR setting. Several commenters recommended that CR participants be 
able to offer financial incentives to model beneficiaries, such as a 
per session payment of $10 to $20 if the beneficiary completes the 
treatment program; payment by the CR participant to rebate part of the 
beneficiary's copayment to reward adherence; or a financial incentive 
that offers assistance to accommodate work or child/elder care 
obligations while the beneficiary attends CR/ICR sessions. Other 
commenters suggested that beneficiary engagement incentives could 
include vouchers for continued enrollment in exercise programs; gym 
memberships; diet and nutrition services and tobacco cessation 
services; and a preventive cardiology visit for review and reassessment 
of patient-centric goals. Another commenter requested clarification 
about regarding beneficiary engagement incentives can be used to assist 
with incorporating technology platforms needed to operate home-based 
cardiac rehabilitation.
    Response: We appreciate the support of the commenters for our 
proposal to allow FFS-CR participants to provide transportation as a 
beneficiary engagement incentive to FFS-CR beneficiaries and the robust 
information provided by the commenters about other beneficiary 
engagement incentives that could help FFS-CR participants to advance 
the goals of the CR incentive payment model of increasing CR/ICR 
service care coordination and the medically necessary utilization of 
CR/ICR services for beneficiaries following hospitalization for AMI or 
CABG. As we stated in the proposed rule (81 FR 50897), we believe that 
EPM-CR and FFS-CR participants should generally have the same 
regulatory flexibilities that are directly relevant to advancing the CR 
incentive payment model goals so that we can evaluate the CR incentive 
payment model under the two different underlying payment methodologies 
for AMI and CABG care (episode or FFS) and draw conclusions about the 
relationship between the CR incentive payment model and the underlying 
payment methodology for care. While undoubtedly transportation has the 
potential to be an important beneficiary engagement incentive for FFS-
CR beneficiaries to enhance their adherence to the CR/ICR treatment 
plan, we believe that our proposal for FFS-CR beneficiary engagement 
incentives was too narrow and would not have allowed FFS-CR 
participants sufficient flexibility to provide other beneficiary 
engagement incentives to help advance the goals of the model, while 
EPM-CR participants may be able to provide those incentives based on 
their participation in the EPM, as discussed in section III.I.9. of 
this final rule. Therefore, we will adopt beneficiary engagement 
incentive requirements for FFS-CR participants that are modeled closely 
after those we are finalizing for the EPMs to address the interests of 
the commenters in providing a broader array of beneficiary incentives 
under the CR incentive payment model and aligning the requirements for 
EPM-CR and FFS-CR participants who want to furnish beneficiary 
incentives to EPM-CR and FFS-CR beneficiaries. We sought comment on the 
proposal for beneficiary engagement incentives in the EPMs and respond 
to those comments in section III.I.9. of this final rule.
    We note that under the EPMs, the item or service provided as a 
beneficiary engagement incentive must be a preventive care item or 
service or an item or service that advances a clinical goal for a 
beneficiary in an EPM episode, where the goals are--
     Beneficiary adherence to drug regimens;
     Beneficiary adherence to care plan;
     Reduction of readmissions and complications resulting from 
treatment for the EPM clinical condition; and
     Management of chronic disease and conditions that may be 
affected by treatment for the EPM clinical condition.
    FFS-CR participants are responsible for increasing CR/ICR service 
care coordination and the medically necessary utilization of CR/ICR 
services for beneficiaries following hospitalization for AMI or CABG. 
The AMI and CABG models both focus on beneficiaries with the same 
clinical conditions as the CR incentive payment model. The CR incentive 
payment model's ultimate goal is improving beneficiary health and 
reducing the cost of health care. Increased utilization of CR/ICR 
services for beneficiaries following AMI and CABG is known to 
contribute to that ultimate goal based on the components of the CR/ICR 
program, and the utilization of CR/ICR services for which the model 
will make a CR incentive payment is only an interim process measure 
that has an association with the longer-term outcomes we are seeking to 
achieve.
    Section 410.49(b)(2) defines the components of a cardiac 
rehabilitation and an intensive cardiac rehabilitation program as:
     Physician-prescribed exercise each day cardiac 
rehabilitation items and services are furnished;
     Cardiac risk factor modification, including education, 
counseling, and behavioral intervention, tailored to the patients' 
individual needs;
     Psychosocial assessment;
     Outcomes assessment; and
     An individualized treatment plan detailing how components 
are utilized for each patient.
    Therefore, we believe that the clinical goals of the CR model for 
the purpose of FFS-CR participants providing beneficiary engagement 
incentives can be appropriately identified as the same as those of the 
EPMs, related to improving beneficiary adherence to recommended 
treatments and improving beneficiary health. We will identify the same 
clinical goals for beneficiary engagement incentives that may be 
provided by FFS-CR participants as for the EPMs, noting that some 
contribute to the immediate CR incentive payment model objective of 
increasing CR/ICR service utilization (for example, beneficiary 
adherence to a care plan) and others to the longer-term improvement of 
beneficiary health that is expected to result from increased 
utilization of CR/ICR services (for example, management of chronic 
disease and conditions that may be affected by treatment for AMI or 
CABG).
    The final regulations for the beneficiary engagement incentive 
payments that may be provided by FFS-CR participants are parallel to 
the final regulations for beneficiary engagement incentives under the 
EPMs, with the exception of the conforming changes that are necessary 
due to FFS-CR participant participation in the CR incentive payment 
model, rather than an EPM; the specific clinical conditions of AMI and 
CABG that are included in the CR incentive payment model; and use of 
the terms AMI care period and CABG care period rather than EPM episode 
to define the duration of time during which the beneficiary engagement 
incentive can be provided by the FFS-CR participant.
    We note that, like the EPMs, the FFS-CR participant beneficiary 
engagement incentive requirements allow the provision of items and 
services as in-kind patient engagement incentives but do not allow FFS-
CR participants to pay

[[Page 591]]

money to FFS-CR participants for any purpose, including completion of 
the treatment program or as a rebate of CR copayments. While we can 
understand the potential benefit of such payments in engaging FFS-CR 
beneficiaries to advance the goals of the CR incentive payment model by 
financially rewarding their participation in CR/ICR services, we do not 
believe that we could include provide sufficient safeguards against 
patient steering if we were to permit such payments as beneficiary 
engagement incentives.
    With regard to the commenters requesting specific clarification 
about transportation incentives, the final beneficiary engagement 
incentives requirement for FFS-CR participant use no longer are 
specific to transportation. Therefore, we encourage those commenters to 
review the final requirements and ensure that all beneficiary 
engagement incentives, including transportation, provided by FFS-CR 
participants to FFS-CR beneficiaries meet the requirements. We note 
that the final requirements include that the item or service must not 
be tied to the receipt of items or services from a particular provider 
or supplier so that a FFS-CR participant who offers transportation as a 
beneficiary engagement incentive to CR/ICR services furnished by the 
FFS-CR participant would need to make comparable transportation support 
available for CR/ICR services furnished by another provider so that the 
availability of transportation would not be used to steer the 
beneficiary to a particular CR/ICR service provider.
    Regarding the request by a commenter for clarification about 
whether beneficiary engagement incentives can be used to assist with 
incorporating technology platforms needed to operate home-based cardiac 
rehabilitation, we note that Medicare does not cover home-based CR. Any 
home-based CR activities could not be billed to Medicare and would not 
contribute to the FFS-CR participant's CR incentive payment.\178\ In 
addition, technology platforms provided as a beneficiary engagement 
incentive by a FFS-CR participant would need to meet all the 
requirements specified in this final rule for beneficiary engagement 
incentives for FFS-CR participant use.
---------------------------------------------------------------------------

    \178\ Medicare Claims Processing Manual. Chapter 32--Billing 
Requirements for Special Services. Section 140.2--Cardiac 
Rehabilitation Program Services Furnished On or After January 1, 
2010.
---------------------------------------------------------------------------

    We are finalizing in the proposals in Sec.  512.740 beneficiary 
engagement incentives to be provided by FFS-CR participants, with 
modification to our proposals for comparability to EPM beneficiary 
engagement incentives. 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 CR incentive payment model in FFS-CR 
participants. Such waivers would be promulgated separately from this 
final 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. Any fraud and abuse waivers issued in 
connection with the FFS-CR beneficiary engagement incentives model will 
be available at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Fraud-and-Abuse-Waivers.html and on OIG's Web 
site. No waivers of any fraud and abuse authorities are being issued in 
this final rule.
    Comment: A commenter requested clarification about what 
considerations could be given for beneficiary adherence to a CR/ICR 
treatment plan when the most convenient CR program is a rural CAH and 
the CR participant's location where their CR program resides is beyond 
a reasonable distance from the beneficiary's home. The commenter 
recommended that CR participants be permitted to extend transportation 
beneficiary engagement incentives to model beneficiaries who are 
receiving CR from rural non-CR participants due to a distance barrier 
in order for transportation cost barriers to CR service adherence to be 
reduced for rural beneficiaries as it is for beneficiaries receiving CR 
at the CR participant. Other commenters who requested that CMS broaden 
the beneficiary engagement incentives permitted for FFS-CR participants 
requested clarification about whether these incentives could still be 
provided if a FFS-CR beneficiary was referred to a CR program at a 
location other than at the FFS-CR participant.
    Response: We appreciate the opportunity to clarify the beneficiary 
engagement incentive policies for CR participants whose model 
beneficiaries obtain CR/ICR services at different locations. Under our 
policies that apply to CR participants, beneficiary engagement 
incentives must be provided directly by the EPM-CR or FFS-CR 
participant or by an agent of the EPM-CR or FFS-CR participant under 
the EPM or FFS-CR participant's direction and control to the EPM-CR or 
FFS-CR beneficiary during an AMI episode or AMI care period, 
respectively, or during a CABG episode or CABG care period. Therefore, 
while we limit who may provide the beneficiary engagement incentives to 
a model beneficiary to safeguard against patient steering to any 
particular provider, transportation to CR/ICR services or other items 
and services provided as in-kind patient engagement incentive may be 
provided by the FFS-CR participant to the model beneficiary, regardless 
of where the beneficiary receives CR/ICR services. Therefore, in the 
example raised by the commenter, the CR participant where the 
beneficiary was hospitalized for AMI or CABG that initiated the AMI 
episode or AMI care period would be permitted to provide transportation 
to CR services at the CAH near the beneficiary's home as an in-kind 
patient engagement incentive, subject to all the other requirements for 
beneficiary engagement incentives for EPM or FFS-CR participants, as 
applicable to the specific CR participant, being met. In this scenario, 
we note that the CR incentive payment for CR/ICR services utilized by 
the beneficiary would be made to the CR participant, not the CAH, 
although the CAH would be paid for all CR services furnished to the 
beneficiary under the applicable Medicare FFS payment system.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposals in Sec.  512.740 for 
beneficiary engagement incentives provided by FFS-CR participants, with 
modification to allow beneficiary engagement incentives that are 
subject to the same overall requirements as the EPM but as applicable 
to AMI care periods and CABG care periods under the CR incentive 
payment model. Beneficiary engagement incentives provided by FFS-CR 
participants must meet the following requirements:
    FFS-CR participants may choose to provide in-kind patient 
engagement incentives to beneficiaries in an AMI care period or CABG 
care period under the CR incentive payment model, subject to the 
following conditions:
     The incentive must be provided directly by the FFS-CR 
participant or by an agent of the FFS-CR participant under the FFS-CR 
participant's direction and control to the FFS-CR beneficiary during an 
AMI care period or CABG care period.
     The item or service provided must be reasonably connected 
to medical care provided to an FFS-CR beneficiary during an AMI care 
period or CABG care period.
     The item or service must be a preventive care item or 
service or an item or service that advances a clinical goal, as listed 
later in this section, for a beneficiary during an AMI care period or 
CABG care by engaging the

[[Page 592]]

beneficiary in better managing his or her own health.
     The item or service must not be tied to the receipt of 
items or services outside the AMI care periods or CABG care periods.
     The item or service must not be tied to the receipt of 
items or services from a particular provider or supplier.
     The availability of items or services must not be 
advertised or promoted except that a beneficiary may be made aware of 
the availability of items or services at the time the beneficiary could 
reasonably benefit from them.
     The cost of the item or service must not be shifted to 
another federal health care program, as defined at section 1128B(f) of 
the Act.
    Beneficiary engagement incentives involving technology are subject 
to the following additional conditions:
     Items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one AMI care period or CABG care period.
     Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an AMI 
care period or CABG care period.
     Items of technology exceeding $100 in retail value must--
    ++ Remain the property of the FFS-CR participant; and
    ++ Be retrieved from the beneficiary at the end of the AMI care 
period or CABG care period. The FFS-CR participant must document all 
retrieval attempts, including the ultimate date of retrieval. 
Documented, diligent, good faith attempts to retrieve items of 
technology will be deemed to meet the retrieval requirement.
    The following are the clinical goals of the CR incentive payment 
model, which may be advanced through beneficiary incentives:
     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment for AMI or CABG.
     Management of chronic diseases and conditions that may be 
affected by treatment for AMI or CABG.
    Documentation of beneficiary engagement incentives:
     FFS-CR participants must maintain documentation of items 
and services furnished as a beneficiary engagement incentive that 
exceeds $25 in retail value.
     The documentation established contemporaneously with the 
provision of the items and services must include at least the 
following:
    ++ The date the incentive is provided.
    ++ The identity of the beneficiary to whom the item or service was 
provided.
     The documentation regarding items of technology exceeding 
$100 in retail must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an AMI care period or CABG 
care period as described previously in this section.
     The FFS-CR participant must retain and provide access to 
the required documentation in accordance with Sec.  512.715.
7. Waiver of Physician Definition for FFS-CR Participants Furnishing CR 
and ICR Services
a. Overview of Program Rule Waivers Under an EPM
    In section III.J. of this final rule, we finalized the waivers of 
certain program rules that we believe offers providers and suppliers 
more flexibility so that they may increase coordination of care and 
management of beneficiaries in EPM episodes. The purpose of such 
flexibilities is to increase EPM 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 additional flexibilities are implemented through our waiver 
authority under section 1115A of the Act, which affords broad authority 
for the Secretary to waive statutory Medicare program requirements as 
necessary to carry out the provisions of section 1115A. We have used 
this authority to implement similar program rule waivers in other 
models, such as the CJR model, as discussed in section III.J. of this 
final rule.
b. General Physician Requirements for Furnishing CR and ICR Services
    A cardiac rehabilitation (CR) program, as defined in Sec.  
410.49(a) of regulations, means a physician-supervised program that 
furnishes physician prescribed exercise, cardiac risk factor 
modification, psychosocial assessment, and outcomes assessment. An 
intensive cardiac rehabilitation (ICR) program, as defined in Sec.  
410.49(a) of the regulations, means a physician-supervised program that 
furnishes cardiac rehabilitation and has shown, in peer-reviewed 
published research, that it improves patients' cardiovascular disease 
through specific outcome measurements described in Sec.  410.49(c). A 
physician is defined under Sec.  410.49(a), and under Sec.  1861(r)(1) 
of the Act as a doctor of medicine or osteopathy.
    In general, the following physician functions are required under 
Sec.  410.49 in furnishing CR/ICR services;
     Medical director--defined at Sec.  410.49(a) as a 
physician that oversees or supervises the cardiac rehabilitation or 
intensive rehabilitation program at a particular site;
     Supervising physician--defined at Sec.  410.49(a) as a 
physician that is immediately available and accessible for medical 
consultations and medical emergencies at all times items and services 
are being furnished to individuals under cardiac rehabilitation and 
intensive cardiac rehabilitation programs;
     Physician-prescribed exercise--defined at Sec.  410.49(a) 
as aerobic exercise combined with other types of exercise (that is, 
strengthening, stretching) as determined to be appropriate for 
individual patients by a physician; and
     Establish, review, and sign an individualized treatment 
plan every 30 days, as described at Sec.  410.49(b)(2)(v).
c. Waiver of Physician Definition for EPM-CR Participants Furnishing CR 
and ICR Services
    In section III.J.8. of this final rule, for cardiac rehabilitation 
and intensive cardiac rehabilitation services provided in an EPM-CR 
participant under the proposed AMI and CABG models, we are waiving the 
physician definition, under Sec.  410.49, to allow a physician or a 
qualified nonphysician practitioner to perform the functions of 
supervising physician, prescribing exercise, and establishing, 
reviewing, and signing an individualized treatment plan every 30 days. 
A nonphysician practitioner, for the purposes of the EPM-CR waiver is 
defined as a physician assistant, nurse practitioner, or clinical nurse 
specialist as authorized under sections 1861(s)(2)(K)(i) and (ii) of 
the Act and defined in section 1861(aa)(5) of the Act, or in Sec. Sec.  
410.74, 410.75, and 410.76 of the regulations. We are implementing the 
EPM-CR waiver to provide greater program flexibility that might 
increase the availability of CR and ICR services to AMI and CABG model 
beneficiaries. This waiver is codified at Sec.  512.630 in this final 
rule.
d. Waiver of Physician Definition for FFS-CR Participants Furnishing CR 
and ICR Services
    Services provided under CR and ICR programs may be furnished to 
those beneficiaries in a FFS-CR participant hospital eligible to 
receive a CR incentive payment. To provide greater

[[Page 593]]

program flexibility that might increase the availability of CR and ICR 
services to beneficiaries in a FFS-CR participant hospital, we proposed 
to provide a waiver to the definition of a physician to include a 
nonphysician practitioner (defined for the purposes of this waiver as a 
physician assistant, nurse practitioner, or clinical nurse specialist 
as authorized under sections 1861(s)(2)(K)(i) and (ii) of the Act and 
defined in section 1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 
410.75, and 410.76 of the regulations). Thus, this proposed waiver for 
FFS-CR participants would allow, in addition to a physician, a 
nonphysician practitioner to perform the functions of supervisory 
physician, prescribing exercise, and establishing, reviewing, and 
signing an individualized treatment plan in furnishing CR and ICR 
services under Sec.  410.49. This proposed waiver for FFS-CR 
participants is similar to the physician definition waiver for EPM-CR 
participants discussed in section III.J.8. of this final rule. All 
other definitions and requirements related to a physician or 
supervising physician under Sec.  410.49 continue to apply. This 
proposed waiver of the physician definition would be terminated if the 
FFS-CR participant is terminated or is not in compliance with the CR 
incentive payment requirements.
    This proposed waiver for FFS-CR participants was codified at 
proposed Sec.  512.745. We sought comments on this proposed CR/ICR 
waiver to allow nonphysician practitioners to perform the specified 
physician functions for the provision of CR/ICR services in a FFS-CR 
participant.
    We received a number of comments on our proposals to provide a CR/
ICR waiver to the physician definition that applied to both the EPM-CR 
participants and FFS-CR participants, and no comments were unique to 
the FFS-CR participants. We refer to section III.J.8. of this final 
rule for a summary of the comments and our responses.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposal, without modification to 
allow, in addition to a physician, a nonphysician practitioner to 
perform the functions of supervisory physician, prescribing exercise, 
and establishing, reviewing, and signing an individualized treatment 
plan in furnishing CR and ICR services under Sec.  410.49. This waiver 
for FFS-CR participants is similar to the physician definition waiver 
for EPM-CR participants discussed in section III.J.8. of this final 
rule. All other definitions and requirements related to a physician or 
supervising physician under Sec.  410.49 continue to apply. This waiver 
of the physician definition would be terminated if the FFS-CR 
participant is terminated or is not in compliance with the CR incentive 
payment model. This waiver for FFS-CR participants is codified at Sec.  
512.745 in this final rule.
G. Considerations Regarding Financial Arrangements Under the CR 
Incentive Payment Model
    As discussed in section VI.E.2. of the proposed rule (81 FR 50981), 
we proposed to not permit the inclusion of CR incentive payments in 
sharing arrangements for EPM participants specified in proposed Sec.  
512.500. Similarly, we did not propose to allow specific financial 
arrangements for FFS-CR participants. Thus, financial arrangements 
regarding CR incentive payments paid by CMS to CR participants would be 
subject to all existing laws and regulations, including all fraud and 
abuse laws and applicable CR payment and coverage requirements. Given 
that more than 95 percent of CR/ICR services were historically 
furnished by hospital outpatient departments (HOPDs) to beneficiaries 
in the 90 days following discharge from a hospitalization for AMI or 
CABG, in the proposed rule we described our expectation that in many 
cases the CR participant that would be accountable under the CR 
incentive payment model would itself carry out the model implementation 
activities, including coordination of CR/ICR services to CR 
beneficiaries, through the hospital's own CR program.\179\ However, in 
other cases, depending on beneficiary choices and the availability of 
CR/ICR services and expertise in a CR participant's local community, CR 
participants might wish to engage other individuals and entities, 
including individuals and entities that are not providers and 
suppliers, in order to advance the CR incentive payment model goals of 
increased CR/ICR service care coordination and the medically necessary 
utilization of CR/ICR services in AMI and CABG model episodes and AMI 
care periods and CABG care periods. Thus, we expected that all 
financial relationships with other individuals and entities under the 
CR incentive payment model would be narrowly focused on certain 
activities related to the CR participant's specific plan to advance the 
goals of model.
---------------------------------------------------------------------------

    \179\ Analysis of cardiac rehabilitation utilization in care 
periods for AMI and CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule that 
began in CYs 2012 through 2014.
---------------------------------------------------------------------------

    For example, we expected that CR participants may choose to engage 
with providers, suppliers, and other organizations that are neither 
providers nor suppliers to assist with matters such as CR/ICR service 
utilization data analysis; beneficiary outreach; CR beneficiary care 
coordination and management for CR/ICR service referral and adherence 
to a treatment plan; CR participant compliance with the terms and 
conditions of the CR incentive payment model; or other model 
activities. These individuals and entities might play important roles 
in a CR participant's plans to implement the CR incentive payment model 
based on their direct clinical care for beneficiaries in AMI or CABG 
model episodes or AMI care periods or CABG care periods; their prior 
experience with cardiovascular risk-factor reduction and management 
initiatives; their care coordination expertise; or their familiarity 
with the local community and access to resources that may reduce 
barriers to beneficiary utilization of CR/ICR services. We expected 
that all relationships established between CR participants and other 
individuals and entities for such purposes of the CR incentive payment 
model would only be those permitted under existing law and regulation. 
We would also expect that all of these relationships would solely be 
based on the level of engagement of the individual's or entity's 
resources to directly support the CR participant's CR incentive payment 
model implementation.
    We recognized in the proposed rule, however, that we do not have 
precedent with other CMS models and programs that have a similar design 
to the CR incentive payment model. Thus, we sought comment on whether 
there are other types of financial arrangements that CR participants 
would wish to pursue in advancing the model goals of increased CR/ICR 
service care coordination and the medically necessary utilization of 
CR/ICR services in AMI and CABG model episodes and AMI care periods and 
CABG care periods. We specifically requested comments on which 
individuals and entities would be parties to the financial 
arrangements; what specific CR incentive payment model implementation 
activities would be included in the financial arrangements; and what 
methodologies would be used for sharing the CR incentive payment under 
such financial arrangements. In addition, we sought comment on what 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the CR incentive payment model 
would be met. Based on comments and our early implementation experience 
with the CR

[[Page 594]]

incentive payment model, we noted that we may make specific proposals 
around CR incentive payment model financial arrangements in future 
rulemaking.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters urged CMS to allow CR participants to 
share CR incentive payments with other providers under the CR incentive 
payment model to assist CR participants in meeting the model goals of 
increasing CR/ICR service care coordination and the medically necessary 
utilization of CR/ICR services for beneficiaries following 
hospitalization for AMI or CABG. Without sharing arrangements that are 
not permissible under existing fraud and abuse laws, the commenters 
believe the model goals may be challenging to achieve while retaining 
beneficiary freedom of choice of CR/ICR service provider, especially in 
some geographic areas of the country. In one example provided by a 
commenter, a tertiary referral center could receive patients for CABG 
or treatment of AMI from distant hospitals with more limited cardiac 
capacity. While the tertiary referral center would be the EPM-CR or 
FFS-CR participant in the CR incentive payment model, the beneficiary 
would commonly return home to their community for CR/ICR services. The 
commenter claimed that the opportunity for the tertiary referral center 
to share some of the CR incentive payment with the referring community 
hospital to augment the available resources of the local CR/ICR program 
to facilitate service availability and beneficiary adherence to the CR/
ICR treatment plan would be valuable. Some commenters expressed concern 
that without permitting sharing arrangements of the CR incentive 
payment between the CR participant and other providers of CR/ICR 
services, the CR incentive payment model would not incentivize 
adherence to CR/ICR programs at rural hospitals, CAHs, and any other CR 
program that is not a CR participant. The commenters believe that 
beneficiaries should have the choice to select where they receive CR/
ICR services, and encouraged CMS to design the model such that it 
supports and incentivizes this choice. In general, a number of 
commenters urged CMS to adopt flexibility in the financial arrangements 
permitted under the CR incentive payment model, which they believe 
would lead to broader utilization of CR/ICR services.
    Response: We appreciate the information provided by the commenters 
about the potential benefits of certain financial arrangements under 
the CR incentive payment model. In response to the commenters who 
expressed concerns about beneficiary freedom of choice of CR/ICR 
provider under the CR incentive payment model, we do not agree that the 
absence of specific financial arrangements being permitted under the 
model is a risk to beneficiary freedom of choice or results in the 
model not incentivizing CR/ICR treatment plan adherence at any CR 
provider that is not a CR participant. The CR participant will receive 
a CR incentive payment based on the totality of CR/ICR services 
furnished to beneficiaries in AMI and CABG episodes or AMI care periods 
and CABG care periods, regardless of where the beneficiary receives CR/
ICR services. Therefore, the model provides a financial incentive to CR 
participants to coordinate CR/ICR services with any CR/ICR program 
selected by the beneficiary, although as we noted in the proposed rule 
(81 FR 50989), historically that CR program has been most commonly that 
of the discharging hospital who would be the CR participant. We also 
expect that CR participants will support the beneficiary's choice of 
CR/ICR provider that is most likely to result in greater beneficiary 
adherence to the CR/ICR treatment plan, and that the choice of a local 
CR/ICR provider would often be of mutual benefit to the beneficiary and 
CR participant by increasing the likelihood that the beneficiary will 
receive more CR/ICR services than at a remote CR program. While we 
appreciate the interest of some commenters in sharing the CR incentive 
payment with other providers, our model design generally relies on the 
CR participant who is accountable under the CR incentive payment model 
itself carrying out the model implementation activities, including 
coordination of CR/ICR services to CR beneficiaries. To the extent CR 
participants may wish to engage other individuals and entities to 
advance the CR incentive payment model goals of increased CR/ICR 
service care coordination and the medically necessary utilization of 
CR/ICR services, we expect that financial relationships with these 
individuals and entities will be narrowly focused on certain activities 
related to the CR participant's specific plan to advance the goals of 
the model. We also expect that all of these relationships will solely 
be based on the level of engagement of the individual's or entity's 
resource to directly support the CR participant's CR incentive payment 
model implementation.
    We made no proposals for financial arrangements under the CR 
incentive payment model. As we stated in the proposed rule (81 FR 
50989), based on the comments on this rulemaking and our early 
implementation experience with the CR incentive payment model, we may 
make specific proposals around CR incentive payment model financial 
arrangements in future rulemaking. We especially need to consider the 
safeguards that would be needed for such financial arrangements to 
ensure program integrity, protect against abuse, and ensure that the 
goals of the CR incentive payment model would be met, because we do not 
have precedent with other CMS models and programs that have a similar 
design to the CR incentive payment model. Thus, we expect that all 
relationships established between CR participants and other individuals 
and entities for purposes of the CR incentive payment model will only 
be those permitted under existing law and regulation.
    Final Decision: We made no specific proposals for financial 
arrangements under the CR incentive payment model that would allow CR 
participants to enter into financial arrangements with other 
individuals and entities to share CR incentive payments, beyond 
relationships permitted under existing law and regulation. We will 
consider the information provided by the commenters and our early 
experience with implementation of the model and we make proposals about 
financial arrangements in future rulemaking.

VII. 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 testing and evaluation of 
models under section 1115A of the Act. As a result, the information 
collection requirements contained in this final rule need not be 
reviewed by the Office of Management and Budget. However, we have 
summarized the anticipated information collection requirements in the 
Regulatory Impact Analysis.

VIII. 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 final rules.

A. Statement of Need

1. Need for EPM Final Rule
    This final rule is necessary in order to implement and test three 
new EPMs under the authority of section 1115A of the Act, which allows 
the Innovation Center to test innovative payment and service delivery 
models in order to ``reduce program expenditures while

[[Page 595]]

preserving or enhancing the quality of care furnished to individuals.'' 
Under the FFS program, 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. The goal for the EPMs we are finalizing in 
this rule is to improve the quality of care provided to beneficiaries 
in an applicable episode while reducing episode spending through 
financial accountability.
    Payment approaches that reward providers for assuming financial and 
performance accountability for a particular episode of care can create 
incentives for the implementation and coordination of care redesign 
between participants and other providers and suppliers such as 
physicians and post-acute care providers. Under the EPMs we are 
finalizing in this rule, CMS will test whether an EPM for AMI, CABG, 
and SHFFT episodes of care will reduce Medicare expenditures while 
preserving or enhancing the quality of care for Medicare beneficiaries. 
We believe the EPM models have the potential to benefit Medicare 
beneficiaries by improving the coordination and transition of care, 
improving the coordination of items and services paid for through FFS 
Medicare, 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. The goal for the EPMs we are finalizing in 
this rule is to improve the quality of care provided to beneficiaries 
in an applicable episode while reducing episode spending.
    The AMI, CABG, and SHFFT models require the participation of 
hospitals in multiple geographic areas that might not otherwise 
participate in testing episode payment for the EPM episodes of care. 
CMS is testing other episode payment models with the BPCI initiative 
and the CJR model. The BPCI initiative is voluntary; risk-bearing 
organizations applied to participate and chose from 48 clinical 
episodes. In the CJR model, acute care hospitals in selected geographic 
areas are required to participate in the CJR model for all eligible 
LEJR episodes that initiate at a CJR model participant hospital. 
Realizing the full potential of the new EPMs requires the engagement of 
an even broader set of providers than have participated to date in our 
episode payment models such as the BPCI initiative and the CJR model. 
As such, we will test and evaluate the impact of episode payment for 
three EPMs (AMI, CABG, and SHFFT models) in a variety of circumstances, 
including those hospitals that may not otherwise participate in such a 
test.
2. Need for CJR Modifications
    This final rule also includes modifications to the CJR model. Acute 
care hospitals in selected geographic areas are required to participate 
in the CJR model for LEJR episodes that initiate at a CJR model 
participant hospital. The modifications finalized in this rule clarify 
and update provisions of the CJR model and create alignment between CJR 
and the AMI, CABG, and SHFFT models. The primary impact of these 
changes are: (1) Incorporation of BPCI and CJR reconciliation payments 
and Medicare repayments in setting quality-adjusted target prices in 
performance years 3-5; and (2) updates to the calculation of composite 
quality scores.
3. Need for CR Incentive Payment Model
    CR and intensive CR services are capable of achieving significant 
improvements in patient outcomes beyond the AMI and CABG model 90-day 
post-discharge care period. Despite evidence from multiple studies that 
CR services improve health outcomes, these services remain 
underutilized. Beneficiaries with CAD often receive care in many 
different settings from multiple providers over the long-term and 
subsequently commonly experience care that is fragmented and 
uncoordinated. Lack of coordination, of both care and financial 
incentives, across the continuum of CAD care, results in higher than 
necessary rates of adverse drug events, hospital readmissions, 
diagnostic errors, and other adverse outcomes, as well as lower than 
appropriate utilization of evidence-based treatments. The CR incentive 
payment model will test whether a financial incentive for hospitals 
that encourages the management of beneficiaries that have had an AMI or 
a CABG in ways that may contribute to long-term improvements in quality 
and reductions in Medicare spending.
4. Aggregate Impact of EPMs, CJR, and CR Incentive Payment Model
    As detailed in Table 57, we estimate a total aggregate impact of 
$159 million in net Medicare savings over the duration of the AMI, 
CABG, and SHFFT models, July 2017 through December 2021. As detailed in 
Table 59, we estimate the changes in the CJR model finalized in this 
final rule, along with the revised assumption about the percentage of 
participating hospitals that will report voluntary quality data during 
the performance years, will lower the net Medicare savings by $26 
million over the duration of the CJR model (April 2016 through December 
2020) relative to the financial estimate published in the CJR final 
rule (80 FR 73288). These estimated impacts represent the net effect of 
federal transfers that incent hospitals for improving care while making 
it more efficient. Furthermore, the AMI, CABG, and SHFFT models may 
benefit beneficiaries since the models require participants to be 
accountable for episodes extending 90 days post-hospital discharge, 
which may potentially 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. 
Although it is possible that participants may respond to the model test 
through improvements in the efficiency of care that reduce FFS Medicare 
spending during these episodes, such reductions in Medicare spending 
will be largely offset through greater reconciliation payments paid by 
the Medicare program to the participating hospital. As long as 
reductions in Medicare FFS spending for participating hospitals are 
equally offset through greater reconciliation payments from the 
Medicare program to those participating hospitals, the financial impact 
to the Medicare program should not be significantly different from our 
estimate.
    As detailed in Table 60, we estimate a total aggregate impact 
between $29 million in net Medicare costs and $32 million in net 
Medicare savings from July 2017 through December 2024 through the 
cardiac rehabilitation incentive payment model. These estimated impacts 
represent the net effect of federal transfers to CR-EPM and CR-FFS 
participants and savings related to decreased future utilization in 
beneficiaries who receive CR/ICR services. A range of potential impacts 
is provided due to uncertainty in the likely increase in CR/ICR 
utilization based on the CR incentive provided.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order

[[Page 596]]

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. This final rule 
triggers these criteria.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes 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 final 
rule that either explicitly or implicitly pre-empts any state law, and 
furthermore we do not believe that this final 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
a. EPMs
    Nationally, the total number of historical episodes ending in CY 
2014 that began with IPPS hospitalizations and extended 90 days post-
hospital discharge were approximately 168,000 for AMI; 48,000 for CABG; 
and 109,000 for SHFFT. The total Medicare spending for these historical 
episodes was approximately $4.1 billion, $2.3 billion, and $4.7 
billion, respectively. Based on analysis of Medicare claims for 
historical episodes in 2012-2014, the mean estimated total payment for 
AMI episodes (defined based on ICD-CM diagnosis code and DRGs as 
described in section III.C of this final rule) is about $24,000, where 
approximately 61 percent of the spending is attributable to hospital 
inpatient services, 18 percent is attributable to post-acute care 
services and 21 percent to physician, outpatient hospital and other 
spending. For CABG episodes (defined based on DRGs as described in 
section III.C. of this final rule) the mean estimated total payment is 
about $47,000, where approximately 68 percent of the spending is 
attributable to hospital inpatient services, 12 percent is attributable 
to post-acute care services and 20 percent to physician, outpatient 
hospital and other spending. For SHFFT episodes (defined based on DRGs 
as described in section III.C. of this final rule) the mean estimated 
total payment is about $43,000, where approximately 33 percent of the 
spending is attributable to hospital inpatient services, 50 percent is 
attributable to post-acute care services and 17 percent to physician, 
outpatient hospital and other spending.
    We finalized our proposal to test the AMI and CABG models in 98 
MSAs out of 293 MSAs (we proposed to use 294 MSAs, however, due to the 
Vermont All Payer model being exempted from the final EPMs as discussed 
in section III.B.2 of this final rule, the number of eligible MSAs 
dropped to 293) eligible for selection, as described in section 
III.B.5. of this final rule; we finalized our proposal to test the 
SHFFT model in 67 MSAs in which CJR is currently operating as discussed 
in section III.B.4. of this final rule. In the 2014 calendar year there 
were 136,000 episodes for AMI, and 42,000 for CABG in the 294 MSAs 
proposed as eligible for selection, and 33,000 episodes for SHFFT in 
the 67 MSAs eligible for participation.
b. CJR
    The overall magnitude of the CJR model is described in the CJR 
final rule (80 FR 73288). The modifications finalized in this rule are 
not related to episode definition or hospital selection and therefore 
do not affect the number of episodes included in the model or the mean 
episode payment. The primary impact of the changes we finalized relate 
to the calculation of quality-adjusted target prices, which will now 
incorporate reconciliation payments and Medicare repayments in years 3 
through 5 of the model and include modifications to the calculation of 
composite quality scores. For the CJR final rule we assumed that 
hospitals would not report voluntary THA/TKA patient-reported outcome-
based data to CMS. Given our experience with performance year 1 of CJR, 
we revised our assumption for this analysis to assume that 27 percent 
of participants in performance years 1 and 2, 63 percent of 
participants in performance year 3, and 99 percent of participants in 
performance years 4 and 5 will report this quality data. These 
modifications along with the revised assumptions regarding quality 
reporting raise the costs estimated to the Medicare program by $26 
million from the estimate of $343 million in savings as published in 
the CJR final rule (80 FR 73288).
c. CR Incentive Payment Model
    We finalized our proposal to test the CR incentive payment model in 
45 of the 98 MSAs selected for the AMI and CABG EPMs, as well as 45 FFS 
MSAs selected through stratified random sampling, as described in 
section VI of this final rule. As discussed subsequently in this 
analysis and displayed in Table 60, this is likely to result in an 
impact between $29 million in net Medicare costs and $32 million in net 
Medicare savings from July 2017 through December 2024.
d. Aggregate Effects on the Market
    There may also be spillover effects in the non-Medicare market, or 
even in the Medicare market in other areas as a result of the EPM and 
CR models. Changes in Medicare payment policy often have substantial 
implications for non-Medicare payers. As an example, non-Medicare 
patients may benefit if participating EPM hospitals introduce system 
wide changes that improve the coordination and quality of health care. 
Other payers may also be developing episode payment models and may 
align their payment structures with the EPM and CR models or may 
utilize results from CMS evaluations of these models.

[[Page 597]]

Because it is unclear whether and how spillover effects may apply to a 
test of a new payment model (as opposed to a change in permanent 
policy), our analyses assume that spillovers effects on non-Medicare 
payers will not occur, although this assumption is subject to 
considerable uncertainty.
2. Effects on the Medicare Program
a. EPMs
    Under this final rule, we will test whether an EPM for AMI, CABG, 
and SHFFT episodes of care will reduce Medicare expenditures while 
preserving or enhancing the quality of care for Medicare beneficiaries. 
Payment approaches that reward providers for assuming financial and 
performance accountability for a particular episode of care can 
potentially create incentives for the implementation and coordination 
of care redesign between participants and other providers and suppliers 
such as physicians and post-acute care providers. The EPMs could enable 
hospitals to consider the most appropriate strategies for care 
redesign, including--(1) increasing post-hospitalization follow-up and 
medical management for patients; (2) coordinating across the inpatient 
and post-acute care spectrum; (3) conducting appropriate discharge 
planning; (4) improving adherence to treatment or drug regimens; (5) 
reducing readmissions and complications during the post-discharge 
period; (6) managing chronic diseases and conditions that may be 
related to the proposed EPM episodes; (7) choosing the most appropriate 
post-acute care setting; and (8) coordinating between providers and 
suppliers such as hospitals, physicians, and post-acute care providers.
    We will test and evaluate the impact of episode payment for the 
AMI, CABG, and SHFFT models in a variety of circumstances, including 
those hospitals that may not otherwise participate in such a test. The 
clinical circumstances of these episodes differ in important ways from 
the LEJR episodes included in the CJR model. We expect the patient 
population included in these episodes would be substantially different 
from the patient population in CJR episodes, due to the clinical nature 
of the cardiac and SHFFT episodes. Beneficiaries in these episodes 
commonly have chronic conditions that contribute to the initiation of 
the episodes, and need both planned and unplanned care throughout the 
EPM episode following discharge from the initial hospitalization that 
begins the episode. Both AMI and CABG model episodes primarily include 
beneficiaries with cardiovascular disease, a chronic condition which 
likely contributed to the acute events or procedures that initiate the 
episodes. About half the average AMI model historical episode spending 
was for the initial hospitalization, with the majority of spending 
following discharge from the initial hospitalization due to hospital 
readmissions, while there was relatively less spending on SNF services, 
Part B professional services, and hospital outpatient services. In CABG 
model historical episodes, about three-quarters of episode spending was 
for the initial hospitalization, with the remaining episode spending 
relatively evenly divided between Part B professional services and 
hospital readmissions, and a lesser percentage on SNF services. Similar 
to AMI episodes, post-acute care provider use was relatively uncommon 
in CABG model historical episodes, while hospital readmissions during 
CABG model historical episodes were relatively common. SHFFT model 
historical episodes also were accompanied by substantial spending for 
hospital readmissions, and post-acute care provider use in these 
episodes also was high.\180\
---------------------------------------------------------------------------

    \180\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that end in CY 2014.
---------------------------------------------------------------------------

    We believe that by requiring participation by a large number of 
hospitals with diverse characteristics, the EPMs will result in a 
robust data set for evaluating this payment approach, and will 
stimulate the rapid development of new evidence-based knowledge. 
Testing the EPMs in this manner will also allow us to learn more about 
patterns of inefficient utilization of health care services and how to 
possibly incentivize quality improvement for beneficiaries receiving 
services in AMI, CABG, and SHFFT episodes.
    Under the EPMs, as described further in section III.B.2. of this 
final rule, an AMI, CABG, or SHFFT model episode would begin with an 
inpatient admission assigned to one of the following MS-DRGs upon 
beneficiary discharge: For AMI episodes, AMI MS-DRGs (280-282) and 
those PCI MS-DRGs (246-251) representing IPPS admissions for AMI that 
are treated with PCIs; CABG MS-DRGs (231-236); and SHFFT MS-DRGs (480-
482). Episodes will end 90 days after the date of discharge from the 
anchor hospitalization. The EPM episodes will include the inpatient 
stays 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 designated EPM participant 
hospitals to be the episode initiators and to be financially 
responsible for episode cost under the proposed EPMs. We require all 
hospitals paid under the IPPS and physically located in selected 
geographic areas to participate, with limited exceptions. Eligible 
beneficiaries who receive care at these hospitals will automatically be 
included in the models. Participating geographic areas, based on MSAs, 
were selected through a random sampling methodology. We believe the 
EPMs may have financial and quality of care effects on non-hospital 
providers that are involved in the care of Medicare beneficiaries 
during model episodes, 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 across 
the inpatient and post-acute care spectrum spanning the episode of 
care.
    As described in section III.D.3. of this final rule, we will 
continue paying hospitals and other providers and suppliers according 
to the usual Medicare FFS payment systems. After the completion of a 
performance year, the Medicare claims payments for services furnished 
to the beneficiary during the EPM episode, based on claims data, will 
be combined to calculate an actual EPM episode payment. The actual EPM 
episode payment will then be reconciled against an established EPM 
quality-adjusted target price. The amount of this calculation, if 
positive, will be paid to the participant in a reconciliation payment. 
If negative, we will require repayment from the participant beginning 
in performance year 2 of the EPMs for participants who elect early 
downside risk and performance year 3 for participants who do not elect 
early downside risk. EPM participants' quality performance also will be 
assessed at reconciliation; each participant would receive a composite 
quality score and a corresponding quality category. EPM participants 
achieving a quality category of ``acceptable'' or higher will be 
eligible for a reconciliation payment.
    We will phase in the requirement that participants whose actual EPM 
episode payments exceed the quality-adjusted target price pay the 
difference back to Medicare during performance years 2, 3 and 4 for 
participants who elect early downside risk and during performance years 
3 and 4 for those who do not elect

[[Page 598]]

early downside risk. Under this final rule, Medicare will not require 
repayment from participants for performance year 1 for actual EPM 
episode payments that exceed their quality-adjusted target price in 
performance year 1, and an applicable discount factor would be used for 
calculating repayment amounts for performance years 2, 3 and 4 for 
participants who elect early downside risk beginning January 1, 2018 
and for performance years 3 and 4 for participants who do not elect 
early downside risk.
    Due to the clinical characteristics and common patterns of care in 
AMI model episodes, we will perform payment adjustments in the cases of 
certain transfers and readmissions of beneficiaries to inpatient 
hospitals for these episodes. These payment adjustments are discussed 
in detail in section III.D. of this final rule. We also will limit how 
much a participant can gain or lose based on its actual EPM episode 
payments relative to quality-adjusted target prices; we are finalizing 
additional policies to further limit the risk of high payment cases for 
all EPM participants and for special categories of EPM participants as 
described in section III.D. of this final rule.
    Based on the mix of financial and quality incentives, the EPMs 
could result in a range of possible outcomes for participants. The 
effects on hospitals of potential savings and liabilities will have 
varying degrees.
(1) Assumptions
    We used standardized Medicare claims data from January 2013 through 
March 2016 to simulate the impact that the EPMs would have on Medicare 
spending for AMI, CABG, and SHFFT model episodes. Specifically, we 
applied the methodology provided in this final rule for calculating 
quality-adjusted target prices. For the SHFFT model, we applied this 
methodology to hospitals in the MSAs in which CJR is currently 
operating which have historical data for SHFFT procedures. For the AMI 
and CABG models, we applied this methodology to the hospitals in the 98 
MSAs selected for participation in the cardiac EPMs. Quality-adjusted 
target prices were calculated based on hospital performance from 90-day 
episodes starting between January 2013 and December 2015. Specifically, 
all IPPS hospitals in the selected MSAs were included in this analysis 
after applying the model-specific hospital exclusions based on 
participation in BPCI Models 2 or 4 for the AMI, PCI, CABG, or SHFFT 
models, as appropriate, as established in this final rule. Individual 
episodes were removed if they initiated a BPCI episode that had 
precedence over the EPM.
    We identified the anchor hospitalization based on episode 
definition criteria in section III.C. of this final rule and included 
the related spending that occurred 90 days after discharge. We removed 
payments excluded from the episode as unrelated to the EPM episode 
diagnosis and procedures based on clinical rationale, as defined in 
section III.C.3.b. of this final rule. Payments during the 90-day 
episodes were calculated using standardized Medicare payment amounts.
    We trended utilization and prices in the prior years to match 
national performance for episodes starting from January 2015 through 
December 2015. BPCI reconciliation payments were then credited to BPCI 
episodes during this time frame. We then incorporated the final outlier 
policy to cap spending for high cost outlier episodes such that 
payments were capped at the price MS-DRG anchor value that is 2 
standard deviations above the regional mean as described in section 
III.D. of this final rule.
    After we pooled episodes for each price MS-DRG, we calculated 
average episode prices for each hospital and region, as well as a 
hospital-specific weight representing a case mix value for each 
hospital that is dependent only on episode volume for a given price MS-
DRG 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 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 episode volume across the 3 historical years, with low 
volume as defined in section III.D.7.c. of this final rule, by setting 
their episode benchmark price as the region's experience. These average 
prices were then disaggregated based on the national severity factor of 
average episode spending as described in section III.D. of this final 
rule. The computed hospital-specific weight, the hospital's wage index, 
and a discount specific to the hospital's quality category based on 
historical quality performance for EPM participants was then applied 
back to the price.
    After calculating quality-adjusted target prices for applicable MS-
DRGs for each hospital for performance years 1 and 2, we compared these 
quality-adjusted target prices against actual performance between 
January 2015 and December 2015. We capped actual spending for 
individual episodes based on the methodology in this final rule for 
high cost outlier spending episodes. After incorporating the outlier 
policy, total Medicare FFS spending was reconciled against the quality-
adjusted target price and total number of episodes for the hospital. 
The aggregate impacts were then determined by multiplying by the total 
episodes for each price MS-DRG.
    We summed the difference between each episode's actual payment and 
the relevant quality-adjusted target price (calculated as quality-
adjusted target price subtracted by actual episode payment) and 
aggregated the difference for all episodes for a participant within the 
performance year, creating the NPRA. Any positive NPRA amount greater 
than the stop-gain limit was capped at the stop-gain limit of 5 percent 
in performance years 1, 2, and 3, 10 percent in performance year 4, and 
20 percent in performance year 5. In addition, any negative NPRA amount 
exceeding the stop-loss limit was capped at the stop-loss limit as 
described in section III.D. of this final rule, with a 5 percent 
repayment limit in performance year 2 (for participants who elect early 
downside risk), 5 percent repayment limit in performance year 3, 10 
percent repayment limit in performance year 4, and 20 percent repayment 
limit in performance year 5. For rural hospitals, MDHS, SCHs and RRCs, 
the repayment limit was capped at the stop-loss limit as described in 
section III.A.2.a. of this final rule, with a 3 percent repayment limit 
in performance year 2 (for participants who elect early downside risk), 
3 percent repayment limit in performance year 3, and 5 percent 
repayment limit in performance years 4 and 5. As described in section 
III.D.7.e. of this final rule, if average 30-day post-episode spending 
for an EPM participant in any given EPM performance year is greater 
than 3 standard deviations above the regional average 30-day post-
episode spending, based on the 30-day post-episode spending for 
episodes attributed to all regional hospitals in the same region as the 
EPM participant hospital, the EPM participant hospital must repay 
Medicare for the difference. Assuming no change in hospital behavior, 
very few hospitals are expected to have average post-episode spending 
exceeding 3 standard deviations from their regional mean. Based on an 
analysis of 30-day

[[Page 599]]

post episode spending for EPMs starting in the 2015 calendar year, very 
few hospitals in the MSAs selected for the EPM had average post-episode 
spending exceeding 3 standard deviations. The estimates in the impact 
analysis are rounded to the nearest million, and the estimated post-
episode reconciliation payments to be made from hospitals to the 
Medicare program are minimal and estimated to round down to 0 million.
    As described in section III.E. of this final rule, we are 
finalizing the use of a composite quality score for each EPM, where the 
composite quality score reflects a combination of outcome and patient 
experience measures, and, as described later in this section, we have 
incorporated this approach in our estimate of impacts. Under the EPMs, 
points for quality performance and improvement (as applicable) will be 
awarded for each episode measure and then summed to develop a composite 
quality score that will determine the EPM participant's quality 
category for the episode. Quality performance will make up the majority 
of available points in the composite quality score, with improvement 
points available as ``bonus'' points for the measure. Additionally, 
participants may voluntarily submit outcome measures data all EPMs, 
resulting in an extra 2 points in their overall quality scores, up to a 
maximum score of 20. The composite quality score will be used as part 
of a pay-for-performance methodology to assign respective EPM 
participants to four quality categories.
    Hospitals assigned as `below acceptable' will not be eligible for a 
reconciliation payment and will be subject to a 3 percent discount. 
Hospitals assigned as `acceptable' will be eligible for a 
reconciliation payment and will be subject to a 3 percent discount. 
Hospitals assigned as `good' will be eligible for a reconciliation 
payment and will be subject to a 2 percent discount. Lastly, hospitals 
assigned as `excellent' will be eligible for a reconciliation payment 
and will be subject to a 1.5 percent discount. We note that for 
participants who elect early downside risk, in performance years 2, 3 
and 4, the applicable discount for repayment would be 1 percentage 
point less than the effective discount applied for a reconciliation 
payment while for hospitals who do not elect early downside risk the 
applicable discount for repayment in years 3 and 4 will be 1 percentage 
point less than the effective discount applied for a reconciliation 
payment.
    In general, we used quality data as publicly reported on Hospital 
Compare in 2015 and 2016 to model the impact of this policy, with 2016 
measures used to calculate performance and the difference between 2015 
and 2016 measures used to calculate improvement. As discussed in 
section III.E. of this final rule, we calculated the HLMR by using 10 
of the 11 publicly reported measures, taking the average of all 
publicly reported measures except how well hospital staff help patients 
manage pain, consistent with revisions under consideration for this 
HCAHPS measure.
    Specifically, we used the following data to model the impact of 
this policy:
     To calculate performance for the AMI model, we utilized: 
Hospital 30-day, all-cause, risk-standardized mortality rate following 
acute myocardial infarction hospitalization (NQF #0230) measure results 
based on the performance period of April 1, 2012 through March 31, 
2015; excess days in acute care after hospitalization for acute 
myocardial infarction measure results based on the performance period 
of April 1, 2012 through March 31, 2015; and HCAHPS survey data (NQF 
#0166) 2015 based on the performance period of January 1, 2015 through 
December 31, 2015.
     To calculate improvement for the AMI model, we utilized: 
Hospital 30-day, all-cause, risk-standardized mortality rate following 
acute myocardial infarction hospitalization (NQF #0230) measure results 
based on the performance period of April 1, 2011 through March 31, 
2014; excess days in acute care after hospitalization for acute 
myocardial infarction measure results based on the performance period 
of April 1, 2011 through March 31, 2014; and HCAHPS survey data (NQF 
#0166) 2015 based on the performance period of January 1, 2014 through 
December 31, 2014.
     To calculate performance for the CABG model, we utilized 
hospital 30-day, all-cause, risk-standardized mortality rate following 
coronary artery bypass graft surgery (NQF #2558) measure results based 
on the performance period of April 1, 2012 through March 31, 2015 and 
HCAHPS survey data (NQF #0166) 2015 based on the performance period of 
January 1, 2015 through December 31, 2015.
     To calculate improvement for the CABG model, we utilized 
hospital 30-day, all-cause, risk-standardized mortality rate following 
coronary artery bypass graft surgery (NQF #2558) measure results based 
on the performance period of April 1, 2011 through March 31, 2014 and 
HCAHPS survey data (NQF #0166) 2015 based on the performance period of 
January 1, 2014 through December 31, 2014.
     To calculate performance for the SHFFT model, we utilized 
hospital-level risk-standardized complication rate following elective 
primary total hip arthroplasty (THA) and/or total knee arthroplasty 
(TKA) measure results based on the performance period of April 1, 2012 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2015 through December 31, 2015.
     To calculate improvement for SHFFT, we utilized hospital-
level risk-standardized complication rate following elective primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) 
measure results based on the performance periods of April 1, 2011 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2014 through December 31, 2014.
    Early experience in CJR shows that 27 percent of hospitals 
submitted voluntary quality data in performance year 1. In addition, 
prior experience in the Medicare program indicates that when payment is 
tied to voluntary reporting of quality measures most hospitals report 
such measures. For this analysis, we assume that hospitals will report 
voluntary measure increasingly throughout the performance years and 
that most hospitals in the EPMs will submit voluntary measures to 
qualify for the reduced discount by the fourth and fifth performance 
year. Therefore, for this analysis we assume in performance year 1 and 
2 that 27 percent of hospitals will submit voluntary quality data. We 
anticipate that 27 percent will submit quality data in performance year 
2, and assume 63 percent submission of quality data in performance year 
3, and 99 percent in performance years 4 and 5 for the EPM and CJR 
models. For the AMI and CABG models, we developed composite quality 
scores for all eligible hospitals among the 98 selected MSAs. Hospitals 
in these MSAs were assigned to a performance percentile and assigned 
the corresponding quality performance score points listed in Tables 24 
and 28 of this final rule, based on their performance in the historical 
performance data described earlier. Hospitals that did not have a 
reported measure result were assigned to the 50th performance 
percentile. Hospitals assigned a quality measure performance percentile 
for the most recent year that were in the top 10 percent of the 
improvement distribution received quality improvement points. Because 
2015 data were not available for the AMI excess days measure, we 
randomly assigned improvement points for this

[[Page 600]]

measure (0.5 points) to 10 percent of hospitals. For SHFFT, hospitals 
in the participating MSAs were assigned to a performance percentile and 
assigned the corresponding quality performance score points listed in 
Table 30 of this final rule, based on their performance in the 
historical performance data described earlier. Hospitals that did not 
have a reported measure result were assigned to the 50th performance 
percentile. Hospitals assigned a quality measure performance percentile 
for the most recent year that improved by at least 2 deciles from the 
prior year received quality improvement points.
    Based on these composite quality scores, hospitals were assigned to 
a quality category of ``below acceptable'', ``acceptable'', ``good'' or 
``excellent'' based on their composite quality scores. As discussed in 
section III.E. of this final rule, composite quality scores will affect 
hospitals' eligibility for reconciliation payments and determine 
hospitals' effective discount percentages at reconciliation.
    To simulate the impact for performance year 1 (July 1, 2017 through 
December 31, 2017), we calculated the NPRA using a blended quality-
adjusted target price calculated for performance year 1, that is two-
thirds hospital experience and one-third region experience, and applied 
no downside risk to participants as described in section III.D. of this 
final rule. Additionally, as part of this estimate, we accounted for 
whether a participant met the minimum composite quality score to be 
eligible for a reconciliation payment. Lastly, we applied the 5 percent 
stop-gain limit on the estimated reconciliation payments made to 
participants with a 3 percent cap for rural hospitals, sole community 
hospitals, Medicare dependent hospitals, and rural referral centers.
    For the simulation in performance year 2, we used a blended 
quality-adjusted target price calculated for performance year 2 that is 
two-thirds hospital experience and one-third regional experience. A 5 
percent stop-loss and stop-gain limit was applied to reconciliation 
payments and repayments for 1 percent of the hospitals to model an 
estimated rate of participants who will elect voluntary downside risk, 
a 5 percent stop-gain limit was applied to reconciliation payments for 
the remaining 99 percent of participants to model those who will not 
elect voluntary downside risk. Finally, a 3 percent stop-loss and stop-
gain limit was applied for rural hospitals, sole community hospitals, 
Medicare dependent hospitals, rural referral centers and low-volume 
participants as defined in section III.D.2.c. of this final rule.
    For the simulation in performance year 3, we rebased episode prices 
to incorporate the reconciliation payments (as described in section 
III.D. of this final rule) simulated from the first performance year. 
To simulate reconciliation for performance year 3, we used the quality-
adjusted target price calculated as one-third of the hospital's 
experience and two-thirds of the regional experience. We included a 5 
percent stop-loss and stop-gain limit on reconciliation payments and 
repayments for participants with the exception of a 3 percent stop-loss 
and stop-gain limit on reconciliation payments and repayments from 
rural hospitals, sole community hospitals, Medicare dependent 
hospitals, rural referral centers, and certain low-volume hospitals as 
defined in section III.D.2.c.of this final rule. For performance year 
4, we simulated the reconciliation process using the episode quality-
adjusted target price based on 100 percent of the regional experience, 
and a stop-loss and stop-gain limit set to 10 percent for all 
participants, with the exception of a 5 percent stop-loss and stop-gain 
limit for rural hospitals, sole community hospitals, Medicare dependent 
hospitals, rural referral centers, and low-volume hospitals as defined 
in section III.D.2.c of this final rule.
    For performance year 5, we rebased prices to include the simulated 
EPM reconciliation payments and repayments from performance years 1, 2, 
and 3. We simulated reconciliation in the fifth performance year using 
quality-adjusted target prices that are based on 100 percent of the 
regional experience, and applied the stop-loss and stop-gain limits of 
20 percent for all participants, with the exception of a 5 percent 
stop-loss and stop-gain limit for rural hospitals, sole community 
hospitals, Medicare dependent hospitals, rural referral centers, and 
certain low-volume hospitals as defined in section III.D.2.c of this 
final rule.
    The final results were then adjusted under the assumption that the 
percentage of EPM episodes excluded due to enrollment in Next 
Generation ACOs, Shared Savings Program ACOs in Track 3, and End Stage 
Renal Disease (ESRD) Seamless Care Organizations for performance years 
1 through 5 would match the percentage of the FFS population 
prospectively assigned to these models for 2017. It was also assumed 
that 99 percent of EPM revenue would come from hospitals that choose 
not to elect downside risk in year 2.
    (2) Analyses

                                        Table 57--Estimates of Impact on the Medicare Program by the Final EPM *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Year(s)                                      Across all 5
                                                         --------------------------------------------------------------------------------    years  of
                                                                                                                                             proposed
                                                               2017            2018            2019            2020            2021           models
--------------------------------------------------------------------------------------------------------------------------------------------------------
AMI net financial impact................................               3               9             (8)            (10)            (27)            (34)
CABG net financial impact...............................               3               6             (5)             (6)            (14)            (16)
SHFFT net financial impact..............................               5              11            (21)            (32)            (71)           (109)
                                                         -----------------------------------------------------------------------------------------------
    Total: Net financial impact of all EPM proposals....              10              25            (34)            (49)           (112)           (159)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: In millions. Totals do not necessarily equal the sums of rounded components.

    Table 57 summarizes the estimated impact for the AMI, CABG, and 
SHFFT models. Our model estimates that the Medicare program will save 
$159 million over the 5 performance years (2017 through 2021).
    The first performance year of the EPMs is expected to cost the 
Medicare program $10 million in reconciliation payments made to 
participants. Participants that receive reconciliation payments must 
earn a quality rating of ``Acceptable'' or better and are the 
participants that provide lower cost care relative to quality adjusted 
target prices, which reflect both hospital and regional historical 
spending.

[[Page 601]]

    In the second performance year of the EPMs, the Medicare program on 
net is expected to pay $25 million to participants. This includes $26 
million in reconciliation payments made by the Medicare program to 
participants, and $1 million in payments made to the Medicare program 
from participants that elect downside risk in year 2. Participants may 
elect early downside risk beginning January 1, 2018 as discussed in 
section III.D.2.c. of this final rule. For participants who do not 
elect early downside risk, downside risk will not be applied for the 
entirety of the second performance year. For participants who elect 
early downside risk in performance year 2, a 5 percent stop-loss and 
stop-gain limit will apply, subject to a 3 percent stop-loss and stop-
gain limit for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, rural referral center hospitals and certain low-
volume hospitals. These limits would cap the total amount of repayments 
paid by participants to the Medicare program. For this analysis, we 
assumed 10 percent of participants will elect early downside risk.
    In the third performance year of the models, net reconciliation 
payments are expected to be $34 million in savings to the Medicare 
program. This includes $33 million in payments from the Medicare 
program to participants, and $67 million in payments from participants 
to the Medicare program. For performance years 4 and 5 of the models, 
the episode quality-adjusted target price will be based on full 
regional pricing. This is expected to create greater variation between 
the quality-adjusted target price and participants' own experience. The 
stop-gain and stop-loss limits of 20 percent for performance year 5 
apply, with a stop-gain and stop-loss limit of 5 percent for rural 
hospitals, sole community hospitals, Medicare dependent hospitals, 
rural referral centers hospitals, and certain low-volume hospitals. As 
a result, net payments are expected to be $49 million from participants 
to the Medicare program in the fourth year and $112 million in the 
fifth year. In performance year 4 this includes $59 million in payments 
from the Medicare program to participants, and $108 million in payments 
from participants to the Medicare program. In performance year 5 this 
includes $59 million in payments from the Medicare program to 
participants, and $171 million in payments from participants to the 
Medicare program. These estimated savings in years 4 and 5 represent an 
average of 2.1 percent of total episode spending in those years. The 
total savings to the Medicare program after the 5 performance years is 
expected to be $159 million out of $15.0 billion or 1.0 percent of 
total episode spending.
    Table 58 summarizes the estimated reconciliation payments for the 
AMI, CABG, and SHFFT models over the 5 performance years (2017 through 
2021) for the selected MSAs.

                                                     Table 58--Estimates of Reconciliation Payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Performance Period
                                                         -----------------------------------------------------------------------------------------------
                   Numbers in millions                      July 2017-
                                                           December 2017       2018            2019            2020            2021        Over 5 years
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    All EPM episodes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total dollars included in NRPA calculation..............            $743          $3,259          $3,440          $3,670          $3,912         $15,023
Net reconciliation and repayment dollars................              10              25             -34             -49            -112            -159
Payments from CMS to hospitals..........................              10              26              33              59              59             187
Repayments from hospitals to CMS........................               0              -1             -67            -108            -171            -346
Financial impact as a percentage of dollars included in             1.4%            0.8%           -1.0%           -1.3%           -2.9%           -1.1%
 model..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Acute Myocardial Infarction episodes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total dollars included in NRPA calculation..............             235           1,026           1,079           1,151           1,227           4,718
Net reconciliation and repayment dollars................               3               9              -8             -10             -27             -34
Payments from CMS to hospitals..........................               3               9              13              22              22              68
Repayments from hospitals to CMS........................               0               0             -21             -32             -49            -102
Financial impact as a percentage of dollars included in             1.3%            0.9%           -0.7%           -0.9%           -2.2%           -0.7%
 model..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Coronary Artery Bypass Grafting episodes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total dollars included in NRPA calculation..............             146             669             704             751             800           3,070
Net reconciliation and repayment dollars................               3               6              -5              -6             -14             -16
Payments from CMS to hospitals..........................               3               6               6              12              12              38
Repayments from hospitals to CMS........................               0               0             -11             -18             -26             -55
Financial impact as a percentage of dollars included in             1.8%            0.9%           -0.7%           -0.8%           -1.7%           -0.5%
 model..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Hip and Femur Procedures Except Major Joint episodes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total dollars included in NRPA calculation..............             362           1,564           1,657           1,768           1,884           7,235
Net reconciliation and repayment dollars................               5              11             -21             -32             -71            -109
Payments from CMS to hospitals..........................               5              11              14              26              26              81
Repayments from hospitals to CMS........................               0               0             -35             -58             -97            -190

[[Page 602]]

 
Financial impact as a percentage of dollars included in             1.2%            0.7%           -1.3%           -1.8%           -3.8%           -1.5%
 model..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Uncertainties
    These estimates are somewhat uncertain. As a result, the EPMs could 
produce more Medicare savings or could result in additional costs to 
the Medicare program. This analysis assumes that the incentives under 
the models drive no change in utilization of services within the 
episode, as this would not materially affect the estimated financial 
impacts to the Medicare program. The prospective prices for the 
episodes incorporate price updates from the FFS payment systems, but no 
change in utilization for the performance years is assumed. If there is 
a national increase in utilization within each episode that is not 
driven by the incentives under the models, 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 episode that 
is not driven by the incentives under the models, then costs to the 
Medicare program may increase due to greater reconciliation payments 
paid by Medicare to participants.
    We also assume that 27 percent of hospitals will submit voluntary 
measures in performance years 1 and 2, consistent with current 
experience in performance year 1 for CJR. We assume the percentage of 
hospitals that submit quality data will increase in 63 percent in 
performance year 3, and 99 percent in performance years 4 and 5 to 
qualify for the reduced discount. As a sensitivity test, if no 
hospitals report the voluntary measures for any of the three EPMs, the 
models together are estimated to save the Medicare program an 
additional $27 million over the 5 performance years.
    Additionally, we were unable to fully estimate the impact of the 
proposal in section III.D. of this final rule which addresses 
beneficiaries in EPMs who are also aligned or attributed to a Medicare 
Shared Savings Program participant or a participant in an ACO model 
initiated by the CMS Innovation Center. Savings achieved during an EPM 
episode will be attributed to the EPM participant, with EPM 
reconciliation payments for ACO-aligned beneficiaries treated as ACO 
expenditures, which should serve to minimize the financial impact of 
ACO overlap on overall savings. As described in section III.D.6. of 
this final rule, beginning in July 2017 we will exclude from AMI, CABG, 
and SHFFT episodes beneficiaries aligned to ACOs in the Next Generation 
ACO model, Shared Savings Program Track 3, and ESRD ESCOs in the 
Comprehensive ESRD Care Initiative in tracks with downside risk for 
financial losses. Excluding these beneficiaries from the EPMs will have 
the effect of reducing the number of eligible episodes and therefore 
the expected savings generated by implementation of the EPMs. To model 
the impact of these exclusions, we assume that the percentage of the 
FFS population aligned to the Next Generation ACO model, Shared Savings 
Program Track 3, and ESRD ESCOs in the Comprehensive ESRD Care 
initiative remains constant over the 5 performance years of the EPM 
model, and is similar to the distribution of beneficiaries aligned to 
these models for the 2017 calendar year.
    Due to the uncertainty of estimating the impacts of the EPMs, 
actual results could be higher or lower than these estimates. 
Additionally, we note that for these estimates, we did not make 
assumptions for changes in efficiency or utilization over the course of 
the performance period. Our analysis presents the cost and transfer 
payment effects of this final rule to the best of our ability. We 
solicited comments on the assumptions and analysis presented.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter noted that the impacts in the proposed rule 
did not present costs and savings attributable to the cardiac 
rehabilitation incentive payment model separate from the AMI, CABG and 
SHFFT EPM costs and savings and requested that we provide this 
information.
    Response: We appreciate the interest of the commenter to obtain a 
breakdown of costs and savings attributable to the cardiac 
rehabilitation incentive payment model. We have presented disaggregated 
cardiac rehabilitation incentive payment model costs and savings in 
this final rule.
    Comment: One commenter expressed concern for the potential economic 
impact that the EPMs may have on beneficiaries' families and family 
caregivers such as increased home health care needs. The commenter 
stated that they believe there is a great deal of economic impact on 
families due to missed work or other out of pocket costs which might 
increase due to shortened stays at inpatient or rehabilitation 
facilities resulting from the EPMs. The commenter requested that CMS 
provide detailed modeling of the economic impacts on family caregivers, 
including direct out of pocket costs and missed work associated with 
caring for family members who are beneficiaries in an EPM.
    Response: We appreciate the commenter's concern for the potential 
economic impact on in-home family care providers. However, we do not 
believe that this is something that can be accurately modeled given the 
high amount of uncertainty regarding the volume of additional in-home 
family-provided care that might potentially be spurred by the EPMs.
    Comment: A commenter requested that we provide greater detail with 
regard to the modeling methods utilized in our estimates. The commenter 
requested that we further explain the implication on physician practice 
under the model.
    Response: Our estimates of the impacts of the EPMs do not include 
assumptions about behavioral change on the part of providers and 
suppliers or other entities other than participating hospitals as a 
result of the EPMs. The EPMs could enable participants to consider the 
most appropriate strategies for care redesign with collaborating 
entities including physicians, such as--(1) increasing post-
hospitalization follow-up and medical management for patients; (2) 
coordinating across the inpatient and post-acute care spectrum; (3) 
conducting appropriate discharge planning; (4) improving adherence to 
treatment or drug regimens; (5) reducing readmissions and complications 
during the post-discharge period; (6) managing chronic diseases and 
conditions that may be related to the proposed EPM episodes; (7) 
choosing the most appropriate post-acute care setting; and

[[Page 603]]

(8) coordinating between providers and suppliers such as hospitals, 
physicians, and post-acute care providers.
    In addition, as discussed in section I.B.5. of this final rule, the 
EPMs create an opportunity for physicians to collaborate in order to 
participate in Track 1 of the EPMs to be eligible for qualification for 
Advanced APM. For purposes of modeling impacts, we have assumed that 
only 1 percent of participants will elect to take on downside risk in 
performance year 2 to qualify as an Advanced APM. Participation in the 
Advanced APMs may result in net profits or losses for collaborating 
physicians. For more information on Advanced APMs, please see the MIPS 
and Alternative Payment Model (APM) Incentive Under the Physician Fee 
Schedule, and Criteria for Physician-Focused Payment Models final rule 
with comment period (81 FR 77008 through 77831). We refer readers to 
Table 57, where we provide the estimated impact associated with the 
implementation of the EPMs.
b. CJR
    We are finalizing our proposal to modify the CJR model to include 
reconciliation payments and Medicare repayments in our calculations 
when updating CJR episode quality-adjusted target prices for 
performance years 3 through 5. We are also finalizing our proposal to 
create consistency between the CJR composite quality scores and SHFFT 
composite quality scores by--(1) awarding quality improvement points 
based on an improvement of 2 deciles (rather than 3 deciles as in the 
final CJR rule); (2) capping the total composite quality score at 20; 
and (3) utilizing an updated HCAHPS algorithm.
(1) Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through December 31, 2014 to update the impact originally outlined in 
the CJR final rule (80 FR 73288) to reflect the changes finalized in 
this final rule for the CJR model. Specifically, we estimated the 
effect of including BPCI and CJR reconciliation payments and Medicare 
repayments in setting quality-adjusted target prices for performance 
years 3-5. We also updated our prior assumption regarding CJR 
participation with voluntary reporting of quality data to be more 
consistent with prior experience. The estimates assume that 27 percent 
of CJR participants will submit quality data in performance years 1 and 
2, consistent with preliminary results regarding quality reporting in 
performance year 1. The model then assumes that more hospitals will 
submit quality data over time to qualify for a lower discount, with 63 
percent reporting quality data in performance year 3, and 99 percent in 
performance years 4 and 5.
    To simulate changes in the calculation of the CJR composite scores, 
we used quality data as publicly reported on Hospital Compare in 2015 
and 2016 to estimate the impact of this policy, with 2016 measures used 
to calculate performance and the difference between 2015 and 2016 
measures used to calculate improvement. We calculated the HLMR by using 
10 of the 11 publicly reported measures, taking the average of all 
publicly reported measures except how well hospital staff help patients 
manage pain, consistent with revisions under consideration for this 
HCAHPS measure. Calculations are as follows:
     To calculate performance for the CJR model, we utilized 
hospital-level risk-standardized complication rate following elective 
primary total hip arthroplasty (THA) and/or total knee arthroplasty 
(TKA) measure results based on the performance period of April 1, 2012 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2015 through December 31, 2015.
     To calculate improvement for CJR, we utilized hospital-
level risk-standardized complication rate following elective primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) 
measure results based on the performance periods of April 1, 2011 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2014 through December 31, 2014.
    For the purpose of this analysis, we assumed that 99 percent of 
hospitals participating in the CJR model will voluntarily submit 
patient-reported outcome measures to qualify for the lower discount by 
performance year 4.
    CJR participants were assigned to a performance percentile and 
assigned the corresponding quality performance score as described in 
the CJR final rule (80 FR 73288). Hospitals that did not have a 
reported measure result were assigned to the 50th performance 
percentile. Hospitals assigned a quality measure performance percentile 
for the most recent year that improved by at least 2 deciles from the 
prior year received quality improvement points, with the total 
composite quality score capped at 20. These composite quality scores, 
consistent with the methodology finalized in section III.E., were then 
applied to the development of quality-adjusted target prices as 
described in the CJR final rule (80 FR 73288).
    We note that we finalized a modification to the application of the 
stop-loss and stop-gain limits to exclude hospital responsibility for 
post-episode spending from the application of these limits. The number 
of hospitals estimated to be affected by the post-episode spending 
calculation is anticipated to be small, and the estimated post-episode 
reconciliation amount is estimated to round down to 0 million.
(2) Analyses

                                        Table 59--Estimates of Impact on the Medicare Program by the CJR Model *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Year(s)                                      Across all 5
                                                         --------------------------------------------------------------------------------  years of the
                                                               2016            2017            2018            2019            2020       proposed model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Original CJR net financial impact from final rule.......              11            (36)            (71)           (120)           (127)           (343)
CJR modifications net financial impact..................               1               2              10              11               2              26
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In millions. Totals do not necessarily equal the sums of rounded components.

    Modifications to the CJR model as established in this final rule 
would begin at the time of reconciliation for performance year 1 and 
therefore affect estimates of the impact of the model from April 2016-
December 2020. The change in the estimated net financial impact to the 
Medicare program from the CJR model modifications in this final rule is 
$22 million in spending, and the updated assumptions regarding the 
number of hospitals that will report

[[Page 604]]

quality data result in an increase of $4 million in spending. The total 
estimated net financial impact to the Medicare program from both the 
modifications in the final rule and revised assumptions are $26 million 
in Medicare spending. Due to the uncertainty of estimating the impacts 
of this model, actual results could be higher or lower than this 
estimate. We are also unable at this time to estimate the impacts of 
considering certain CJR and EPM providers and Affiliated Practitioners 
to be participating in Advanced APMs. Eligible clinicians that qualify 
as QPs for a year through participation in EPMs and CJR will receive a 
bonus equal to 5 percent of their prior year Medicare payments, thereby 
increasing Medicare expenditures.
c. CR Incentive Payment Model
    As detailed in section VI of this final rule, the CR incentive 
payment model will test whether a financial incentive for hospitals 
that encourages the management of beneficiaries that have had an AMI or 
a CABG in ways that may contribute to long-term improvements in quality 
and reductions in Medicare spending. The CR incentive payment model 
will test the effects on quality of care and Medicare expenditures of 
providing explicit financial incentives to CR participants for 
beneficiaries hospitalized for treatment of AMI or CABG to encourage 
care coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program.
    Under the CR incentive payment model, we will provide a CR 
incentive payment to selected hospitals with financial responsibility 
for AMI or CABG model episodes (hereinafter EPM-CR participants) 
because they are already engaged in managing the AMI or CABG model 
beneficiary's overall care for a period of time following hospital 
discharge. We will also provide a CR incentive payment to selected 
hospitals that are not AMI or CABG model participants (hereinafter FFS-
CR participants), enabling us to test and improve our understanding of 
the effects of the CR incentive payment within the context of an EPM 
and the Medicare FFS program, as well as to identify potential 
interactions between the CR incentive payment and the underlying EPM 
and FFS payment methodologies. We will test the CR incentive payment 
model in 45 of the 98 MSAs selected for the AMI and CABG EPMs, as well 
as 45 FFS MSAs selected through stratified random sampling.
(1) Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through December 31, 2015 to identify CR and ICR services that count 
towards CR incentive payments on the basis of the presence of the HCPCS 
codes on PFS and OPPS claims and APC codes on OPPS claims that report 
CR/ICR services. We then compared total Medicare spending over 3 years 
post hospital discharge for AMI and CABG for beneficiaries that 
received cardiac rehabilitation services within 90 days of discharge, 
to beneficiaries that did not receive cardiac rehabilitation services 
within 90 days of discharge. We found that among beneficiaries 
continuously enrolled over 3 years in FFS Medicare Part A and B those 
receiving cardiac rehabilitation services within 90 days of discharge 
from an AMI and or CABG hospitalization had lower Medicare spending 
relative to beneficiaries whom did not receive cardiac rehabilitation 
services post discharge from an AMI and or CABG hospitalization, even 
after adjusting for differences in age, sex, and case-mix between the 
two populations. The difference in average spending between the group 
that received cardiac rehabilitation services and the group that did 
not receive cardiac rehabilitation services within 90 days of discharge 
represents the reduction in Medicare spending we would anticipate from 
an additional beneficiary receiving cardiac rehabilitation services due 
to the cardiac rehabilitation incentive payment model. However, 
adjusting for age, sex and case-mix may not fully account for other 
characteristics in the cardiac rehabilitation population compared to 
patients who did not receive such services that may account for the 
difference in Medicare spending.
    CR incentive payments apply to CR/ICR sessions during the 90-day 
episode (for EPM participants) or 90-day care period (for FFS 
participants) from date of discharge. CR and ICR services paid by 
Medicare to any provider or supplier for model beneficiaries during AMI 
or CABG model episodes/care periods would result in participant 
eligibility for CR incentive payments. To model the impact of the 
cardiac rehabilitation incentive payment model, we calculated the costs 
of the incentive payments for beneficiaries receiving cardiac 
rehabilitation services, as well as any reduction in Medicare spending 
due to more beneficiaries receiving cardiac rehabilitation services. 
For the 90 MSAs selected for the cardiac rehabilitation incentive 
payment model, we used final action Medicare claims data for the 2015 
calendar year to calculate what the cardiac rehabilitation incentive 
payments would be for all beneficiaries receiving cardiac 
rehabilitation services within 90 days of an AMI and CABG 
hospitalization. For a given increase in the proportion of 
beneficiaries observed in the 2015 calendar year that received cardiac 
rehabilitation services (see table 60), we calculated both the cost of 
the cardiac rehabilitation incentive payments for these additional 
beneficiaries, as well as the estimated reduction in Medicare spending 
over a 3-year period due to these additional beneficiaries receiving 
cardiac rehabilitation services. We estimated spending based on the 
pricing structure described in section VI.E. of this final rule. For a 
given rate of beneficiaries receiving cardiac rehabilitation services, 
we summed the costs of CR incentive payments. We then subtracted the 
estimated reduction in Medicare spending due to the increase in the 
rate of beneficiaries receiving cardiac rehabilitation services 
relative to the rate receiving such services in the 2015 calendar year 
to arrive at the net financial impact. This analysis considers the 
impact of increased utilization on transfer payments from Medicare to 
providers, as well as beneficiary copays and coinsurance.
    We recognize that utilization of CR/ICR services is driven by many 
factors, and we lack sufficient data to reliably estimate the effect of 
a CR incentive payment on beneficiary utilization of CR/ICR services, 
particularly during the 90-day episode/care period. Therefore, we 
calculated a range of potential impacts based on alternatives in the 
increase in cardiac rehabilitation utilization, ranging from no change 
to an increase in utilization of 4 percentage points.
(2) Analyses

[[Page 605]]



        Table 60--Range of Potential Long-Term Impact of Cardiac Rehabilitation Incentive Payment Model *
----------------------------------------------------------------------------------------------------------------
                                                                  Increase in cardiac rehabilitation utilization
                                                                 -----------------------------------------------
                              Year                                                 2 percentage    4 percentage
                                                                    No increase       points          points
----------------------------------------------------------------------------------------------------------------
2017............................................................               2               2               2
2018............................................................               6               6               6
2019............................................................               7               4               1
2020............................................................               7               2             (3)
2021............................................................               8               1             (7)
2022............................................................  ..............             (8)            (16)
2023............................................................  ..............             (5)            (10)
2024............................................................  ..............             (3)             (5)
                                                                 -----------------------------------------------
    Total: 2017-2024............................................              29             (1)            (32)
----------------------------------------------------------------------------------------------------------------
* In millions of dollars. Totals do not necessarily equal the sums of rounded components.

    Table 60 summarizes the estimated impact for the CR incentive 
payment model. Our model estimates that the impact on Medicare spending 
may range from up to $29 million of spending to $32 million of savings 
between 2017 and 2024, depending on the change in utilization of CR/ICR 
services under the model. The estimate only considers the financial 
effects of additional beneficiaries receiving CR/ICR services, and does 
not take into account potential changes in the volume of CR/ICR 
services that beneficiaries may receive within 90-days of hospital 
discharge. Increasing CR/ICR services within 90 days of hospital 
discharge will increase CR/ICR incentive payments, and may influence 
Medicare spending after the 90 day episode. Due to the uncertainty of 
estimating the impacts of this model, actual results could be higher or 
lower than this estimate. Our analysis presents the cost and transfer 
payment effects of this final rule to the best of our ability. We 
solicited comments on our assumptions and analysis presented in the 
proposed rule (81 FR 50989 through 51002). However, we did not receive 
comments on this topic.
d. 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, as well 
as the CJR model. Under the authority of section 1866C of the Act, the 
Medicare program 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 
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 PAC 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 
this initiative, entities enter into payment arrangements with CMS that 
include financial and performance accountability for episodes of care. 
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. We believe that our experiences with 
BPCI support the design of the EPMs.
    Although there is some evidence from BPCI and ACE suggesting that 
providers may improve their performance, the participants that 
volunteered to participate may be in a better position to reduce 
episode spending relative to the average provider. The CJR model is 
testing the first bundled payment model under the Innovation Center 
authority in which providers are required to participate. The CJR model 
test began in April 2016 and we are finalizing refinements to the CJR 
in this final rule to support successful implementation. The design of 
the EPMs finalized in this rule incorporates early learnings from the 
CJR model.
    Finally, although we project savings to Medicare under the EPMs and 
updated CJR, 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 it is determined that termination or modification is necessary, 
such actions would be undertaken through rulemaking.
3. Effects on Beneficiaries
    We believe that episode payment models may have the potential to 
benefit beneficiaries because the intent of the models is to test 
whether providers under episode payment models 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 that 
episode payment models have a patient-centered focus such that they 
incentivize improved healthcare delivery and communication delivered 
around the needs of the beneficiary, thus potentially benefitting the 
beneficiary community. However, the EPMs do not affect beneficiary cost 
sharing for services or premiums paid by beneficiaries. If there is a 
shift in services utilized within each episode, then beneficiary cost 
sharing could be higher or lower than would otherwise be experienced.
    We finalized the use of several patient outcomes and patient 
experience measures to tie payment to quality performance with the 
intent that this approach encourages the provider community to focus on 
and deliver improved quality care for Medicare beneficiaries. 
Additionally, participants must meet an acceptable level of quality 
performance in order to qualify to

[[Page 606]]

receive a reconciliation payment. The accountability of participants 
for both quality and cost of care provided for Medicare beneficiaries 
within episodes provides participants with new incentives to improve 
the health and well-being of the Medicare beneficiaries they treat.
    Additionally, the EPMs and CJR do 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. Eligible beneficiaries who 
choose to receive services from a participant would not have the option 
to opt out of inclusion in the models. Although the EPMs and CJR allow 
participants to enter into risk-sharing arrangements with certain other 
providers, and participants may recommend those providers to the 
beneficiary, participants 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 participants if claims analysis indicates an 
inappropriate change in delivered services. As described in section 
III.G. of this final rule, given that participants would receive a 
reconciliation payment when they are able to reduce average spending 
per episode and achieve acceptable or greater quality performance, 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 participants--for example, to compare a 
hospital's case mix relative to a pre-model historical baseline to 
determine whether complex cases are being systematically excluded. 
Furthermore, we also proposed to require providers to supply 
beneficiaries with written information regarding the design and 
implications of these EPMs 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 
post-hospital discharge episode duration is sufficiently long to 
minimize the risk that any episode-related care will be delayed beyond 
the end of the episode. Moreover, we are finalizing that as part of the 
payment definition (see section III.D. of this final rule) that 
participants would be financially responsible for certain outlier post-
episode payments occurring in the 30-day window subsequent to the end 
of the 90-day episode.
    Lastly, we note that Medicare payments for services will continue 
to be made for each Medicare FFS payment system under the CJR model and 
the EPMs. Because we are finalizing our proposal to waive beneficiary 
coinsurance for reconciliation payments and repayments, beneficiaries 
will be subject to copayments, deductibles, and coinsurance consistent 
with Medicare FFS payments, rather than as determined by quality-
adjusted target prices. In our analysis of impacts, we assume that 
beneficiary payments will not be affected, as only the participant will 
be subject to the reconciliation process. If participants are 
successful in improving quality or care while reducing costs, 
beneficiaries may benefit through reduced out-of-pocket expenditures 
across the episode. Alternatively, if participants respond to the 
incentives under the models by shifting medical care outside of the 90-
day bundle, than this may negatively impact the quality of care that 
beneficiaries receive.
4. 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 604 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. The models finalized in this 
rule do not require participation of hospitals located outside of MSAs. 
We have included a more protective stop-loss policy for certain IPPS 
hospitals that are 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 reclassified to rural in accordance with Sec.  
412.103. The models finalized in this rule will affect some rural 
hospitals based on this definition.
    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 finalized additional financial 
protections for rural hospitals (in addition to other protections under 
the EPMs for Medicare Dependent Hospitals, Rural Referral Centers, Sole 
Community and certain low-volume participants). In performance year 2, 
a rural hospital which qualifies for reduced stop-loss and stop-gain 
limits and elects downside risk could owe Medicare no more than 3 
percent of the sum of quality-adjusted target prices for the hospital's 
episodes in an EPM. In performance year 3, a rural hospital could owe 
Medicare no more than 3 percent of quality-adjusted target prices for 
the hospital's episodes in an EPM. In performance years 4 and 5, a 
rural hospital could owe Medicare no more than 5 percent of the sum of 
quality-adjusted target prices for the hospital's episode in an EPM. 
Although we are finalizing these additional protections, we believe 
that few rural hospitals will be included in the models, and therefore 
that few will need these protections.
    AMI, CABG, and SHFFT episodes account for less than 5 percent of 
all discharges, and because relatively few of these procedures are 
performed at small rural hospitals, and because the EPMs are 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 final rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    We solicited public comments on our estimates and analysis of the 
impact of our proposals on small rural hospitals.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters were concerned that this rule may have a 
negative impact or create unnecessary burden on small rural hospitals. 
One commenter reported concern that the EPMs could have a negative 
financial impact on small rural hospitals. Another commenter stated 
that the EPMs may reduce access for rehabilitation services in rural 
areas. This commenter stated that they are concerned non-rural EPM 
participant hospitals may encourage beneficiaries to receive care at 
providers affiliated with or within close proximity to the non-rural 
EPM participant hospital, which could negatively impact volume of 
services provided by rural hospitals. The commenter also stated that 
beneficiaries living in rural settings might therefore be forced to 
choose between relocating to less rural areas to receive appropriate 
care or to simply not receive appropriate post-acute care and follow-
up.
    Response: We understand the commenters' concern that the EPMs may 
have negative financial implications on rural hospitals. To limit the 
impact on rural hospitals, we have largely excluded them from the MSAs

[[Page 607]]

eligible for EPM. As discussed in section III.D.7.c.(1) of this final 
rule, we provide additional protections for rural hospitals in the 
EPMs. We have also established, in Sec.  512.450, that participants may 
not limit beneficiary choice to any list of providers or suppliers in 
any manner other than that permitted under applicable statutes and 
regulations including small rural hospitals.
    We recognize that rural IPPS hospitals, SCHs, MDH and RRCs often 
serve as the only sites of care for beneficiaries living in rural 
areas, and these providers may have limited resources to contain costs 
under the EPMs. Additionally, they may have a limited number of 
providers and suppliers with which to coordinate care, such as CAHs 
that are reimbursed at a higher cost-based rate. As a result, we have 
provided for more protective stop-loss limits for these groups of IPPS 
hospitals in order to include them in the models while alleviating some 
financial risk. We believe that these models will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals. The discussion of separate financial loss limits for 
certain hospitals that may be less equipped to tolerate risk is 
included in Sec.  512.305(c)(2)(iii)(C).
    We appreciate the comment regarding the potential impact of this 
model on rural providers, particularly small rural hospitals. As we 
note in section III.D.7.c.(1) of this final rule, we are providing 
additional protections for rural IPPS hospitals, SCHs, MDHs, RRCs and 
certain low-volume hospitals located in the MSAs selected for 
participation in the models. As discussed in section III.D.7.c.(1), we 
note that these categories of hospitals often have special payment 
protections or additional payment benefits under the Medicare program 
because we recognize the importance of preserving Medicare 
beneficiaries' access to care from these hospitals.
5. 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/smallbusiness-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 final 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 final rule 
discusses aspects of episode payment models that may or will affect 
them, we have no reason to assume that these effects will reach the 
threshold level of 3 percent of revenues used by HHS to identify what 
are likely to be ``significant'' impacts. We assume that all or almost 
all of these entities will continue to serve beneficiaries, and receive 
payments in accordance with Medicare FFS payment methodologies.
    Accordingly, we have determined that this final rule will not have 
a significant impact on a substantial number of small entities.
6. Effects on Collection of Information
    There are three primary sets of information collection activities 
that EPM participants may be engaged in: Activities related to quality 
reporting, activities related to Advanced APM participation, and ad hoc 
reporting of beneficiary notification upon request by CMS. Here, we 
briefly describe the anticipated scope and effects of information 
collection in each of these three areas for EPM participants.
    Quality reporting associated with the EPMs includes EPM-specific 
quality measures, HCAHPS, and voluntarily reported quality measures 
(AMI, CABG and SHFFT models), described in more detail in section 
III.E. of this final rule. IPPS hospitals are subject to incentives 
under quality reporting incentives such as the HVBP program and 
Medicare Electronic Health Record (EHR) Incentive Program, among 
others. Most IPPS hospitals already report information for the EPM-
specific quality measures and HCAHPS for other CMS programs, and those 
hospitals that do not otherwise report this information to CMS would 
not be required to report under the EPMs. Thus, for EPM participants 
there will be no required information collection activities for the 
EPMs.
    For the AMI model, participants have the option of reporting data 
for the Hybrid AMI Mortality measure. This measure includes a 
combination of claims and EHR data for a total of five EHR-based 
clinical data elements and six claims-based elements. AMI voluntary 
data submission must occur within 60 days of most recent data 
collection period. Successful submission of optional Hybrid AMI 
Mortality measure data will be based upon inclusion of five key 
clinical data elements.
    We anticipate that participants who choose to engage in voluntary 
reporting of the Hybrid AMI Mortality measure will engage in the 
following process:
     Hospitals receive the measure authoring tool (MAT) output, 
a template layout for the data reporting file, and other artifacts that 
describe what they are supposed to do and how. The only data elements 
required are simple labs and vital signs that are collected 
consistently in structured fields. All hospitals with EHRs should be 
able to extract these from structured fields. Many will have some 
experience based on work with eCQMs.
     Hospitals review the MAT output and submit questions or 
request clarification via ongoing Q&A.
     Hospitals create a query for their EHR database using the 
MAT output and populate the reporting file with the core clinical data 
elements (CCDE). The hospital IT staff will typically run some queries 
on a small set of admissions and look at the corresponding charts to 
make sure they are getting the right data and may modify the query if 
needed.
     Hospitals submit the CCDE to CMS on the prescribed 
template (QRDA, consolidated clinical document architecture (CCDA), or 
simple excel file are all options).
     Hospitals do not need to do any measure calculation. Once 
data elements are submitted, CMS will link with claims data to 
calculate measure scores.
    Given this process, the initial effort of establishing operability 
will create the majority of burden. Once the initial effort of 
establishing the query is complete, the burden will be minimal, as the 
same query can be run against the EHR for ongoing reporting. We assume 
that the primary cost for a hospital will be the IT support to set up 
the initial query and ensure the correct data is being pulled from the 
EHR. The data elements should be less burdensome than a typical eCQM 
because participants do not need to create new fields, all data is 
feasibly accessed in

[[Page 608]]

current EHRs without creating new clinical workflows, and hospitals do 
not need to do any measure calculation.
    AMI model participants must meet the following requirements for 
each performance year in order to fulfill the successful Hybrid AMI 
Mortality data collection criterion. In performance year 1, 
participants will be required to submit this data for 50 percent of 
eligible AMI episodes occurring during the 2-month period between July 
1, 2017 and August 31, 2017. In performance year 2, AMI voluntary data 
submission will be for 10 months of eligible discharges. In performance 
years 3 through 5, participants will need to submit data for the entire 
performance year. Furthermore, in performance years 2 through 5, 
participants will need to submit the five key clinical data elements 
for at least 90 percent of eligible AMI discharges to receive credit 
for successful submission and two additional points toward the 
participant's AMI model composite quality score.
    We are unable to provide a direct cost estimate for hospitals at 
this time, but expect to learn more as part of model testing. The 
voluntary data submission initiative will allow AMI model participants 
to build processes to extract and report the EHR data elements, as well 
as support CMS testing of systems required for Hybrid AMI Mortality 
measure (NQF #2473) production including data receiving and auditing, 
the merging EHR and claims data, calculation and production of measure 
results.
    For the CABG model, the voluntary quality measure is successful 
submission of data to the Society of Thoracic Surgeons Adult Cardiac 
Surgery Database (STS measure). We anticipate that for the majority of 
CABG model participants, there will be no additional burden of 
reporting as the STS measure as most CABG participants are already 
submitting data for this measure.
    We do not anticipate significant operational difficulties as we 
plan to work collaboratively with the STS Registry to receive the data 
files following each data collection period as prescribed by the STS 
Registry. EPM participants who are not members of the STS Proprietary 
Registry, but are a HQR participating facility would have access to 
SFT. Data files can be securely sent via SFT in a transitional 
submission format available to systems using a spreadsheet-based 
approach.
    We are unable to provide a direct cost estimate for hospitals at 
this time, but expect to learn more as part of the CABG model testing.
    For the SHFFT model, the voluntary quality measure is based on THA/
TKA patient-reported outcome-based measure data submission, which draws 
upon patient interviews to gain insights into patient experience and 
related outcomes.
    We anticipate that participants who choose to engage in voluntary 
reporting of the THA/TKA patient-reported outcome-based data will 
engage in the following process:
     Participating hospitals will need to establish a means to 
collect patient-reported outcome data from patients pre-operatively 
and, again, post-operatively. In addition, they would need to collect 
select additional risk variables from patient charts.
     The specific instruments (and risk variables) have been 
vetted by a Technical Expert Panel and public comment: Veterans RAND 12 
Item Health Survey (VR-12) or Patient-Reported Outcomes Measurement 
Information System (PROMIS) Global-10 generic PRO survey; Hip 
disability and Osteoarthritis Outcome Score (HOOS)/Knee injury and 
Osteoarthritis Outcome Score (KOOS) Jr. or HOOS/KOOS subscales PRO 
survey; additional risk variables that can be physician-reported or 
chart-abstracted.
     If hospitals select the least burdensome instruments, data 
collection requires patients to answer 16 through 17 outcome questions 
and 3 risk factor questions. Estimates from instrument developers, 
input from the patient members of a Technical Expert Panel, and 
empirical results from a survey of physicians collecting similar data 
on THA/TKA patients support minimal patient burden (under 5 minutes) to 
collect the required data.
     Pre-operative survey completion could be arranged to be 
completed online, by phone, or at pre-operative clinic or hospital 
admission intake visits. Post-operative survey completion must occur 
between 270 and 365 days after the eligible elective primary procedure, 
and may occur in a variety of ways, such as online or by phone.
     Hospitals will collect or extract 6 risk variables that 
are commonly available in the medical record.
    Currently available data suggests costs associated with information 
collection for this measure can vary tremendously. We anticipate the 
SHFFT patient-reported outcomes reporting costs to a participant 
hospital would decrease over time as the collection process is 
streamlined and integrated into clinical care workflows. A number of 
hospitals are already collecting this data either as a part of an 
established registry or for participation in the existing CJR. For 
these participants, the burden of developing data collection systems 
will be minimal.
    Participating hospitals must meet the following information 
submission requirements for each performance year in order to fulfill 
the successful THA/TKA patient-reported outcome-based data collection 
criterion. In performance year 1, participants must submit pre-
operative data for at least 60 percent of eligible procedures or at 
least 75 cases performed between September 1, 2016 and June 30, 2017. 
In performance year 2, participants must submit post-operative data for 
at least 60 percent of eligible procedures or at least 75 cases 
performed between September 1, 2016 and June 30, 2017 and also must 
submit pre-operative data for at least 70 percent of eligible 
procedures or at least 100 cases. In performance year 3, participants 
must submit post-operative data for at least 70 percent of eligible 
procedures or at least 100 cases performed between July 1, 2017 and 
June 30, 2018 and also must submit pre-operative data for at least 80 
percent of eligible procedures or at least 200 cases performed between 
July 1, 2018 and June 30, 2019. In performance year 4, participants 
must submit post-operative data for at least 80 percent of eligible 
procedures or at least 200 cases performed between July 1, 2018 and 
June 30, 2019 and also must submit pre-operative data for at least 80 
percent of eligible procedures or at least 200 cases performed between 
July 1, 2019 and June 30, 2020. In performance year 5, participants 
must submit post-operative data for at least 80 percent of eligible 
procedures or at least 200 cases performed between July 1, 2019 and 
June 30, 2020 and also must submit pre-operative data for at least 80 
percent of eligible procedures or at least 200 cases performed between 
July 1, 2020 and June 30, 2021.
    We are unable to provide a direct cost estimate for hospitals at 
this time, but expect to learn more as part of SHFFT and CJR model 
testing.
    Overall, we anticipate the net burden of voluntary data submissions 
in the AMI, CABG and SHFFT models will be marginal, as we anticipate 
hospitals will only choose to proceed with optional data submission if 
they believe the net financial benefit will be positive.
    Information collection related to the Track 1 EPMs and the Track 1 
CJR model to meet the Advanced APM requirements included in the Quality 
Payment Program proposed rule and to operationalize the EPMs and CJR as 
Advanced APMs includes EPM and CJR participant attestation to CEHRT and 
clinician financial arrangements lists

[[Page 609]]

submission. We believe that the selection by EPM and CJR participants 
to meet and attest to the CEHRT use requirement would create no 
significant additional administrative burden on EPM and CJR model 
participants. The submission of clinician financial arrangements lists 
(no more frequently than quarterly) for Track 1 EPMs and the Track 1 
CJR model may create some additional administrative requirements for 
certain EPM and CJR participants.
    Finally, we expect that participants are able to produce lists of 
beneficiaries who have received compliant notification of participation 
in model. We provided flexible guidelines for this requirement as 
specific record keeping methods can be chosen by individual 
participants so long as the necessary information is maintained readily 
available to report upon request. We sought comment on any burden 
derived from this requirement. In total, we anticipate marginal 
additional reporting burden resulting from this final rule.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter expressed concern over increased quality data 
reporting in the EPMs and the CJR model. The commenter stated that, to 
date, they have utilized extensive resources to maintain compliance 
with CJR quality reporting requirements and are concerned about further 
quality reporting requirements for the EPMs. The commenter requested 
that CMS delay quality reporting requirements due to the resource 
investment necessary to comply with EPM quality reporting requirements.
    Response: We appreciate the commenter's concern over potential 
burden associated with quality data reporting in the EPMs. As discussed 
in section III.E.3. of this final rule, EPM participants are not 
required to report quality data for reconciliation payment eligibility. 
While EPM participants may choose to increase their financial 
opportunity under the model by successfully submitting data for future 
measure development, as discussed in sections III.E.3.d. of this final 
rule, reporting data for future measure development is not required for 
reconciliation payment eligibility.
7. 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 2016, that 
is approximately $146 million. This final 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 $146 million in any 1 year.

D. Alternatives Considered

    Throughout this final rule, we have identified the policies and 
alternatives that we have considered, and provided information as to 
the possible effects of these alternatives and the rationale for each 
of the policies we have finalized. We solicited and welcomed comments 
on our proposals, on the alternatives we 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 hospitals in the CJR 
model, hospitals that will be included in the SHFFT model, hospitals 
selected to participate in the AMI and CABG models, and the FFS-CR 
participants. This final rule will not impinge directly on hospitals 
that are not participating in CJR or the EPMs. However, it may 
encourage innovations in health care delivery in other areas or in care 
paid through other payers. For example, a hospital and affiliated 
providers may choose to extend their arrangements for an EPM to other 
payers, not just those beneficiaries paid under Medicare FFS. 
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 
EPMs. We welcomed comments that address these or other possibilities.
    We present the implications of alternatives considered in the 
development of the EPMs here. As discussed in section III.C. of this 
final rule, we will define beneficiary inclusion in the AMI model by 
discharge under an AMI MS-DRG (280-282), representing those individuals 
admitted with AMI who receive medical therapy but no revascularization, 
and discharge under a PCI MS-DRG (246-251) with an ICD-10-CM diagnosis 
code of AMI on the IPPS claim for the anchor hospitalization in the 
principal or secondary diagnosis code position. Alternately, we could 
have defined beneficiary inclusion based only on the principal 
diagnosis code which would have reduced the number of episodes included 
in the EPMs.
    As discussed in section III.E. of this final rule, we allow 
participants to qualify for a higher composite quality score in the 
AMI, CABG and SHFFT models based on submission of voluntary measures or 
data. If we had not provided the option for participants to achieve an 
increased composite quality score for voluntary reporting (or if we 
assume no hospitals report this data), the AMI, CABG and SHFFT models 
are estimated to result in an additional $27 million savings over the 5 
performance years.
    As discussed in section VI of this final rule, we have finalized 
our proposal for the selection of CR MSAs via a modified stratified 
random selection based on several key dimensions related to CR/ICR 
service provision, including percent of eligible cases in the MSA who 
receive CR/ICR services, percent who complete CR or ICR services, and 
the number of CR/ICR providers. In the proposed rule, we outlined 
alternative MSA selection strategies and solicited comments on the MSA 
selection approach. We anticipate that, because these approaches draw 
from the same pool of eligible MSAs without regard to MSA size or total 
cost of care during the episode or care period, the overall financial 
impact of different selection methodologies will be minimal, and the 
primary impact of varied MSA selection approaches will be on balance 
among model arms for evaluation.

E. Accounting Statement and Table

    As required by OMB Circular A-4 under Executive Order 12866 
(available at http://www.whitehouse.gov/omb/circulars_a004_a-4) in 
Table 61, we have prepared an accounting statement showing the 
classification of transfers, benefits, and costs associated with the 
provisions in this final rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis. As described in 
Table 57, we estimate this final EPM model will result in savings to 
the federal government of $159 million over the 5 performance years of 
the model from 2017 to 2021. Table 58 shows the annualized change in 
net federal monetary transfers, and potential reconciliation payments 
to participants net of repayments from participants that are associated 
with the EPM provisions of this final rule as compared to baseline. As 
described in Table 59, we estimate the modifications to the CJR model 
finalized in this final rule will result in a reduced savings to the 
federal government of $26 million over the 5 performance years of the 
model from 2016 to 2020. As described in Table 60, we estimate the 
range of impact for this final CR model to be between a cost of $29 to 
a savings of $32 million over 2017 to 2024. In Table 61, the overall 
annualized change in payments (for all provisions finalized in this 
final rule) based on a 7 percent and 3 percent discount rate, results 
in net federal monetary transfer from the participant

[[Page 610]]

IPPS hospitals to the federal government of $13 million and $16 million 
respectively over the period of 2016 to 2024. For purposes of the 
accounting statement, we assumed no change in the rate of beneficiaries 
receiving cardiac rehabilitation services.
    This final rule does not result in any significant additional 
administrative burden on participants.

    Table 61--Accounting Statement (2016-2024), Estimated Impacts for
  Episode Payment Models (2017-2021), Changes to Comprehensive Care for
   Joint Replacement (2016-2020), and Cardiac Rehabilitation Incentive
  Payment Model (2017-2024) Assuming No Change in the Rate of Patients
                Receiving Cardiac Rehabilitation Services
------------------------------------------------------------------------
                                     Primary
            Category                estimate      Source citation  (RIA,
                                   (millions)        preamble, etc.)
------------------------------------------------------------------------
Transfers                        ..............  .......................
    Annualized monetized                    $13  Change from baseline to
     transfers: Discount rate                     final changes (Tables
     7%.                                          57, 59, and 60).
    Annualized monetized                     16
     transfers: Discount rate
     3%.
                                ----------------------------------------
From whom to whom?.............     From Participant IPPS Hospitals to
                                           Federal Government.
 
------------------------------------------------------------------------

F. Conclusion

    This 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 final rule, we estimate that the 
financial impact of the AMI, CABG, and SHFFT EPM models proposed here 
would be net federal savings of $159 million over a 5-year performance 
period (2017 through 2021), the financial impact of the CJR model as 
modified here with the revised assumptions on hospital reporting of 
quality data would be an estimated net federal decrease in savings of 
$26 million over a 5-year period (2016 through 2020) relative to the 
estimates published in the CJR final rule. The financial impact of the 
CR incentive payment model would be net change in federal spending 
between $29 million in additional costs and $32 million in savings to 
the Medicare program over an 8-year period (2017 through 2024).
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 510

    Administrative Practice and Procedure, Health facilities, Health 
professions, Medicare, and Reporting and recordkeeping requirements.

42 CFR Part 512

    Administrative practice and procedure, Health facilities, Medicare, 
Reporting and recordkeeping requirements.

0
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 amends 42 CFR Chapter IV as follows:

Subchapter H--Health Care Infrastructure and Model Programs

PART 510--COMPREHENSIVE CARE FOR JOINT REPLACEMENT MODEL

0
1. The authority citation for part 510 continues to read as follows:

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


0
2. Section 510.2 is amended by--
0
a. Adding in alphabetical order definitions for ``Applicable discount 
factor'', ``Area'', ``CEHRT'', ``CJR beneficiary,'' and ``Episode 
benchmark price'';
0
b. Removing the definition of ``Episode target price'';
0
c. Revising the definitions of ``HCPCS'', ``HHA'', and ``Historical 
episode payment'';
0
d. Adding in alphabetical order a definition for ``Hospital'';
0
e. Removing the definition of ``IPPS hospital (or hospital)'';
0
f. Adding in alphabetical order a definition for ``Quality-adjusted 
target price'';
0
g. Revising the definition of ``Quality improvement points''; and
0
h. Adding in alphabetical order a definition of ``Therapist in private 
practice''.
    The additions and revisions read as follows:


Sec.  510.2  Definitions.

* * * * *
    Applicable discount factor means the discount percentage 
established by the participant hospital's quality category as 
determined in Sec.  510.315 and that is applied to the episode 
benchmark price for purposes of determining a participant hospital's 
Medicare repayment in performance years 2 and 3.
    Area means, as defined in Sec.  400.200 of this chapter, the 
geographical area within the boundaries of a State, or a State or other 
jurisdiction, designated as constituting an area with respect to which 
a Professional Standards Review Organization or a Utilization and 
Quality Control Peer Review Organization has been or may be designated.
* * * * *
    CEHRT means certified electronic health record technology that 
meets the requirements of 45 CFR 170.102. .
    CJR beneficiary means a beneficiary who meets the beneficiary 
inclusion criteria in Sec.  510.205 and who is in a CJR episode.
* * * * *
    Episode benchmark price means a dollar amount assigned to CJR 
episodes based on historical episode payment data (3 years of 
historical Medicare payment data grouped into CJR episodes according to 
the episode definition as described in Sec.  510.200(b)) prior to the 
application of the effective discount factor or applicable discount 
factor, as described in Sec.  510.300(c).
* * * * *
    HCPCS stands for Healthcare Common Procedure Coding System.
    HHA means a Medicare-enrolled home health agency.
    Historical episode payment means the expenditures for historical 
episodes that occurred during the historical period used to determine 
the episode benchmark price.
    Hospital means a provider subject to the prospective payment system 
specified in Sec.  412.1(a)(1) of this chapter.
* * * * *

[[Page 611]]

    Quality-adjusted target price means the dollar amount assigned to 
CJR episodes as the result of adjusting the episode benchmark price by 
the participant hospital's effective discount factor or applicable 
discount factor based on the participant hospital's quality category, 
as described in Sec. Sec.  510.300(c) and 510.315(f).
    Quality improvement points are points that CMS adds to a 
participant hospital's composite quality score for a measure if the 
hospital's performance percentile on an individual quality measure for 
performance years 2 through 5 increases from the previous performance 
year by at least 2 deciles on the performance percentile scale, as 
described in Sec.  510.315(d). For performance year 1, CMS adds quality 
improvement points to a participant hospital's composite quality score 
for a measure if the hospital's performance percentile on an individual 
quality measure increases from the corresponding time period in the 
previous year by at least 2 deciles on the performance percentile 
scale, as described in Sec.  510.315(d).
* * * * *
    Therapist in private practice means a therapist that--
    (1) Complies with the special provisions for physical therapists in 
private practice in Sec.  410.60(c) of this chapter;
    (2) Complies with the special provisions for occupational 
therapists in private practice in Sec.  410.59(c) of this chapter; or
    (3) Complies with the special provisions for speech-language 
pathologists in private practice in Sec.  410.62(c) of this chapter.
* * * * *

0
3. Section 510.2 is further amended, effective July 1, 2017, by--
0
a. Revising the definition of ``ACO'';
0
b. Adding in alphabetical order definitions for ``ACO participant'' and 
``ACO provider/supplier'';
0
c. Revising the definition for ``Alignment payment'';
0
d. Revising the definition of ``CJR collaborator'';
0
e. Adding in alphabetical order a definition for ``Collaboration 
agent'';
0
f. Removing the definition of ``Collaborator agreement'';
0
g. Adding in alphabetical order a definition for ``CORF'';
0
h. Revising the definitions of ``Distribution arrangement'' and 
``Distribution payment'';
0
i. Adding in alphabetical order definitions for ``Downstream 
collaboration agent'', ``Downstream distribution arrangement'', 
``Downstream distribution payment'',
0
j. Adding in alphabetical order definitions for ``Member of the NPPGP 
or NPPGP member'', ``Member of the TGP or TGP member'', and ``NPPGP'';
0
k. Removing the definition of ``Practice collaboration agent'';
0
l. Revising the definition of ``Provider of outpatient therapy 
services'';
0
m. Adding in alphabetical order definitions of ``TGP''; and
0
n. In the definition of ``Therapist'' by removing the phrase ``the 
following as defined at Sec.  484.4:'' and adding in its place the 
phrase ``the following individuals as defined at Sec.  484.4 of this 
chapter:''.
    The additions and revisions read as follows:


Sec.  510.2  Definitions.

* * * * *
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Shared Savings Program 
and is not in Track 3.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.
* * * * *
    Alignment payment means a payment from a CJR collaborator to a 
participant hospital under a sharing arrangement, for the sole purpose 
of sharing the participant hospital's responsibility for making 
repayments to Medicare.
* * * * *
    CJR activities means activities related to promoting accountability 
for the quality, cost, and overall care for CJR beneficiaries, 
including managing and coordinating care; encouraging investment in 
infrastructure enabling technologies and redesigned care processes for 
high quality and efficient service delivery; the provision of items and 
services during a CJR episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
CJR.
* * * * *
    CJR collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) Physician Group Practice (PGP).
    (11) Hospital.
    (12) CAH.
    (13) Non-Physician Provider Group Practice (NPPGP).
    (14) Therapy Group Practice (TGP).
* * * * *
    Collaboration agent means an individual or entity that is not a CJR 
collaborator and that is either of the following:
    (1) A member of a PGP, NPPGP, or TGP that has entered into a 
distribution arrangement with the same PGP, NPPGP, or TGP in which he 
or she is an owner or employee, and where the PGP, NPPGP, or TGP is a 
CJR collaborator.
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating, and where the ACO is a CJR collaborator.
* * * * *
    CORF stands for comprehensive outpatient rehabilitation facility.
* * * * *
    Distribution arrangement means a financial arrangement between a 
CJR collaborator that is an ACO, PGP, NPPGP, or TGP and a collaboration 
agent for the sole purpose of distributing some or all of a gainsharing 
payment received by the ACO, PGP, NPPGP, or TGP.
    Distribution payment means a payment from a CJR collaborator that 
is an ACO, PGP, NPPGP, or TGP to a collaboration agent, under a 
distribution arrangement, composed only of gainsharing payments.
* * * * *
    Downstream collaboration agent means an individual who is not a CJR 
collaborator or a collaboration agent and who is a PGP member, an NPPGP 
member, or a TGP member that has entered into a downstream distribution 
arrangement with the same PGP, NPPGP, or TGP in which he or she is an 
owner or employee, and where the PGP, NPPGP, or TGP is a collaboration 
agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP, NPPGP, or TGP and an 
ACO participant and a downstream collaboration agent for the sole 
purpose of distributing some or all of a distribution payment received 
by the PGP, NPPGP, or TGP.
    Downstream distribution payment means a payment from a 
collaboration agent that is both a PGP, NPPGP, or TGP and an ACO 
participant to a downstream collaboration agent, under a downstream 
distribution arrangement,

[[Page 612]]

composed only of distribution payments.
* * * * *
    Member of the NPPGP or NPPGP member means a nonphysician 
practitioner or therapist who is an owner or employee of an NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment.
    Member of the TGP or TGP member means a therapist who is an owner 
or employee of a TGP and who has reassigned to the TGP his or her right 
to receive Medicare payment.
* * * * *
    NPPGP means an entity that is enrolled in Medicare as a group 
practice, includes at least one owner or employee who is a nonphysician 
practitioner, does not include a physician owner or employee, and has a 
valid and active TIN.
* * * * *
    Provider of outpatient therapy services means an entity that is 
enrolled in Medicare as a provider of therapy services and furnishes 
one or more of the following:
    (1) Outpatient physical therapy services as defined in Sec.  410.60 
of this chapter.
    (2) Outpatient occupational therapy services as defined in Sec.  
410.59 of this chapter.
    (3) Outpatient speech-language pathology services as defined in 
Sec.  410.62 of this chapter.
* * * * *
    TGP means an entity that is enrolled in Medicare as a therapy group 
in private practice, includes at least one owner or employee who is a 
therapist in private practice, does not include an owner or employee 
who is a physician or nonphysician practitioner, and has a valid and 
active TIN.
* * * * *

0
4. Section 510.110 is added to subpart B, effective July 1, 2017, to 
read as follows:


Sec.  510.110  Access to records and retention.

    Participant hospitals, CJR collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing CJR activities must do all of the following:
    (a) Allow the Government, including CMS, OIG, HHS and the 
Comptroller General or their designees, scheduled and unscheduled 
access to all books, contracts, records, documents and other evidence 
(including data related to utilization and payments, quality criteria, 
billings, lists of CJR collaborators, sharing arrangements, 
distribution arrangements, downstream distribution arrangements and the 
documentation required under Sec. Sec.  510.500(d) and 510.525(c)) 
sufficient to enable the audit, evaluation, inspection or investigation 
of any of the following:
    (1) The individual's or entity's compliance with CJR model 
requirements.
    (2) The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments.
    (3) The obligation to repay any reconciliation payments owed to 
CMS.
    (4) The quality of the services furnished to a CJR beneficiary 
during a CJR episode.
    (5) The sufficiency of CJR beneficiary notifications.
    (6) The accuracy of the CJR participant hospital's submissions 
under CEHRT use requirements.
    (b) 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 CJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the participant hospital 
at least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the participant hospital, CJR collaborator, collaboration 
agents, downstream collaboration agent, or any other individual or 
entity performing CJR activities in which case the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.

0
5. Section 510.120 is added to subpart B to read as follows:


Sec.  510.120  CJR participant hospital CEHRT track requirements.

    (a) CJR CEHRT use. For performance years 2 through 5, CJR 
participant hospitals choose either of the following:
    (1) CEHRT use. Participant hospitals attest in a form and manner 
specified by CMS to their use of CEHRT as defined in Sec.  414.1305 of 
this chapter to document and communicate clinical care with patients 
and other health professionals.
    (2) No CEHRT use. Participant hospitals do not attest in a form and 
manner specified by CMS to their use of CEHRT as defined in Sec.  
414.1305 of this chapter to document and communicate clinical care with 
patients and other health professionals.
    (b) Clinician financial arrangements list. Each participant 
hospital that chooses CEHRT use as provided in paragraph (a)(1) of this 
section must submit to CMS a clinician financial arrangements list in a 
form and manner specified by CMS on a no more than quarterly basis. The 
list must include the following information on individuals and entities 
for the period of the CJR performance year specified by CMS:
    (1) CJR collaborators. For each physician, nonphysician 
practitioner, or therapist in private practice who is a CJR 
collaborator during the period of the CJR performance year specified by 
CMS:
    (i) The name, TIN, and NPI of the CJR collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the CJR participant hospital and the CJR 
collaborator.
    (2) Practice collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a practice collaboration agent during 
the period of the CJR performance year specified by CMS:
    (i) The name and TIN of the CJR collaborator and the name, TIN, and 
NPI of the practice collaboration agent.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator and the practice 
collaboration agent.
    (3) [Reserved.]
    (4) Attestation to no individuals. If there are no individuals that 
meet the requirements to be reported, as specified in paragraphs (b)(1) 
through (3) of this section, the CJR participant hospital must attest 
in a form and manner required by CMS that there are no individuals to 
report on the clinician financial arrangements list.
    (c) Documentation requirements. (1) Each CJR participant hospital 
that chooses CEHRT use as provided in paragraph (a)(1) of this section 
must maintain documentation of their attestation to CEHRT use and 
clinician financial arrangements lists.
    (2) [Reserved.]

0
6. Section 510.120 is amended, effective July 1, 2017, by revising 
paragraph (b)(2) and by adding paragraphs (b)(3) and (c)(2) to read as 
follows:


Sec.  510.120  CJR participant hospital CEHRT track requirements.

* * * * *
    (b) * * *
    (2) Collaboration agents. For each physician, nonphysician 
practitioner, or

[[Page 613]]

therapist who is a collaboration agent during the period of the CJR 
performance year specified by CMS:
    (i) The name and TIN of the CJR collaborator and the name, TIN, and 
NPI of the collaboration agent.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator and the 
collaboration agent.
    (3) Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the period of the CJR performance year 
specified by CMS--
    (i) The name and TIN of the CJR collaborator and the name and TIN 
of the collaboration agent and the name, TIN, and NPI of the downstream 
collaboration agent.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent and 
the downstream collaboration agent.
* * * * *
    (c) * * *
    (2) The CJR participant hospital must retain and provide access to 
the required documentation in accordance with Sec.  510.110.

0
7. Section 510.205 is amended by adding paragraph (a)(6) to read as 
follows:


Sec.  510.205  Beneficiary inclusion criteria.

    (a) * * *
    (6) For episodes beginning on or after July 1, 2017, are not 
prospectively assigned to--
    (i) An ACO in the Next Generation ACO model;
    (ii) An ACO in a track of the Comprehensive ESRD Care Model 
incorporating downside risk for financial losses; or
    (iii) A Shared Savings Program ACO in Track 3.
* * * * *

0
8. Section 510.300 is amended by--
0
a. Revising the section heading;
0
b. Revising paragraphs (a) introductory text and (a)(1) through (3);
0
c. Redesignating paragraph (a)(5) as paragraph (a)(6);
0
d. Adding a new paragraph (a)(5);
0
e. Revising the paragraph (b) subject heading and revising paragraphs 
(b)(1) introductory text and (b)(3), (5), and (7);
0
f. Adding paragraph (b)(8); and
0
g. Revising paragraph (c).
    The revisions and additions read as follows:


Sec.  510.300  Determination of episode quality-adjusted target prices.

    (a) General. CMS establishes episode quality-adjusted target prices 
for participant hospitals for each performance year of the model as 
specified in this section. Episode quality-adjusted target prices are 
established according to the following:
    (1) MS-DRG and fracture status. MS-DRG assigned at discharge for 
anchor hospitalization and present of hip fracture diagnosis for anchor 
hospitalization--
    (i) MS-DRG 469 with hip fracture;
    (ii) MS-DRG 469 without hip fracture;
    (iii) MS-DRG 470 with hip fracture; or
    (iv) MS-DRG 470 without hip fracture.
    (2) Applicable time period for performance year episode quality-
adjusted target prices. Episode quality-adjusted target prices are 
updated to account for Medicare payment updates no less than 2 times 
per year, for updated quality-adjusted target prices effective October 
1 and January 1, and at other intervals if necessary.
    (3) Episodes that straddle performance years or payment updates. 
The quality-adjusted target price that applies to the type of episode 
as of the date of admission for the anchor hospitalization is the 
quality-adjusted target price that applies to the episode.
* * * * *
    (5) Quality performance. Quality-adjusted target prices reflect 
effective discount factors or applicable discount factors based on a 
hospital's composite quality score, as specified in Sec. Sec.  
510.300(c) and 510.315(f).
* * * * *
    (b) Episode quality-adjusted target price. (1) CMS calculates 
quality-adjusted target prices based on a blend of each participant 
hospital's hospital-specific and regional episode expenditures. The 
region corresponds to the U.S. Census Division associated with the 
primary address of the CCN of the participant hospital and the regional 
component is based on all hospitals in said region, except as follows. 
In cases where an MSA selected for participation in CJR spans more than 
one U.S. Census Division, the entire MSA will be grouped into the U.S. 
Census Division where the largest city by population in the MSA is 
located for quality-adjusted target price and reconciliation 
calculations. The calendar years used for historical expenditure 
calculations are as follows:
* * * * *
    (3) Exception for low-volume hospitals. Quality-adjusted target 
prices for participant hospitals with fewer than 20 CJR episodes in 
total across the 3 historical years of data used to calculate the 
quality-adjusted target price are based on 100 percent regional 
historical episode payments.
* * * * *
    (5) Exception for high episode spending. Episode payments are 
capped at 2 standard deviations above the mean regional episode payment 
for both the hospital-specific and regional components of the quality-
adjusted target price.
* * * * *
    (7) Communication of episode quality-adjusted target prices. CMS 
communicates episode quality-adjusted target prices to participant 
hospitals before the performance period in which they apply.
    (8) Inclusion of reconciliation payments and repayments. For 
performance years 3, 4, and 5 only, reconciliation payments and 
repayment amounts under Sec.  510.305(f)(2) and (f)(3) and from LEJR 
episodes included in the BPCI initiative are included in historical 
episode payments.
    (c) Discount factor. A participant hospital's episode quality-
adjusted target prices incorporate discount factors to reflect 
Medicare's portion of reduced expenditures from the CJR model as 
described in this section.
    (1) Discount factors affected by the quality incentive payments and 
the composite quality score. In all performance years, the discount 
factor may be affected by the quality incentive payment and composite 
quality score as provided in Sec.  510.315 to create the effective 
discount factor or applicable discount factor used for calculating 
reconciliation payments and repayment amounts. The quality-adjusted 
target prices incorporate the effective or applicable discount factor 
at reconciliation.
    (2) Discount factor for reconciliation payments. The discount 
factor for reconciliation payments in all performance years is 3.0 
percent.
    (3) Discount factors for repayment amounts. The discount factor for 
repayment amounts is--
    (i) Not applicable in performance year 1, as the requirement for 
hospital repayment under the CJR model is waived in performance year 1;
    (ii) In performance years 2 and 3, 2.0 percent; and
    (iii) In performance years 4 and 5, 3.0 percent.
* * * * *

0
9. Section 510.305 is amended by--
0
a. Revising paragraphs (e) introductory text, (e)(1)(ii) and (v), 
(f)(1)(i) and (ii), (f)(2), (g)(2), and (h)(6);
0
b. Adding paragraph (h)(7);
0
c. Revising paragraph (i); and
0
d. Adding paragraph (j).

[[Page 614]]

    The revisions and additions read as follows:


Sec.  510.305  Determination of the NPRA and reconciliation process.

* * * * *
    (e) Calculation of the NPRA. By comparing the quality-adjusted 
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) * * *
    (ii) Multiplies each episode quality-adjusted target price by the 
number of episodes included in the performance year (other than 
episodes that have been canceled in accordance with Sec.  510.210(b)) 
to which that episode quality-adjusted target price applies.
* * * * *
    (v) Applies the following prior to determination of the 
reconciliation payment or repayment amount:
    (A) Limitation on loss. Except as provided in paragraph 
(e)(1)(v)(C) of this section, the total amount of the NPRA and 
subsequent reconciliation calculation for a performance year cannot 
exceed the following:
    (1) For performance year 2 only, 5 percent of the amount calculated 
in paragraph (e)(1)(iii) of this section for the performance year.
    (2) For performance year 3, 10 percent of the amount calculated in 
paragraph (e)(1)(iii) of this section for the performance year.
    (3) For performance years 4 and 5, 20 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (4) As provided in paragraph (i) of this section, the subsequent 
reconciliation calculation reassesses the limitation on loss for a 
given performance year by applying the limitations on loss to the 
aggregate of the 2 reconciliation calculations.
    (5) The post-episode spending and ACO overlap calculation amounts 
in paragraphs (j)(1) and (2) of this section are not subject to the 
limitation on loss.
    (B) Limitation on gain. The total amount of the NPRA and subsequent 
reconciliation calculation for a performance year cannot exceed the 
following:
    (1) For performance years 1 and 2, 5 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (2) For performance year 3, 10 percent of the amount calculated in 
paragraph (e)(1)(iii) of this section for the performance year.
    (3) For performance years 4 and 5, 20 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (4) As provided in paragraph (i) of this section, the subsequent 
reconciliation calculation reassesses the limitation on gain for a 
given performance year by applying the limitations on gain to the 
aggregate of the 2 reconciliation calculations.
    (5) The post-episode spending and ACO overlap calculation amounts 
in paragraphs (j)(1) and (j)(2) of this section are not subject to the 
limitation on gain.
    (C) Financial loss limits for rural hospitals, SCHs, MDHs, and 
RRCs. If a participant hospital is a rural hospital, SCH, MDH, or RRC, 
then for performance year 2, the total repayment amount for which the 
participant hospital is responsible due to the NPRA and subsequent 
reconciliation calculation cannot exceed 3 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section. For performance 
years 3 through 5, the amount cannot exceed 5 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section.
    (f) * * *
    (1) * * *
    (i) Subject to paragraph (f)(1)(iii) of this section, for 
performance year 1, the reconciliation payment (if any) is equal to the 
NPRA.
    (ii) Subject to paragraph (f)(1)(iii) of this section, for 
performance years 2 through 5, results from the subsequent 
reconciliation calculation for a prior year's reconciliation as 
described in paragraph (i) of this section and the post-episode 
spending and ACO overlap calculations as described in paragraph (j) of 
this section are added to the current year's NPRA in order to determine 
the reconciliation payment or repayment amount.
* * * * *
    (2) Reconciliation payment. If the amount described in paragraph 
(f)(1) of this section is positive and the composite quality score 
described in Sec.  510.315 is acceptable (defined as greater than or 
equal to 5.00 and less than 6.9), good (defined as greater than or 
equal to 6.9 and less than or equal to 15.0), or excellent (defined as 
greater than 15.0), Medicare pays the participant hospital a 
reconciliation payment in an amount equal to the amount described in 
paragraph (f)(1) of this section.
* * * * *
    (g) * * *
    (2) If the hospital's composite quality score described in Sec.  
510.315 is acceptable (defined as greater than or equal to 5.00 and 
less than 6.9), good (defined as greater than or equal to 6.9 and less 
than or equal to 15.0), or excellent (defined as greater than 15.0), 
and the hospital is determined to have a positive NPRA under Sec.  
510.305(e)), the hospital is eligible for a reconciliation payment.
* * * * *
    (h) * * *
    (6) The post-episode spending amount and ACO overlap calculation 
for the previous performance year, as applicable.
    (7) 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 episode cancelations due to 
overlap between the CJR model and other CMS models and programs, or for 
other reasons as specified in Sec.  510.210(b).
    (2) The subsequent calculation for performance years 1 through 4 
occurs concurrently with the first reconciliation process for the 
following 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 aggregate calculation of the 
amounts described in paragraphs (e)(1)(iv) and (i)(1) of this section 
for that performance year (the initial reconciliation and the 
subsequent reconciliation calculation) to ensure such amount does not 
exceed the applicable stop-loss or stop-gain limits. Because there will 
be no additional performance year after performance year 5, the 
subsequent reconciliation calculation for performance year 5 will occur 
independently in 2022.
    (j) Additional adjustments to the reconciliation payment or 
repayment amount. (1) In order to account for shared savings payments, 
CMS will reduce the reconciliation payment or increase the repayment 
amount for the subsequent performance year (for years 1 through 4) by 
the amount of the participant hospital's discount percentage that is 
paid to the ACO in the prior performance year as shared savings. (This 
amount will be assessed independently for performance year 5 in 2022.) 
This adjustment is made only when the participant hospital is a 
participant or provider/supplier in the ACO and the beneficiary in the 
CJR episode is assigned to one of the following ACO models or programs:
    (i) The Pioneer ACO model.

[[Page 615]]

    (ii) The Medicare Shared Savings Program (excluding Track 3 for CJR 
episodes that initiate on or after July 1, 2017).
    (iii) The Comprehensive ESRD Care Initiative (excluding a track 
with downside risk for CJR episodes that initiate after July 1, 2017).
    (iv) The Next Generation ACO model (excluding CJR episodes that 
initiate on or after July 1, 2017).
    (2) Increases in post-episode spending. If the average post-episode 
Medicare Parts A and B payments for a participant hospital in the prior 
performance year is greater than 3 standard deviations above the 
regional average post-episode payments for the same performance year, 
then the spending amount exceeding 3 standard deviations above the 
regional average post-episode payments for the same performance year is 
subtracted from the net reconciliation or added to the repayment amount 
for the subsequent performance year for years 1 through 4, and assessed 
independently for year 5.

0
10. Section 510.310 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(1) and (2);
0
b. Removing paragraph (a)(3);
0
c. Redesignating paragraph (a)(4) as paragraph (a)(3);
0
d. Adding a new paragraph (a)(4);
0
e. Revising paragraph (c);
0
f. Redesignating paragraph (d) as paragraph (e);
0
g. Adding a new paragraph (d); and
0
h. Revising newly designated paragraph (e)(6).
    The revisions and additions read as follows:


Sec.  510.310  Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart D of this part, if a participant 
hospital wishes to dispute calculations involving a matter related to 
payment, reconciliation amounts, repayment amounts, the use of quality 
measure results in determining the composite quality score, or the 
application of the composite quality score during reconciliation, the 
participant hospital is required to provide written notice of the 
calculation error, in a form and manner specified by CMS.
    (1) Unless the participant hospital provides such notice, CMS deems 
final the CJR reconciliation report 45 calendar days after it is issued 
and proceeds with the payment or repayment processes as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report, CMS 
responds in writing within 30 calendar days to either confirm that 
there was an error in the calculation or verify that the calculation is 
correct, although CMS reserves the right to an extension upon written 
notice to the participant hospital.
* * * * *
    (4) Only participant hospitals may use the notice of calculation 
error process described in this part.
* * * * *
    (c) Exception to the process. If the participant hospital contests 
a matter that does not involve an issue contained in, or a calculation 
that contributes to, a CJR reconciliation report, a notice of 
calculation error is not required. In these 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. This does not apply to the 
limitations on review in paragraph (e) of this section.
    (d) Notice of a participant hospital's termination from the CJR 
model. If a participant hospital receives notification that it has been 
terminated from the CJR model, it must provide a written notice to CMS 
requesting review of the termination within 10 calendar days of the 
notice. CMS has 30 days to respond to the participant hospital's 
request for review. If the participant hospital fails to notify CMS, 
the termination is deemed final.
    (e) * * *
    (6) 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 section 1115A(c)(1) 
or (2) of the Act.

0
11. Section 510.315 is amended by--
0
a. Revising paragraph (c) introductory text;
0
b. Redesignating paragraph (c)(1)(ix) as paragraph (c)(1)(viii);
0
c. Redesignating paragraph (c)(2)(ix) as paragraph (c)(2)(viii); and
0
d. Revising paragraphs (d) and (f).
    The revisions read as follows:


Sec.  510.315  Composite quality scores for determining reconciliation 
payment eligibility and quality incentive payments.

* * * * *
    (c) Quality performance points. CMS computes quality performance 
points for each quality measure based on the participant hospital's 
performance relative to the distribution of performance of all 
subsection (d) hospitals that are eligible for payment under IPPS and 
meet the minimum patient case or survey count for that measure.
* * * * *
    (d) Quality improvement points. For performance year 1, if a 
participant hospital's quality performance percentile on an individual 
measure described in Sec.  510.400(a) increases from the corresponding 
time period in the previous year by at least 2 deciles on the 
performance percentile scale, then the hospitals is eligible to receive 
quality improvement points equal to 10 percent of the total available 
point for that individual measure up to a maximum composite quality 
score of 20 points. For performance years 2 through 5, if a participant 
hospital's quality performance percentile on an individual measure 
described in Sec.  510.400(a) increases from the previous performance 
year by at least 2 deciles on the performance percentile scale, then 
the hospitals is eligible to receive quality improvement points equal 
to 10 percent of the total available point for that individual measure 
up to a maximum composite quality score of 20 points.
* * * * *
    (f) Quality incentive payments. CMS provides incentive payments to 
participant hospitals that demonstrate good or excellent quality 
performance on the composite quality scores described in paragraph (b) 
of this section. These incentive payments are implemented in the form 
of the following reductions to the effective discount factors or 
applicable discount factors described in Sec.  510.300(c):
    (1) A 1.0 percentage point reduction to the effective discount 
factor or applicable discount factor for participant hospitals with 
good quality performance, defined as composite quality scores that are 
greater than or equal to 6.9 and less than or equal to 15.0.
    (2) A 1.5 percentage point reduction to the effective discount 
factor or applicable discount factor for participant hospitals with 
excellent quality performance, defined as composite quality scores that 
are greater than 15.0.

0
12. Section 510.400 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  510.400  Quality measures and reporting.

* * * * *
    (c) * * *
    (3) Does not publicly report the voluntary patient-reported 
outcomes and limited risk variable data during this model, but 
indicates whether a hospital has successfully submitted

[[Page 616]]

such data in accordance with Sec.  510.400(b).

0
13. Section 510.405 is amended by revising paragraph (a)(1) and (b) to 
read as follows:


Sec.  510.405  Beneficiary choice and beneficiary notification.

    (a) * * *
    (1) As part of discharge planning and referral, participant 
hospitals must provide a complete list of HHAs, SNFs, IRFs, or LTCHs 
that are participating in the Medicare program, and that serve the 
geographic area (as defined by the HHA) in which the patient resides, 
or in the case of a SNF, IRF, or LTCH, in the geographic area requested 
by the patient.
    (i) This list must be presented to CJR beneficiaries for whom home 
health care, SNF, IRF, or LTCH services are medically necessary.
    (ii) Participant hospitals must specify on the list those post-
acute care providers on the list with whom they have a sharing 
arrangement.
    (iii) Participant hospitals may recommend preferred providers and 
suppliers, consistent with applicable statutes and regulations.
    (iv) Participant hospitals may not limit beneficiary choice to any 
list of providers or suppliers in any manner other than that permitted 
under applicable statutes and regulations.
    (v) Participant hospitals must take into account patient and family 
preferences when they are expressed.
* * * * *
    (b) Required beneficiary notification--(1) Participant hospital 
detailed notification. Each participant hospital must provide written 
notification to any Medicare beneficiary that meets the criteria in 
Sec.  510.205 of his or her inclusion in the CJR model. The 
notification must be provided upon admission to the participant 
hospital if the admission that initiates the CJR episode is not 
scheduled with the participant hospital in advance. If the admission is 
scheduled in advance, then the participant hospital must provide notice 
as soon as the admission is scheduled. In circumstances where, due to 
the patient's condition, it is not feasible to provide notification at 
such times, the notification must be provided to the beneficiary or his 
or her representative as soon as is reasonably practicable but no later 
than discharge from the participant hospital accountable for the CJR 
episode. 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 or the 1-800-MEDICARE helpline.
    (v) A list of the providers, suppliers, and ACOs with whom the CJR 
participant hospital has a sharing arrangement. This requirement may be 
fulfilled by the participant hospital including in the detailed 
notification a Web address where beneficiaries may access the list.
    (2) CJR collaborator notice. A participant hospital must require 
every CJR collaborator to provide written notice to applicable CJR 
beneficiaries of the structure of the CJR model and the existence of 
its sharing arrangement with the participant hospital.
    (i) A CJR participant hospital must require every CJR collaborator 
(other than PGPs) that furnishes an item or service to a CJR 
beneficiary during a CJR episode to provide written notice to the 
beneficiary of the structure of the model and the existence of the 
individual's or entity's sharing arrangement. The notice must be 
provided no later than the time at which the beneficiary first receives 
an item or service from the CJR collaborator during a CJR episode. In 
circumstances where, due to the patient's condition, it is not feasible 
to provide notification at such time, the notification must be provided 
to the beneficiary or his or her representative as soon as is 
reasonably practicable.
    (ii) A participant hospital must require every PGP that is a CJR 
collaborator where a member of the PGP furnishes an item or service to 
a CJR beneficiary during a CJR episode to provide written notice to the 
beneficiary of the structure of the model and the existence of the 
entity's sharing arrangement under the model. The notice must be 
provided no later than the time at which the beneficiary first receives 
an item or service from any member of the PGP, and the required PGP 
notice may be provided by that member. In circumstances where, due to 
the patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable.
    (3) Discharge planning notice. A participant hospital must provide 
the beneficiary with a written notice of any potential financial 
liability associated with non-covered services recommended or presented 
as an option as part of discharge planning, no later than the time that 
the beneficiary discusses a particular post-acute care option or at the 
time the beneficiary is discharged, whichever occurs earlier.
    (i) If the participant hospital knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the participant hospital must notify the beneficiary that the 
service would not be covered by Medicare.
    (ii) If the participant hospital is discharging a beneficiary to a 
SNF prior to the occurrence of a 3-day hospital stay, and the 
beneficiary is being transferred to or is considering a SNF that would 
not qualify under the SNF 3-day waiver in Sec.  510.610, the 
participant hospital must notify the beneficiary in accordance with 
paragraph (b)(3)(i) of this section that the beneficiary will be 
responsible for payment for the services furnished by the SNF during 
that stay, except those services that would be covered by Medicare Part 
B during a non-covered inpatient SNF stay.

0
14. Section 510.405 is further amended, effective July 1, 2017, by 
revising paragraphs (b)(1) and (2) and adding paragraph (b)(4) to read 
as follows:


Sec.  510.405  Beneficiary choice and beneficiary notification.

* * * * *
    (b) * * *
    (1) Participant hospital detailed notification. Each participant 
hospital must provide written notification to any Medicare beneficiary 
that meets the criteria in Sec.  510.205 of his or her inclusion in the 
CJR model. The notification must be provided upon admission to the 
participant hospital if the admission that initiates the CJR episode is 
not scheduled with the participant hospital in advance. If the 
admission is scheduled in advance, then the participant hospital must 
provide notice as soon as the admission is scheduled. In circumstances 
where, due to the patient's condition, it is not feasible to provide 
notification at such times, the notification must be provided to the 
beneficiary or his or her representative as soon as is reasonably 
practicable but no later than discharge from the participant hospital 
accountable for the CJR episode. The participant hospital must be able 
to generate a list of all beneficiaries

[[Page 617]]

receiving such notification, including the date on which the 
notification was provided to the beneficiary, to CMS or its designee 
upon request. 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 or the 1-800-MEDICARE helpline.
    (v) A list of the providers, suppliers, and ACOs with whom the CJR 
participant hospital has a sharing arrangement. This requirement may be 
fulfilled by the participant hospital including in the detailed 
notification a Web address where beneficiaries may access the list.
    (2) CJR collaborator notice. A participant hospital must require 
every CJR collaborator to provide written notice to applicable CJR 
beneficiaries of the structure of the CJR model and the existence of 
its sharing arrangement with the participant hospital.
    (i) With the exception of ACOs, PGPs, NPPGPs, and TGPs, a CJR 
participant hospital must require every CJR collaborator that furnishes 
an item or service to a CJR beneficiary during a CJR episode to provide 
written notice to the beneficiary of the structure of the model and the 
existence of the individual's or entity's sharing arrangement. The 
notice must be provided no later than the time at which the beneficiary 
first receives an item or service from the CJR collaborator during a 
CJR episode. In circumstances where, due to the patient's condition, it 
is not feasible to provide notification at such time, the notification 
must be provided to the beneficiary or his or her representative as 
soon as is reasonably practicable. The CJR collaborator must be able to 
generate a list of all beneficiaries who received such a notice, 
including the date on which the notice was provided to the beneficiary, 
to CMS upon request.
    (ii) A participant hospital must require every PGP, NPPGP, or TGP 
that is a CJR collaborator where a member of the PGP, member of the 
NPPGP, or member of the TGP furnishes an item or service to a CJR 
beneficiary during a CJR episode to provide written notice to the 
beneficiary of the structure of the model and the existence of the 
entity's sharing arrangement. The notice must be provided no later than 
the time at which the beneficiary first receives an item or service 
from any member of the PGP, member of the NPPGP, or member of the TGP, 
and the required PGP, NPPGP, or TGP notice may be provided by that 
member respectively. In circumstances where, due to the patient's 
condition, it is not feasible to provide notice at such times, the 
notice must be provided to the beneficiary or his or her representative 
as soon as is reasonably practicable. The PGP, NPPGP, or TGP must be 
able to generate a list of all beneficiaries who received such a 
notice, including the date on which the notice was provided to the 
beneficiary, to CMS upon request.
    (iii) A participant hospital must require every ACO that is a CJR 
collaborator where an ACO participant or ACO provider/supplier 
furnishes an item or service to a CJR beneficiary during a CJR episode 
to provide written notice to the beneficiary of the structure of the 
model and the existence of the entity's sharing arrangement. The notice 
must be provided no later than the time at which the beneficiary first 
receives an item or service from any ACO participant or ACO provider/
supplier and the required ACO notice may be provided by that ACO 
participant or ACO provider/supplier respectively. In circumstances 
where, due to the patient's condition, it is not feasible to provide 
notice at such times, the notice must be provided to the beneficiary or 
his or her representative as soon as is reasonably practicable. The ACO 
must be able to generate a list of all beneficiaries who received such 
a notice, including the date on which the notice was provided to the 
beneficiary, to CMS upon request.
* * * * *
    (4) Access to records and retention. Lists of beneficiaries that 
receive notifications or notices must be retained, and access provided 
to CMS, or its designees, in accordance with Sec.  510.110.

0
15. Section 510.410 is amended, effective July 1, 2017, by revising 
paragraphs (b)(1) introductory text, (b)(1)(i) introductory text, 
(b)(1)(i)(F), (b)(1)(ii), (b)(2)(i) through (v), and (b)(3) to read as 
follows:


Sec.  510.410  Compliance enforcement.

* * * * *
    (b) * * *
    (1) CMS may take one or more of the remedial actions set forth in 
paragraph (b)(2) of this section if a participant hospital or its 
related CJR collaborators, collaboration agents, or downstream 
collaboration agents--
    (i) Fails to comply with any requirements of this part or is 
identified as noncompliant through monitoring by HHS (including CMS and 
OIG) of the CJR model, including but not limited to the following:
* * * * *
    (F) Failing to follow the requirements related to sharing 
arrangements.
    (ii) Has signed a sharing arrangement, distribution arrangement, or 
downstream distribution arrangement that is noncompliant with the 
requirements of this part.
* * * * *
    (2) * * *
    (i) Issuing a warning letter to the participant hospital.
    (ii) Requiring the participant hospital to develop a corrective 
action plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating a participant hospital's 
reconciliation payment.
    (iv) Requiring a participant hospital to terminate a sharing 
arrangement with a CJR collaborator and prohibiting further engagement 
in sharing arrangements with the participant hospital by that CJR 
collaborator.
    (v) Terminating the participant hospital's participation in the CJR 
model. Where a participant is terminated from the CJR model, the 
participant hospital will remain liable for all negative NPRA generated 
from episodes of care that ended prior to termination.
    (3) CMS may add a 25 percent penalty to a repayment amount on the 
participant hospital's reconciliation report if all of the following 
conditions are met:
    (i) CMS has required a corrective action plan from a participant 
hospital;
    (ii) The participant hospital owes a repayment amount to CMS; and
    (iii) The participant hospital fails to timely comply with the 
corrective action plan or is noncompliant with the CJR model's 
requirements.

0
16. Section 510.500 is revised, effective July 1, 2017, to read as 
follows:


Sec.  510.500  Sharing arrangements under the CJR model.

    (a) General. (1) A participant hospital may enter into a sharing 
arrangement with a CJR collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. A participant hospital must 
not make a gainsharing payment or receive an alignment payment except 
in accordance with a sharing arrangement.

[[Page 618]]

    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) Participant hospitals must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be CJR 
collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent. A selection criterion that considers 
whether a potential CJR collaborator has performed a reasonable minimum 
number of services that would qualify as CJR activities will be deemed 
not to violate the volume or value standard if the purpose of the 
criterion is to ensure the quality of care furnished to CJR 
beneficiaries.
    (4) If a participant hospital enters into a sharing arrangement, 
its compliance program must include oversight of sharing arrangements 
and compliance with the applicable requirements of the CJR model.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to CJR 
beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the CJR collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with all of the following:
    (i) The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees).
    (ii) All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement.
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the CJR collaborator to 
have or be covered by a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the CJR 
model that apply to its role as a CJR collaborator, including any 
distribution arrangements.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (6) The board or other governing body of the participant hospital 
must have responsibility for overseeing the participant hospital's 
participation in the CJR model, its arrangements with CJR 
collaborators, its payment of gainsharing payments, its receipt of 
alignment payments, and its use of beneficiary incentives in the CJR 
model.
    (7) The written agreement memorializing a sharing arrangement must 
specify the following:
    (i) The purpose and scope of the sharing arrangement.
    (ii) The obligations of the parties, including specified CJR 
activities and other services to be performed by the parties under the 
sharing arrangement.
    (iii) The date of the sharing arrangement.
    (iv) The financial or economic terms for payment, including the 
following:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payment.
    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment or alignment payment.
    (8) The sharing arrangement must not--
    (i) Induce the participant hospital, CJR collaborator, or any 
employees, contractors, or subcontractors of the participant hospital 
or CJR collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    (ii) Restrict the ability of a CJR collaborator to make decisions 
in the best interests of its patients, including the selection of 
devices, supplies, and treatments.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payments, or internal 
cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality of care criteria for the performance 
year for which the participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment. The quality of care criteria must be established 
by the participant hospital and directly related to the CJR episode.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator other than 
ACO, PGP, NPPGP, or TGP must have directly furnished a billable item or 
service to a CJR beneficiary during a CJR episode that occurred in the 
same performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:
    (A) The PGP, NPPGP, or TGP must have billed for an item or service 
that was rendered by one or more PGP member, NPPGP member, or TGP 
member respectively to a CJR beneficiary during a CJR episode that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment or was assessed a 
repayment amount.
    (B) The PGP, NPPGP, or TGP must have contributed to CJR activities 
and been clinically involved in the care of CJR beneficiaries during 
the same performance year for which the CJR participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount. For example, a PGP, NPPGP, or TGP might have been clinically 
involved in the care of CJR beneficiaries by--
    (1) Providing care coordination services to beneficiaries during 
and/or after inpatient admission;
    (2) Engaging with a participant hospital in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are

[[Page 619]]

designed to improve the quality of care for CJR episodes and reduce CJR 
episode spending; or
    (3) In coordination with other providers and suppliers (such as PGP 
members, NPPGP members, or TGP members; the participant hospital; and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of CJR beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a CJR beneficiary during a CJR episode that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment or was assessed a 
repayment amount; and
    (B) The ACO must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed the repayment amount. 
For example, an ACO might be have been clinically involved in the care 
of CJR beneficiaries by--
    (1) Providing care coordination services to CJR beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with a participant hospital in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are designed to improve the quality of care and reduce 
spending for CJR episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the participant hospital, and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of CJR beneficiaries.
    (3)(i) The methodology for accruing, calculating and verifying 
internal cost savings must be transparent, measurable, and verifiable 
in accordance with generally accepted accounting principles (GAAP) and 
Government Auditing Standards (The Yellow Book).
    (ii) The methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the participant 
hospital through the documented implementation of CJR activities 
identified by the participant hospital and must exclude--
    (A) Any savings realized by any individual or entity that is not 
the participant hospital; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.
    (4) The total amount of a gainsharing payment for a performance 
year paid to a CJR collaborator must not exceed the following:
    (i) In the case of a CJR collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the participant hospital's CJR 
beneficiaries during CJR episodes that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
    (ii) In the case of a CJR collaborator that is a PGP or NPPGP, 50 
percent of the Medicare-approved amounts under the PFS for items and 
services billed by that PGP or NPPGP and furnished to the participant 
hospital's CJR beneficiaries by the PGP members or NPPGP members 
respectively during CJR episodes that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
    (5) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is substantially based on quality of 
care and the provision of CJR activities. The methodology may take into 
account the amount of such CJR activities provided by a CJR 
collaborator relative to other CJR collaborators.
    (6) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from a reconciliation payment the CJR 
participant hospital receives from CMS must not exceed the amount of 
that reconciliation payment.
    (7) No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
    (8) A participant hospital must not make a gainsharing payment to a 
CJR collaborator if CMS has notified the participant hospital that such 
collaborator is subject to any action for noncompliance with this part 
or the fraud and abuse laws, or for the provision of substandard care 
to CJR beneficiaries or other integrity problems.
    (9) The sharing arrangement must require the participant hospital 
to recoup any gainsharing payment that contained funds derived from a 
CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
    (10) Alignment payments from a CJR collaborator to a participant 
hospital may be made at any interval that is agreed upon by both 
parties, and must not be--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by a participant hospital if it does not owe a 
repayment amount.
    (11) The participant hospital must not receive any amounts under a 
sharing arrangement from a CJR collaborator that are not alignment 
payments.
    (12) For a performance year, the aggregate amount of all alignment 
payments received by the participant hospital must not exceed 50 
percent of the participant hospital's repayment amount.
    (13) The aggregate amount of all alignment payments from a CJR 
collaborator to the participant hospital may not be greater than--
    (i) With respect to a CJR collaborator other than an ACO, 25 
percent of the participant hospital's repayment amount.
    (ii) With respect to a CJR collaborator that is an ACO, 50 percent 
of the participant hospital's repayment amount.
    (14) The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration

[[Page 620]]

agent, or downstream collaboration agent.
    (15) All gainsharing payments and any alignment payments must be 
administered by the participant hospital in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (16) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) Participant hospitals must--(i) 
Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    (ii) Publicly post (and update on at least a quarterly basis) on a 
Web page on the CJR participant hospital's Web site--
    (A) Accurate current and historical lists of all CJR collaborators, 
including CJR collaborator names and addresses.
    (B) Written policies for selecting individuals and entities to be 
CJR collaborators required by Sec.  510.500(a)(3).
    (iii) Maintain and require each CJR collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a 
minimum:
    (A) Nature of the payment (gainsharing payment or alignment 
payment);
    (B) Identity of the parties making and receiving the payment;
    (C) Date of the payment;
    (D) Amount of the payment;
    (E) Date and amount of any recoupment of all or a portion of a CJR 
collaborator's gainsharing payment.
    (F) Explanation for each recoupment, such as whether the CJR 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation report, or was based 
on the submission of false or fraudulent data.
    (2) The participant hospital must keep records of all of the 
following:
    (i) Its process for determining and verifying its potential and 
current CJR collaborators' eligibility to participate in Medicare.
    (ii) Its plan to track internal cost savings.
    (iii) Information on the accounting systems used to track internal 
cost savings.
    (iv) A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The participant hospital must retain and provide access to, and 
must require each CJR collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.

0
17. Section 510.505 is revised, effective July 1, 2017, to read as 
follows:


Sec.  510.505  Distribution arrangements.

    (a) General. (1) An ACO, PGP, NPPGP, or TGP that has entered into a 
sharing arrangement with a participant hospital may distribute all or a 
portion of any gainsharing payment it receives from the participant 
hospital only in accordance with a distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the parties, contain the date of the agreement, 
and be entered into before care is furnished to CJR beneficiaries under 
the distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the participant hospital, any CJR collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO, from an 
NPPGP to an NPPGP member, or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision of CJR activities and that may 
take into account the amount of such CJR activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on quality of care and the provision of CJR activities and that 
may take into account the amount of such CJR activities provided by a 
collaboration agent relative to other collaboration agents.
    (7) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g) of this chapter, a collaboration 
agent is eligible to receive a distribution payment only if the 
collaboration agent furnished or billed for an item or service rendered 
to a CJR beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    (8) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g) of this chapter, the total amount 
of distribution payments for a performance year paid to a collaboration 
agent must not exceed the following:
    (i) In the case of a collaboration agent that is a physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed.
    (ii) In the case of a collaboration agent that is a PGP or NPPGP, 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services billed by that PGP or NPPGP for items and services 
furnished by PGP members or NPPGP member respectively to the 
participant hospital's CJR beneficiaries during CJR episodes that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment being distributed.
    (9) With respect to the distribution of any gainsharing payment 
received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the CJR collaborator from the participant hospital.
    (10) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (11) The collaboration agent must retain the ability to make 
decisions in the best interests of the patient,

[[Page 621]]

including the selection of devices, supplies, and treatments.
    (12) The distribution arrangement must not--
    (i) Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The CJR collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  510.110, including the following:
    (i) The relevant written agreements;
    (ii) The date and amount of any distribution payment(s);
    (iii) The identity of each collaboration agent that received a 
distribution payment; and
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (14) The CJR collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same participant hospital.
    (15) The CJR collaborator must retain and provide access to, and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.

0
18. Section 510.506 is added, effective July 1, 2017, to read as 
follows:


Sec.  510.506  Downstream distribution arrangements.

    (a) General. (1) An ACO participant that is a PGP, NPPGP, or TGP 
and that has entered into a distribution arrangement with a CJR 
collaborator that is an ACO may distribute all or a portion of any 
distribution payment it receives from the CJR collaborator only in 
accordance with downstream distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the date of the 
agreement, and be entered into before care is furnished to CJR 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.
    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the participant hospital, any CJR collaborator, 
any collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision CJR activities and that may take 
into account the amount of such CJR activities provided by a downstream 
collaboration agent relative to other downstream collaboration agents.
    (6) The amount of any downstream distribution payments from a PGP 
must be determined either in a manner that complies with Sec.  
411.352(g) of this chapter or in accordance with a methodology that is 
substantially based on quality of care and the provision CJR activities 
and that may take into account the amount of such CJR activities 
provided by a downstream collaboration agent relative to other 
downstream collaboration agents.
    (7) Except for a downstream distribution payment from a PGP to a 
PGP member that complies with Sec.  411.352(g) of this chapter, a 
downstream collaboration agent is eligible to receive a downstream 
distribution payment only if the downstream collaboration agent 
furnished an item or service by the downstream collaboration agent to a 
CJR beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the PGP, NPPGP, or TGP that is an ACO 
participant.
    (8) Except for a downstream distribution payment from a PGP to a 
PGP member that complies with Sec.  411.352(g) of this chapter, the 
total amount of downstream distribution payments for a performance year 
paid to a downstream collaboration agent who is a physician or 
nonphysician practitioner and is either a member of a PGP or a member 
of an NPPGP must not exceed 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
downstream collaboration agent to the participant hospital's CJR 
beneficiaries during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the distribution payment being distributed.
    (9) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP, NPPGP, or TGP from the ACO.
    (10) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (11) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
    (12) The downstream distribution arrangement must not--
    (i) Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The PGP, NPPGP, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  510.110, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (14) The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    (i) A sharing arrangement with a participant hospital.
    (ii) A distribution arrangement with the ACO that the PGP, NPPGP, 
or TGP is a participant in.
    (15) The PGP, NPPGP, or TGP must retain and provide access to, and 
must require downstream collaboration agents to retain and provide 
access to, the required documentation in accordance with Sec.  510.110.

0
19. Section 510.515 is amended, effective July 1, 2017, by revising 
paragraphs (a)(2) and (3), (b), (c) and (d), and removing paragraph 
(e).

[[Page 622]]

    The revisions read as follows:


Sec.  510.515  Beneficiary incentives under the CJR model.

* * * * *
    (a) * * *
    (2) The item or service provided must be reasonably connected to 
medical care provided to a beneficiary during a CJR episode of care.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (c) of this section, for a beneficiary in a CJR episode by 
engaging the beneficiary in better managing his or her own health.
* * * * *
    (b) Technology provided to a CJR beneficiary. Beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (1) Items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one CJR episode.
    (2) Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in a CJR 
episode.
    (3) Items of technology exceeding $100 in retail value must--
    (i) Remain the property of the CJR participant; and
    (ii) Be retrieved from the beneficiary at the end of the CJR 
episode. The participant hospital must document all retrieval attempts, 
including the ultimate date of retrieval. Documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement.
    (c) Clinical goals of the CJR model. The following are the clinical 
goals of the CJR model, which may be advanced through beneficiary 
incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications resulting from LEJR 
procedures.
    (4) Management of chronic diseases and conditions that may be 
affected by the LEJR procedure.
    (d) Documentation of beneficiary incentives. (1) Participant 
hospitals must maintain documentation of items and services furnished 
as beneficiary incentives that exceed $25 in retail value.
    (2) The documentation must be established contemporaneously with 
the provision of the items and services and must include at least the 
following:
    (i) The date the incentive is provided.
    (ii) The identity of the beneficiary to whom the item or service 
was provided.
    (3) The documentation regarding items of technology exceeding $100 
in retail value must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of a CJR episode as described 
in paragraph (b)(3) of this section.
    (4) The CJR participant hospital must retain and provide access to 
the required documentation in accordance with Sec.  510.110.

0
20. Section 510.610 is revised to read as follows:


Sec.  510.610  Waiver of SNF 3-day rule.

    (a) Waiver of the SNF 3-day rule. For episodes being tested in 
performance years 2 through 5 of the CJR model, CMS waives the SNF 3-
day rule for coverage of a SNF stay for a beneficiary who is a CJR 
beneficiary on the date of discharge from the anchor hospitalization, 
but only if the SNF is identified on the applicable calendar quarter 
list of qualified SNFs at the time of the CJR beneficiary's admission 
to the SNF.
    (1) CMS determines the qualified SNFs for each calendar quarter 
based on a review of the most recent rolling 12 months of overall star 
ratings on the Five-Star Quality Rating System for SNFs on the Nursing 
Home Compare Web site. Qualified SNFs are rated an overall of 3 stars 
or better for at least 7 of the 12 months.
    (2) CMS posts to the CMS Web site the list of qualified SNFs in 
advance of the calendar quarter and the waiver only applies for a 
beneficiary who has been discharged from an anchor hospitalization if 
the SNF is included on the applicable calendar quarter list for the 
date of the beneficiary's admission to the SNF.
    (b) Financial liability for non-covered SNF services. If CMS 
determines that the waiver requirements specified in paragraph (a) of 
this section were not met, the following apply:
    (1) CMS makes no payment to a SNF for SNF services if the SNF 
admits a CJR beneficiary who has not had a qualifying inpatient stay.
    (2) In the event that CMS makes no payment for SNF services 
furnished by a SNF as a result of paragraph (b)(1) of this section, the 
beneficiary protections specified in paragraph (b)(3) of this section 
apply, unless the participant hospital has provided the beneficiary 
with a discharge planning notice in accordance with Sec.  
510.405(b)(3).
    (3) If the participant hospital does not provide the beneficiary 
with a discharge planning notice in accordance with Sec.  
510.405(b)(3)--
    (i) The SNF must not charge the beneficiary for the expenses 
incurred for such services;
    (ii) The SNF must return to the beneficiary any monies collected 
for such services; and
    (iii) The participant hospital is financially liable for the 
expenses incurred for such services.
    (4) If the participant hospital provided a discharge planning 
notice to the beneficiary in accordance with Sec.  510.405(b)(3), then 
normal SNF coverage requirements apply and the beneficiary may be 
financially liable for non-covered SNF services.
    (c) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered services continue to apply except as 
otherwise waived in this part.

0
21. Section 510.620 is amended by revising paragraph (a) to read as 
follows:


Sec.  510.620  Waiver of deductible and coinsurance that otherwise 
apply to reconciliation payments and repayments.

    (a) Waiver of deductible and coinsurance. CMS waives the 
requirements of sections 1813 and 1833(a) of the Act for 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 the final payment model 
for CJR participant hospitals.
* * * * *

0
22. Part 512 is added to subchapter H to read as follows:

PART 512--EPISODE PAYMENT MODEL

Sec.
Subpart A--General Provisions
512.1 Basis and scope.
512.2 Definitions.
Subpart B--Episode Payment Model Participants
512.100 EPM episodes being tested.
512.105 Geographic areas.
512.110 Access to records and retention.
512.120 EPM participant CEHRT track requirements.
Subpart C--Scope of Episodes
512.200 Time periods for EPM episodes.
512.210 Included and excluded services.
512.230 Beneficiary inclusion criteria.
512.240 Determination of the EPM episode.
Subpart D--Pricing and Payment
512.300 Determination of episode quality-adjusted target prices and 
actual episode payments.
512.305 Determination of the NPRA and reconciliation process.

[[Page 623]]

512.307 Subsequent calculations.
512.310 Appeals process.
512.315 Composite quality scores for determining reconciliation 
payment eligibility and effective and applicable discount factors.
512.320 Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.
512.350 Data sharing.
Subpart E--Quality Measures, Beneficiary Protections, and Compliance 
Enforcement
512.400 Quality measures and reporting--general.
512.411 Quality measures and reporting for AMI model.
512.412 Quality measures and reporting for CABG model.
512.413 Quality measures and reporting for SHFFT model.
512.450 Beneficiary choice and beneficiary notification.
512.460 Compliance enforcement.
Subpart F--Financial Arrangements and Beneficiary Incentives
512.500 Sharing arrangements under the EPM.
512.505 Distribution arrangements under the EPM.
512.510 Downstream distribution arrangements under the EPM.
512.520 Enforcement authority under the EPM.
512.525 Beneficiary engagement incentives under the EPM.
Subpart G--Waivers
512.600 Waiver of direct supervision requirement for certain post-
discharge home visits.
512.605 Waiver of certain telehealth requirements.
512.610 Waiver of SNF 3-day rule.
512.615 Waiver of certain post-operative billing restrictions.
512.620 Waiver of deductible and coinsurance that otherwise apply to 
reconciliation payments or repayments.
512.630 Waiver of physician definition for furnishing cardiac 
rehabilitation and intensive cardiac rehabilitation services to an 
EPM beneficiary.
Subpart H--CR Incentive Payment Model for EPM and Medicare Fee-for-
Service Participants
512.700 Basis and scope.
512.703 CR incentive payment model participants.
512.705 CR/ICR services that count towards CR incentive payments.
512.710 Determination of CR incentive payments.

Provisions for FFS-CR Participants

512.715 Access to records and retention for FFS-CR participants.
512.720 Appeals process for FFS-CR participants.
512.725 Data sharing for FFS-CR participants.
512.730 Compliance enforcement for FFS-CR participants.
512.735 Enforcement authority for FFS-CR participants.
512.740 Beneficiary engagement incentives for FFS-CR participant 
use.
512.745 Waiver of physician definition for furnishing CR and ICR 
services to a FFS-CR beneficiary.
Subparts I-J [Reserved]
Subpart K--Model Termination
512.900 Termination of an episode payment model.
512.905 Termination of the CR incentive payment model.

    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.  512.1  Basis and scope.

    (a) Basis. This part implements the test of episode payment models 
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, or 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 each episode payment model.
    (2) The episodes being tested in each episode payment model.
    (3) The methodology for pricing and payment under each episode 
payment model.
    (4) Quality performance standards and quality reporting 
requirements.
    (5) Safeguards to ensure preservation of beneficiary choice and 
beneficiary notification.


Sec.  512.2  Definitions.

    For the purposes of this part, the following definitions are 
applicable unless otherwise stated:
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Shared Savings Program 
and is not in Track 3.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.
    Actual episode payment means the sum of Medicare claims payments 
and certain non-claims-based payments for items and services that are 
included in the episode in accordance with Sec.  512.210(a), excluding 
the items and services described in Sec.  512.210(b).
    Alignment payment means a payment from an EPM collaborator to an 
EPM participant under a sharing arrangement, for the sole purpose of 
sharing the EPM participant's responsibility for making repayments to 
Medicare.
    AMI means acute myocardial infarction, an event caused by 
diminished blood supply to the heart leading to irreversible heart 
muscle cell damage or death.
    AMI care period means a period of AMI care that would meet the 
requirements to be an AMI model episode in accordance with all 
provisions in subpart B of this part if the FFS-CR participant were an 
AMI model participant.
    AMI model means the EPM for AMI.
    AMI model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in the AMI model in accordance with Sec.  
512.105(b), as of the date of selection or any time thereafter during 
any performance year.
    Anchor hospitalization means a hospitalization that initiates an 
EPM episode.
    Anchor hospitalization portion means the part of an EPM episode 
that occurs during the anchor hospitalization.
    Anchor MS-DRG means the MS-DRG assigned to the hospitalization 
discharge, which initiates an EPM episode.
    Applicable discount factor means the discount percentage 
established by the EPM participant's quality category as determined in 
Sec.  512.315, that is applied to the episode benchmark price for 
purposes of determining an EPM participant's Medicare repayment in 
performance year 2 for EPM participants who elect early downside risk 
and performance years 3 and 4 for all EPM participants.
    Area means, as defined in Sec.  400.200 of this chapter, the 
geographical area within the boundaries of a State, or a State or other 
jurisdiction, designated as constituting an area with respect to which 
a Professional Standards Review Organization or a Utilization and 
Quality Control Peer Review Organization has been or may be designated.
    BPCI stands for the Bundled Payment for Care Improvement 
initiative.
    CABG means coronary artery bypass graft, a surgical procedure that 
diverts the flow of blood around a section of a blocked or partially 
blocked artery in the heart, creating a new pathway that improves blood 
flow to heart muscle.
    CABG care period means a period of CABG care that would meet the 
requirements to be a CABG model episode in accordance with all

[[Page 624]]

provisions in subpart B of this part if the FFS-CR participant were a 
CABG model participant.
    CABG model means the EPM for CABG.
    CABG model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in the CABG model in accordance with Sec.  
512.105(b), as of the date of selection or any time thereafter during 
any performance year.
    CAH means a critical access hospital designated under subpart F of 
part 485 of this chapter.
    CCN stands for CMS certification number.
    CEC stands for Comprehensive ESRD Care Model.
    CEHRT means certified electronic health record technology that meet 
the requirements of 45 CFR 170.102.
    Collaboration agent means an individual or entity that is not an 
EPM collaborator and that is either of the following:
    (1) A PGP member, an NPPGP member, or a TGP member that has entered 
into a distribution arrangement with the same PGP, NPPGP, or TGP in 
which he or she is an owner or employee, and where the PGP, NPPGP, or 
TGP is an EPM collaborator.
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating, and where the ACO is an EPM collaborator.
    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.
    CORF stands for comprehensive outpatient rehabilitation facility.
    CR means cardiac rehabilitation as defined in Sec.  410.49(a) of 
this chapter, a physician-supervised program that furnishes physician 
prescribed exercise, cardiac risk factor modification, psychosocial 
assessment, and outcomes assessment.
    CR amount means the dollar amount determined by the number of CR/
ICR services paid by Medicare under the OPPS or to any supplier 
reporting place of service code 11 on the PFS claim for a beneficiary 
in an AMI or CABG model episode or AMI care period or CABG care period.
    CR incentive payment means a payment made by CMS to an EPM-CR 
participant or FFS-CR participant for CR/ICR service use that is the 
sum of the CR amounts as determined in accordance with Sec.  512.710.
    CR incentive payment model means the model testing CR incentive 
payments for CR/ICR service use made in accordance with subpart H of 
this part.
    CR participant means all EPM-CR participants and FFS-CR 
participants.
    CR performance year means one of the years in which the CR 
incentive payment model is being tested. Performance years for the CR 
incentive payment model correlate to calendar years with the exception 
of performance year 1, which is July 1, 2017 through December 31, 2017.
    CR service count means the number of CR/ICR services paid by 
Medicare under the OPPS or to any supplier reporting place of service 
code 11 on the PFS claim for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period.
    Distribution arrangement means a financial arrangement between an 
EPM collaborator that is an ACO, PGP, NPPGP, or TGP and a collaboration 
agent for the sole purpose of distributing some or all of a gainsharing 
payment received by the ACO, PGP, NPPGP, or TGP.
    Distribution payment means a payment from an EPM collaborator that 
is an ACO, PGP, NPPGP, or TGP to a collaboration agent, under a 
distribution arrangement, composed only of gainsharing payments.
    DME stands for durable medical equipment.
    Downstream collaboration agent means an individual who is not an 
EPM collaborator or a collaboration agent and who is a PGP member, an 
NPPGP member, or a TGP member that has entered into a downstream 
distribution arrangement with the same PGP, NPPGP, or TGP in which he 
or she is an owner or employee, and where the PGP, NPPGP, or TGP is a 
collaboration agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP, NPPGP, or TGP and an 
ACO participant and a downstream collaboration agent for the sole 
purpose of distributing some or all of a distribution payment received 
by the PGP, NPPGP, or TGP.
    Downstream distribution payment means a payment from a 
collaboration agent that is both a PGP, NPPGP, or TGP and an ACO 
participant to a downstream collaboration agent, under a downstream 
distribution arrangement, composed only of distribution payments.
    Effective discount factor means the discount factor established by 
the EPM participant's quality category as determined in Sec.  512.315, 
that is applied to the episode benchmark price to calculate the 
quality-adjusted target price.
    Episode attribution means the process of assigning financial 
responsibility for an EPM episode to an EPM participant.
    Episode benchmark price means a dollar amount assigned to EPM 
episodes based on historical episode data (3 years of historical 
Medicare payment data grouped into EPM episodes according to the EPM 
episode definitions as discussed in Sec.  512.300(b)) prior to the 
application of the effective discount factor, as described in Sec.  
512.300(d).
    Episode payment model (EPM) means the AMI model, CABG model, SHFFT 
model, or another model with payment made on an episode basis in 
accordance with this part. Each section of the regulations applies in 
its entirety to each model.
    EPM activities means activities related to promoting accountability 
for the quality, cost, and overall care for EPM beneficiaries, 
including managing and coordinating care; encouraging investment in 
infrastructure, enabling technologies, and redesigned care processes 
for high quality and efficient service delivery; the provision of items 
and services during an EPM episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
the EPM.
    EPM beneficiary means a beneficiary who meets the beneficiary 
inclusion criteria in Sec.  512.230 and who is in an EPM episode.
    EPM collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Therapist in private practice.
    (8) CORF.
    (9) Provider of outpatient therapy services.
    (10) PGP.
    (11) Hospital.
    (12) CAH.
    (13) NPPGP.
    (14) TGP.
    EPM composite quality score means a score computed for each EPM 
participant's level of quality performance and improvement and 
successful reporting of voluntary data, if

[[Page 625]]

applicable, on specified EPM quality measures as described in Sec.  
512.315.
    EPM-CR participant means an AMI or CABG model participant that is 
eligible to receive CR incentive payments from CMS in accordance with 
Sec.  512.710.
    EPM episode of care (or Episode) means all Medicare Part A and Part 
B items and services described in Sec.  512.210(a) (and excluding the 
items and services described in Sec.  512.210(b)) that are furnished to 
an EPM beneficiary described in Sec.  512.240 that begins with the 
beneficiary's admission to an anchor hospitalization, with the day of 
discharge itself from the anchor hospitalization being counted as the 
first day of the 90-day post-discharge period.
    EPM participant means a Medicare provider or supplier that is 
eligible to receive payment from CMS on an episode basis for services 
rendered to EPM beneficiaries.
    EPM volume protection hospital means an EPM participant that meets 
the requirements under Sec.  512.305(c)(2)(iii)(D).
    ESRD stands for end-stage renal disease.
    FFS-CR beneficiary means a beneficiary attributed to an FFS-CR 
participant and receiving care during an AMI care period or CABG care 
period.
    FFS-CR participant means a hospital that is not an EPM participant 
and that is eligible to receive CR incentive payments from CMS in 
accordance with Sec.  512.710.
    Gainsharing payment means a payment from an EPM participant to an 
EPM collaborator, under a sharing arrangement, composed of only 
reconciliation payments or internal cost savings or both.
    HCAHPS stands for Hospital Consumer Assessment of Healthcare 
Providers and Systems.
    HCPCS stands for CMS Common Procedure Coding System.
    Health Insurance Claim Number (HICN) means the unique number 
assigned by the Social Security Administration to an individual for the 
purpose of identifying that individual as a Medicare beneficiary.
    HHA means a Medicare-enrolled home health agency.
    Historical episode payment means the expenditures for episodes that 
occurred during the historical period used to determine the EPM episode 
benchmark price.
    Hospital means a provider 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.
    ICR means intensive cardiac rehabilitation as defined in Sec.  
410.49(a) of this chapter, a physician-supervised program that 
furnishes cardiac rehabilitation and has shown, in peer-reviewed 
published research, that it improves patients' cardiovascular disease 
through specific outcome measurements described in Sec.  410.49(c) of 
this chapter.
    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 EPM participant resulting from care 
redesign undertaken by such participant in connection with providing 
items and services to beneficiaries within specific EPM episodes. 
Internal cost savings does not include savings realized by any 
individual or entity that is not the EPM participant.
    Intracardiac procedures means procedures performed within the heart 
chambers, rather than within coronary artery blood vessels, through 
percutaneous access to blood vessels. These procedures are indicated 
for the treatment of congenital cardiac malformations, cardiac valve 
disease, and cardiac arrhythmias.
    IPF stands for inpatient psychiatric facility.
    IRF stands for inpatient rehabilitation facility.
    LTCH stands for long-term care hospital.
    MDH means a Medicare-dependent, small rural hospital that meets the 
classification criteria specified under Sec.  412.108 of this chapter.
    Member of the PGP or PGP member means a physician, nonphysician 
practitioner, or therapist who is an owner or employee of a PGP and who 
has reassigned to the PGP his or her right to receive Medicare payment.
    Member of the NPPGP or NPPGP member means a nonphysician 
practitioner or therapist who is an owner or employee of an NPPGP and 
who has reassigned to the NPPGP his or her right to receive Medicare 
payment.
    Member of the TGP or TGP member means a therapist who is an owner 
or employee of a TGP and who has reassigned to the TGP his or her right 
to receive Medicare payment.
    MSA stands for metropolitan statistical area and means a CBSA 
associated with at least one urbanized area that has a population of at 
least 50,000.
    MS-DRG stands for Medicare severity diagnosis-related group, which 
is the classification of inpatient hospital discharges updated in 
accordance with Sec.  412.10 of this chapter.
    Nonphysician practitioner means (except for purposes of subpart G 
of this part) one of the following:
    (1) A physician assistant who satisfies the qualifications set 
forth at Sec.  410.74(a)(2)(i) and (ii) of this chapter.
    (2) A nurse practitioner who satisfies the qualifications set forth 
at Sec.  410.75(b) of this chapter.
    (3) A clinical nurse specialist who satisfies the qualifications 
set forth at Sec.  410.76(b) of this chapter.
    (4) A certified registered nurse anesthetist (as defined at Sec.  
410.69(b) of this chapter).
    (5) A clinical social worker (as defined at Sec.  410.73(a) of this 
chapter).
    (6) A registered dietician or nutrition professional (as defined at 
Sec.  410.134 of this chapter).
    NPI stands for National Provider Identifier.
    NPPGP means an entity that is enrolled in Medicare as a group 
practice, includes at least one owner or employee who is a nonphysician 
practitioner, does not include a physician owner or employee, and has a 
valid and active TIN.
    NPRA means the net payment reconciliation amount determined in 
accordance with Sec.  512.305(c).
    OIG stands for the Department of Health and Human Services Office 
of Inspector General.
    OPPS stands for the Medicare Outpatient Prospective Payment System.
    PAC stands for post-acute care.
    PBPM stands for per-beneficiary-per-month.
    PCI means percutaneous coronary intervention, a procedure used to 
open blocked arteries in the heart through percutaneous placement of a 
small wire mesh tube that keeps the artery open and minimizes the risk 
of it later narrowing.
    Performance year means one of the years in which the EPM is being 
tested. Performance years for the EPMs correlate to calendar years with 
the exception of performance year 1, which is July 1, 2017 through 
December 31, 2017.
    PFS means the Medicare Physician Fee Schedule authorized under 
section 1848 of the Act.
    PGP stands for physician group practice.
    Physician has the meaning set forth in section 1861(r) of the Act.
    Post-anchor hospitalization portion means the part of an episode 
that occurs after the anchor hospitalization.
    Post-episode spending amount means the sum of Medicare Parts A and 
B

[[Page 626]]

payments for items and services that are furnished to a beneficiary 
within 30 days after the end of the beneficiary's EPM episode.
    Provider of outpatient therapy services means an entity that is 
enrolled in Medicare as a provider of therapy services and furnishes 
one or more of the following:
    (1) Outpatient physical therapy services as defined in Sec.  410.60 
of this chapter.
    (2) Outpatient occupational therapy services as defined in Sec.  
410.59 of this chapter.
    (3) Outpatient speech-language pathology services as defined in 
Sec.  410.62 of this chapter.
    Quality-adjusted target price means the dollar amount assigned to 
EPM episodes as the result of reducing the episode benchmark price by 
the EPM participant's effective discount factor based on the EPM 
participant's quality category, as described in Sec.  512.315(b)(5), 
(c)(5), or (d)(5).
    Quality improvement points are points that CMS adds to an EPM 
participant's EPM composite quality score for a measure if the EPM 
participant's performance improves from the previous performance year 
according to the relevant EPM measure improvement methodology.
    Quality performance points are points that CMS adds to an EPM 
participant's EPM composite quality score for a measure based on the 
performance percentile scale and for successful submission of voluntary 
data if applicable to the EPM.
    Reconciliation payment means a payment made by CMS to an EPM 
participant as determined in accordance with Sec.  512.305(d).
    Repayment amount means the amount owed by an EPM participant to 
CMS, as reflected on a reconciliation report.
    RRC means a rural referral center that satisfies the criteria set 
forth in Sec.  412.96 of this chapter.
    Rural hospital means an IPPS 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(a)(1) of this chapter.
    (3) Has reclassified as a rural hospital under Sec.  412.103 of 
this chapter.
    SCH means a sole community hospital that meets the classification 
criteria specified in Sec.  412.92 of this chapter.
    Sharing arrangement means a financial arrangement between an EPM 
participant and an EPM collaborator for the sole purpose of making 
gainsharing payments or alignment payments under the EPM.
    SHFFT stands for surgical hip/femur fracture treatment and means 
surgical treatment for hip and femur fractures, other than hip 
replacements, consisting primarily of hip fixation procedures, with or 
without reduction of the fracture, as well as open and closed surgical 
approaches.
    SHFFT model means the EPM for SHFFT.
    SHFFT model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in a SHFFT model in accordance with Sec.  
512.105(a), as of the date of selection or any time thereafter during 
any performance year.
    SNF stands for skilled nursing facility.
    TGP means an entity that is enrolled in Medicare as a therapy group 
in private practice, includes at least one owner or employee who is a 
therapist in private practice, does not include an owner or employee 
who is a physician or nonphysician practitioner, and has a valid and 
active TIN.
    THA/TKA stands for total hip arthroplasty/total knee arthroplasty.
    Therapist means one of the following individuals as defined at 
Sec.  484.4 of this chapter:
    (1) Physical therapist.
    (2) Occupational therapist.
    (3) Speech-language pathologist.
    Therapist in private practice means a therapist that either--
    (1) Complies with the special provisions for services furnished by 
physical therapists in private practice in Sec.  410.60(c) of this 
chapter;
    (2) Complies with the special provisions for services furnished by 
occupational therapists in private practice in Sec.  410.59(c) of this 
chapter; or
    (3) Complies with the special provisions for services furnished by 
speech-language pathologists in private practice in Sec.  410.62(c) of 
this chapter.
    TIN stands for taxpayer identification number.
    Two-sided risk arrangement means an arrangement in which the ACO 
may share savings with the Medicare program, if it meets the 
requirements for doing so, and is also liable for sharing losses 
incurred under the program or model, if it meets the criteria under 
which sharing losses occurs.

Subpart B--Episode Payment Model Participants


Sec.  512.100  EPM episodes being tested.

    (a) Initiation of an episode. An episode is initiated when an EPM 
participant admits a Medicare beneficiary described in Sec.  512.230 
for an anchor hospitalization.
    (b) Hospital exclusions. (1) A hospital is excluded from 
participating in EPMs for EPM anchor MS-DRGs that are included in BPCI 
episodes in which the hospital currently participates.
    (2) These exclusions cease to apply as of the date that the 
hospital no longer meets the conditions specified in this paragraph (b) 
or September 30, 2018, whichever date is sooner.
    (c) Types of EPM episodes. An EPM episode is initiated by a 
beneficiary's admission to an EPM participant for an anchor 
hospitalization that is paid under an EPM anchor MS-DRG and, in the 
case of the AMI model, with an AMI ICD-10-CM diagnosis code if the 
admission is under a PCI MS-DRG. The EPM anchor MS-DRGs and ICD-10-CM 
diagnosis codes for the EPM episodes are as follows:
    (1) Acute myocardial infarction (AMI). (i) Discharge under an AMI 
MS-DRG (MS-DRGs 280 to 282); or
    (ii) Discharge under a PCI MS-DRG (MS-DRGs 246 to 251) with an ICD-
10-CM diagnosis code of AMI on the claim for the anchor hospitalization 
in the principal or secondary diagnosis code position.
    (2) Coronary artery bypass graft (CABG). Discharge under a CABG MS-
DRG (MS-DRGs 231 to 236).
    (3) Surgical hip/femur fracture treatment (SHFFT). Discharge under 
a SHFFT MS-DRG (MS-DRGs 480 to 482).
    (d) Identifying AMI historical episodes and EPM episodes with AMI 
ICD-CM diagnosis codes. CMS develops a list of AMI ICD-9-CM and ICD-10-
CM diagnosis codes that identify the initiation of historical episodes 
or initiate AMI model episodes when reported in the principal or 
secondary diagnosis code position on the inpatient hospital claim for a 
historical hospitalization or the anchor hospitalization discharged 
under PCI MS-DRGs (MS-DRGs 246 to 251). The list of ICD-9-CM and ICD-
10-CM diagnosis codes representing AMI is posted on the CMS Web site.
    (1) On an annual basis, or more frequently as needed, CMS updates 
the list of ICD-10-CM diagnosis codes representing AMI to reflect 
coding changes or other issues brought to CMS' attention.

[[Page 627]]

    (2) CMS applies the following standard when revising the list of 
ICD-10-CM diagnosis codes representing AMI: The ICD-10-CM diagnosis 
code is sufficiently specific that it represents an AMI.
    (3) CMS posts the following to the CMS Web site:
    (i) Potential AMI ICD-10-CM diagnosis codes for public comment; and
    (ii) A final AMI ICD-10-CM diagnosis code list after consideration 
of public comment.
    (4) CMS excludes AMI historical episodes with PCI MS-DRGs and 
inpatient claims that contain intracardiac ICD-9-CM procedure codes. 
CMS excludes historical AMI model episodes discharged under PCI MS-DRGs 
with an AMI ICD-9-CM diagnosis code in the principal or secondary 
diagnosis code position on the inpatient hospital claim from the AMI 
historical episodes that set episode benchmark prices if there is an 
intracardiac ICD-9-CM procedure code in any procedure code field on the 
inpatient hospital claim. The intracardiac ICD-9-CM procedure codes are 
as follows:
    (i) 35.52 (Repair of atrial septal defect with prosthesis, closed 
technique).
    (ii) 35.96 (Percutaneous balloon valvuloplasty).
    (iii) 35.97 (Percutaneous mitral valve repair with implant).
    (iv) 37.26 (Catheter based invasive electrophysiologic testing).
    (v) 37.27 (Cardiac mapping).
    (vi) 37.34 (Excision or destruction of other lesion or tissue of 
heart, endovascular approach).
    (vii) 37.36 (Excision, destruction, or exclusion of left atrial 
appendage).
    (viii) 37.90 (Insertion of left atrial appendage device).


Sec.  512.105  Geographic areas.

    (a) The SHFFT model must be implemented in the same geographic 
areas as the CJR model as described under Sec.  510.105 of the chapter.
    (b) The geographic areas for inclusion in the CABG and AMI models 
will be obtained using a random sampling of certain MSAs in the United 
States. All counties within each of the selected MSAs are selected for 
inclusion in the AMI and CABG models. CMS excludes MSAs that met the 
following criteria between January 1, 2014 and December 31, 2014 from 
the possibility of being selected geographic areas. MSAs are excluded 
if they--
    (1) Had fewer than 75 AMI episodes;
    (2) Had fewer than 75 AMI episodes that were not attributable to 
BPCI Model 2 or 4, AMI, CABG or PCI episodes;
    (3) Had more than 50 percent of otherwise qualifying (BPCI or non 
BPCI) episodes attributable to a BPCI Model 2 or 4 AMI, CABG or PCI 
episodes; or
    (4) Are in Maryland, Vermont, or another state where CMS is 
implementing a state-wide all-payer model. In such situations all MSAs 
in the state may be excluded even if hospitals are otherwise being paid 
in accordance with the IPPS and would otherwise qualify as an eligible 
EPM participant.
    (c) In all geographic areas where the AMI, CABG, or SHFFT models 
are being implemented, the accountable financial entity must be an 
acute care IPPS hospital.


Sec.  512.110  Access to records and retention.

    EPM participants, EPM collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing EPM activities must:
    (a) Allow the Government, including CMS, OIG, HHS, and the 
Comptroller General or their designees, scheduled and unscheduled 
access to all books, contracts, records, documents, and other evidence 
(including data related to utilization and payments, quality of care 
criteria, billings, lists of EPM collaborators, sharing arrangements, 
distribution arrangements, downstream distribution arrangements, and 
the documentation required under Sec. Sec.  512.500(d) and 512.525(d)) 
sufficient to enable the audit, evaluation, inspection, or 
investigation of the following:
    (1) The individual's or entity's compliance with EPM requirements 
and, if applicable, the individual's or entity's compliance with CR 
incentive payment model requirements.
    (2) The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments.
    (3) The obligation to repay any reconciliation payments or CR 
incentive payments, if applicable, owed to CMS.
    (4) The quality of the services furnished to an EPM beneficiary 
during an EPM episode.
    (5) The sufficiency of EPM beneficiary notifications.
    (6) The accuracy of the EPM participant's submissions under CEHRT 
use requirements.
    (b) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the EPM 
participant's participation in the EPM or from the date of completion 
of any audit, evaluation, inspection, or investigation, whichever is 
later, unless--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the EPM participant at 
least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the EPM participant, EPM collaborator, collaboration 
agent, downstream collaboration agent, or any other individual or 
entity performing EPM activities in which case the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.


Sec.  512.120  EPM participant CEHRT track requirements.

    (a) EPM CEHRT use. For performance year 2 if the EPM participant 
elects downside risk and for performance years 3 through 5, EPM 
participants choose either of the following:
    (1) CEHRT use. EPM participants attest in a form and manner 
specified by CMS to their use of CEHRT as defined in Sec.  414.1305 of 
this chapter to document and communicate clinical care with patients 
and other health professionals.
    (2) No CEHRT use. EPM participants do not attest in a form and 
manner specified by CMS to their use of CEHRT as defined in Sec.  
414.1305 of this chapter to document and communicate clinical care with 
patients and other health professionals.
    (b) Clinician financial arrangements list. Each EPM participant 
that chooses CEHRT use as provided in paragraph (a)(1) of this section 
must submit to CMS a clinician financial arrangements list in a form 
and manner specified by CMS on a no more than quarterly basis. The list 
must include the following information on individuals and entities for 
the period of the EPM performance year specified by CMS:
    (1) EPM collaborators. For each physician, nonphysician 
practitioner, or therapist in private practice who is an EPM 
collaborator during the period of the EPM performance year specified by 
CMS:
    (i) The name, TIN, and NPI of the EPM collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the EPM participant and the EPM collaborator.
    (2) Collaboration agents. For each physician, nonphysician 
practitioner, or therapist who is a collaboration agent during the 
period of the EPM performance year specified by CMS:

[[Page 628]]

    (i) The name and TIN of the EPM collaborator and the name, TIN, and 
NPI of the collaboration agent.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the EPM collaborator and the 
collaboration agent.
    (3) Downstream collaboration agents. For each physician, 
nonphysician practitioner, or therapist who is a downstream 
collaboration agent during the period of the EPM performance year 
specified by CMS:
    (i) The name and TIN of the EPM collaborator, the name and TIN of 
the collaboration agent and the name, TIN, and NPI of the downstream 
collaboration agent.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent and 
the downstream collaboration agent.
    (4) Attestation to no individuals. If there are no individuals that 
meet the requirements to be reported, as specified in paragraphs (b)(1) 
through (3) of this section, the EPM participant must attest in a form 
and manner required by CMS that there are no individuals to report on 
the clinician financial arrangements list.
    (c) Documentation requirements. (1) Each EPM participant that 
chooses CEHRT use as provided in paragraph (a)(1) of this section must 
maintain documentation of their attestation to CEHRT use and clinician 
financial arrangements lists.
    (2) The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.

Subpart C--Scope of Episodes


Sec.  512.200  Time periods for EPM episodes.

    All AMI, CABG, and SHFFT episodes begin on or after July 1, 2017 
and end on or before December 31, 2021.


Sec.  512.210  Included and excluded services.

    (a) Included services for an EPM. All Medicare Parts A and B items 
and services are included in the EPM episode, except as specified in 
paragraph (b) of this section. These services include, but are not 
limited to, the following:
    (1) Physicians' services.
    (2) Inpatient hospital services.
    (3) IPF services.
    (4) LTCH services.
    (5) IRF services.
    (6) SNF services.
    (7) HHA services.
    (8) Hospital outpatient services.
    (9) Independent outpatient therapy services.
    (10) Clinical laboratory services.
    (11) DME.
    (12) Part B drugs and biologicals.
    (13) Hospice.
    (14) PBPM payments under models tested under section 1115A of the 
Act.
    (b) Excluded services. The following items, services, and payments 
are excluded from the EPM episode:
    (1) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter.
    (2) New technology add-on payments for medical devices as defined 
in part 412, subpart F, of this chapter.
    (3) Transitional pass-through payments for medical devices as 
defined in Sec.  419.66 of this chapter.
    (4) Items and services unrelated to the anchor MS-DRG that 
initiates the EPM episode, as determined by CMS. 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 unrelated to a condition likely to 
have been affected by care during the EPM episode, such as 
prostatectomy.
    (D) Acute disease surgical unrelated to a condition resulting from 
or likely to have been affected by care during the EPM episode, such as 
appendectomy.
    (ii) Medicare Part B services during the 90-day post-discharge 
period and additionally DME during the anchor hospitalization, as 
identified by the principal ICD-CM diagnosis code on the claim that 
groups to the following categories of diagnoses:
    (A) Acute disease diagnoses unrelated to a condition resulting from 
or likely to have been affected care during the EPM episode, 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 care during the EPM episode or whether 
substantial services were likely to be provided for the chronic 
condition during the EPM episode.
    (iii) Certain PBPM payments under models tested under section 1115A 
of the Act that CMS determines to be primarily used for care 
coordination or care management services for clinical conditions in 
excluded categories of diagnoses for an EPM, as described in paragraphs 
(b)(4)(i) and (ii) of this section.
    (iv) All PBPM model payments funded from the Innovation Center 
appropriation.
    (c) Updating the exclusion lists for EPMs. (1) The EPM exclusion 
list that applies to each anchor MS-DRG for an EPM episode and that 
displays excluded MS-DRGs, ICD-9-CM and ICD-10-CM diagnosis codes, and 
CMS model PBPM payments is posted on the CMS Web site.
    (2) On an annual basis, or more frequently as needed, CMS updates 
the EPM exclusion lists to reflect annual coding changes or other 
issues brought to CMS' attention.
    (3) CMS applies the following standards when revising the EPM 
exclusion lists for reasons other than to reflect annual coding 
changes:
    (i) Items or services that are directly related to the EPM episode 
or the quality or safety of the EPM episode care are included in the 
EPM episode.
    (ii) Items or services for chronic conditions that may be affected 
by the EPM episode care are related and included in the EPM episode.
    (iii) Items and services for chronic conditions that are generally 
not affected by the EPM episode care are excluded from the EPM episode.
    (iv) Items and services for acute clinical conditions not arising 
from existing EPM episode-related chronic clinical conditions or 
complications of EPM episode care are excluded from the EPM episode.
    (v) PBPM payments under CMS models determined to be primarily used 
for care coordination or care management services for clinical 
conditions in excluded categories of diagnoses for an EPM, as described 
in paragraph (b)(4)(iii) of this section, are excluded from the EPM 
episode.
    (4) CMS posts the following on the CMS Web site:
    (i) Potential revisions to the EPM exclusion lists to allow for 
public comment; and
    (ii) Updated EPM exclusion lists after consideration of public 
comment.


Sec.  512.230  Beneficiary inclusion criteria.

    EPM episode care is furnished to beneficiaries who meet all of the 
following criteria upon admission to the anchor hospitalization:
    (a) Enrolled in Medicare Part A and Part B.
    (b) Eligibility for Medicare is not based on end-stage renal 
disease, as described in Sec.  406.13 of this chapter.
    (c) Not enrolled in any managed care plan (for example, Medicare 
Advantage, health care prepayment plans, or cost-based health 
maintenance organizations).
    (d) Not covered under a United Mine Workers of America health care 
plan.
    (e) Have Medicare as their primary payer pursuant to the 
requirements in Sec.  411.20 of this chapter.

[[Page 629]]

    (f) Not prospectively assigned to one of the following:--
    (1) An ACO in the Next Generation ACO model;
    (2) An ACO in a track of the Comprehensive ESRD Care Model 
incorporating downside risk for financial losses; or
    (3) A Shared Savings Program ACO in Track 3.
    (g) Not under the care of an attending or operating physician, as 
designated on the inpatient hospital claim, who is a member of a 
physician group practice that initiates BPCI Model 2 episodes at the 
EPM participant for the MS-DRG that would be the anchor MS-DRG under 
the EPM.
    (h) Not already in any BPCI model episode.
    (i) Not already in an AMI; SHFFT; CABG; or CJR model episode with 
an episode definition that does not exclude the MS-DRG that would be 
the anchor MS-DRG under the EPM.


Sec.  512.240  Determination of the EPM episode.

    (a) AMI Model--(1) General. The AMI episode begins with the 
admission of a Medicare beneficiary as described in Sec.  512.230 to an 
AMI model participant for an anchor hospitalization and ends on the 
90th day after the date of discharge, with the day of discharge itself 
being counted as the first day in the 90-day post-discharge period.
    (2) Cancellation of an AMI model episode. The AMI episode is 
canceled and is not included in the determination of NPRA as specified 
in Sec.  512.305 if the beneficiary does any of the following during 
the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230(a) through 
(f).
    (ii) Dies.
    (iii) Is transferred during the anchor hospitalization for 
inpatient hospitalization at another hospital.
    (iv) Initiates any BPCI model episode.
    (b) CABG Model--(1) General. The CABG episode begins with the 
admission of a Medicare beneficiary as described in Sec.  512.230 to a 
CABG model participant for an anchor hospitalization and ends on the 
90th day after the date of discharge, with the day of discharge itself 
being counted as the first day in the 90-day post-discharge period.
    (2) Cancellation of a CABG model episode. The CABG episode is 
canceled and is not included in the determination of NPRA as specified 
in Sec.  512.305 if the beneficiary does any of the following during 
the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230(a) through 
(f).
    (ii) Dies.
    (iii) Initiates any BPCI model episode.
    (c) SHFFT Model--(1) General. The SHFFT episode begins with the 
admission of a Medicare beneficiary as described in Sec.  512.230 to a 
SHFFT model participant for an anchor hospitalization and ends on the 
90th day after the date of discharge, with the day of discharge itself 
being counted as the first day in the 90-day post-discharge period.
    (2) Cancellation of a SHFFT model episode. The SHFFT episode is 
canceled and is not included in the determination of NPRA as specified 
in Sec.  512.305 if the beneficiary does any of the following during 
the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230 (a) 
through (f).
    (ii) Dies.
    (iii) Initiates any BPCI model episode.

Subpart D--Pricing and Payment


Sec.  512.300  Determination of episode quality-adjusted target prices 
and actual episode payments.

    (a) General. CMS establishes episode quality-adjusted target prices 
and calculates actual episode payments for EPM participants for each 
performance year of the EPMs as specified in this section.
    (b) Calculating episode quality-adjusted target prices. Episode 
quality-adjusted target prices and actual episode payments are 
calculated for episodes according to the following:
    (1) For episodes involving AMI, MS-DRGs.
    (i) 280 (Acute myocardial infarction, discharged alive with MCC).
    (ii) 281 (Acute myocardial infarction, discharged alive with CC).
    (iii) 282 (Acute myocardial infarction, discharged alive without 
CC/MCC).
    (iv) 246 (Perc cardiovasc proc with drug-eluting stent with MCC or 
4+ vessels/stents).
    (v) 247 (Perc cardiovasc proc with drug-eluting stent without MCC).
    (vi) 248 (Perc cardiovasc proc with non-drug-eluting stent with MCC 
or 4+ vessels/stents).
    (vii) 249 (Perc cardiovasc proc with non-drug-eluting stent without 
MCC).
    (viii) 250 (Perc cardiovasc proc without coronary artery stent with 
MCC).
    (ix) 251 (Perc cardiovasc proc without coronary artery stent 
without MCC).
    (2) For episodes involving CABG, MS-DRGs.
    (i) 231 (Coronary bypass with PTCA with MCC).
    (ii) 232 (Coronary bypass with PTCA without MCC).
    (iii) 233 (Coronary bypass with cardiac cath with MCC).
    (iv) 234 (Coronary bypass with cardiac cath without MCC).
    (v) 235 (Coronary bypass without cardiac cath with MCC).
    (vi) 236 (Coronary bypass without cardiac cath without MCC).
    (3) For episodes involving SHFFT, MS-DRGs.
    (i) 480 (Hip and femur procedures except major joint with MCC).
    (ii) 481 (Hip and femur procedures except major joint with CC).
    (iii) 482 (Hip and femur procedures except major joint without CC 
or MCC).
    (c) Calculating quality-adjusted target prices. CMS calculates 
quality adjusted target prices as specified in Sec.  512.300(c)(1) 
through (13).
    (1) Calculation of the historical expenditures. CMS calculates 
historical expenditure calculations based on the following calendar 
years:
    (i) Episodes beginning in 2013 through 2015 for performance years 1 
and 2.
    (ii) Episodes beginning in 2015 through 2017 for performance years 
3 and 4.
    (iii) Episodes beginning in 2017 through 2019 for performance year 
5.
    (2) Calculation of the quality-adjusted target prices. CMS 
calculates quality-adjusted target prices based on a blend of each EPM-
participant hospital-specific and regional historical episode 
expenditures.
    (i) The region corresponds to the U.S. Census Division associated 
with the primary address of the CCN of the EPM participant and the 
regional component is based on episodes occurring at all acute care 
hospitals in said region, except as follows.
    (ii) In cases where an MSA selected for participation in an EPM 
spans more than one U.S. Census Division, the entire MSA is grouped 
into the U.S. Census Division where the largest city by population in 
the MSA is located for quality-adjusted target price and episode 
payment calculations.
    (3) Calculation of the quality-adjusted target price blend. The 
quality-adjusted target price blend consists of the following:
    (i) Two-thirds of the EPM participant'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 EPM participant'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.
    (4) Exception for low-volume hospitals. (i) For the SHFFT model, 
quality-adjusted target prices for participants with fewer than 50 
SHFFT

[[Page 630]]

model episodes in total across the 3 historical years of data used to 
calculate the quality-adjusted target price are based on 100 percent 
regional historical episode payments.
    (ii) For the AMI model, quality-adjusted target prices for anchor 
MS-DRGs 280-282 for participants with fewer than 75 AMI model episodes 
with anchor MS-DRGs 280-282 in total across the 3 historical years of 
data used to calculate the quality-adjusted target price are based on 
100 percent regional historical episode payments.
    (iii) For the AMI model, quality-adjusted target prices for anchor 
MS-DRGs 246-251 for participants with fewer than 125 AMI model episodes 
with anchor MS-DRGs 246-251 in total across the 3 historical years of 
data used to calculate the quality-adjusted target price are based on 
100 percent regional historical episode payments.
    (iv) For the CABG model, quality-adjusted target prices for 
participants with fewer than 50 CABG model episodes in total across the 
3 historical years of data used to calculate the quality-adjusted 
target price are based on 100 percent regional historical episode 
payments.
    (5) Exception for recently merged or split hospitals. EPM-
participant hospital-specific historical episode payments for EPM 
participants that have undergone a merger, consolidation, spin off or 
other reorganization that results in a new hospital entity without 3 
full years of historical claims data are determined using the 
historical episode payments attributed to their predecessor(s).
    (6) Episodes that straddle performance years or payment updates. 
Where an episode straddles performance years or payment updates, the 
quality-adjusted target price is based on the quality-adjusted target 
price for the type of episode as of the date of admission for the 
anchor hospitalization.
    (7) Adjustments for certain hospitalizations under the AMI and CABG 
models--(i) Adjustments for CABG model episodes with anchor MS-DRGs 
231-236. The episode benchmark price for an episode with CABG anchor 
MS-DRG 231-236 is set based on the sum of expenditures during the 
anchor hospitalization portion and post-anchor hospitalization portion 
of the episode as follows:
    (A) The anchor hospitalization portion of the episode benchmark 
price is set based on the CABG anchor MS-DRG at discharge.
    (B) The post-anchor hospitalization portion of the episode 
benchmark price is set separately for episodes:
    (1) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (2) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (3) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (4) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (ii) Adjustments for Certain AMI Model Episodes with CABG 
Readmissions. The episode benchmark price for an AMI model episode with 
AMI anchor MS-DRG 280-282 or PCI anchor MS-DRG 246-251 with a 
readmission to any of CABG anchor MS-DRGs 231-236 is the sum of the 
anchor hospitalization portion of the CABG episode benchmark price 
corresponding to the MS-DRG of the CABG readmission and the episode 
benchmark price for the corresponding anchor MS-DRG that would be 
applied to the episode if it did not include a CABG readmission.
    (8) Inclusion of reconciliation payments and Medicare repayments. 
CMS will include certain reconciliation payments and Medicare 
repayments when updating quality adjusted target prices.
    (i) Inclusion of reconciliation payments and Medicare repayments in 
BPCI initiative. Reconciliation payments and Medicare repayments under 
Sec.  512.305(d)(2) and (3) and those from episodes in the BPCI 
initiative are included when updating quality-adjusted target prices 
for performance years 3 through 5, subject to the adjustment for CABG 
model episodes in paragraph (c)(8)(ii) of this section.
    (ii) Inclusion of reconciliation payments and Medicare repayments 
in CABG model episodes. When updating prices for CABG episodes, 
reconciliation payments and Medicare repayments under Sec.  
512.305(d)(2) and (d)(3) and from episodes included in the BPCI 
initiative will be apportioned proportionally to the anchor 
hospitalization and post-anchor hospitalization portions of historical 
CABG episodes. The proportions will be based on based on regional 
average historical episode payments that occurred during the anchor 
hospitalization portion of CABG model episodes and regional average 
historical episode payments that occurred during the post-anchor anchor 
hospitalization portion of CABG model episodes that were initiated 
during the 3 historical years.
    (9) Communication of quality-adjusted target prices. CMS 
communicates quality--adjusted target prices to EPM participants prior 
to the beginning of the performance period in which they apply.
    (10) Applicable time period for updating quality-adjusted target 
prices. In general quality-adjusted target prices are updated to 
account for Medicare payment updates no less than 2 times per year, for 
updated quality-adjusted target prices effective October 1 and January 
1, and at other intervals if necessary as determined by CMS.
    (i) For CABG model episodes, quality-adjusted target prices are 
updated by separately updating the anchor hospitalization portion of 
the episode benchmark price and the post-anchor hospitalization portion 
of the episode benchmark price and then applying the effective discount 
factor.
    (ii) [Reserved].
    (11) Trending of historical expenditure data. CMS trends historical 
expenditure data by applying separate national trend factors to episode 
payments. A trend factor is calculated for each of the first 2 years in 
the historical period based on the ratio of national average episode 
payments in the third year of the historical period to national average 
episode payments in each of the first 2 years in the historical period, 
for the following scenarios:
    (i) Separately for each SHFFT anchor MS-DRGs 480 through 482.
    (ii) Separately for each AMI anchor MS-DRGs 280 through 282 and PCI 
anchor MS-DRGs 246 through 251 for AMI model episodes without CABG 
readmissions.
    (iii) For CABG model episodes, separately for the anchor 
hospitalization portion and post-anchor hospitalization portion as 
follows:
    (A) For the anchor hospitalization portion of CABG model episodes, 
separately for each CABG anchor MS-DRGs 231 through 236.
    (B) For the post-anchor hospitalization portion of CABG model 
episodes, separately for episodes:
    (1) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (2) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG without major

[[Page 631]]

complication or comorbidity (232, 234, or 236).
    (3) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (4) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (12) Normalizing for wage variation. CMS applies the CMS Price 
(Payment) Standardization Detailed Methodology to remove wage level 
differences in calculating EPM-episode benchmark prices and actual EPM-
episode payments. CMS reintroduces wage index variations by multiplying 
the blended and updated historical payments by a wage normalization 
factor of 0.7 * IPPS wage index + 0.3.
    (13) Combining episodes to set stable benchmark and quality-
adjusted target prices. For purposes of having sufficient episode 
volume to set stable EPM episode benchmark and quality-adjusted target 
prices, where applicable, CMS aggregates EPM episodes and portions of 
EPM episodes across dimensions that include anchor MS-DRGs, the 
presence of an AMI ICD-CM diagnosis code on the anchor inpatient claim, 
and the presence of a major complication or comorbidity for anchor CABG 
MS-DRGs.
    (i) For each EPM, CMS combines episodes for anchor MS-DRGs adjusted 
for severity and hospital-specific and region-specific weights both for 
EPM participants and IPPS hospitals within each region for the purposes 
of blending EPM-participant hospital-specific components of the episode 
benchmark price and region-specific components of the episode benchmark 
price as follows:
    (A) For SHFFT model episodes, CMS combines episodes with anchor MS-
DRGs 480 through 482.
    (B) For AMI model episodes with AMI anchor MS-DRGs in 280 through 
282 or PCI anchor MS-DRGs 246 through 251 and without readmissions for 
CABG MS-DRGs, episodes with AMI anchor MS-DRGs 280 through 282 are 
grouped separately from episodes with PCI anchor MS-DRGs 246 through 
251.
    (C) For CABG model episodes with CABG anchor MS-DRGs in 231 through 
236, CMS separately groups the anchor hospitalization portion and the 
post-anchor hospitalization portion.
    (1) For the anchor hospitalization portion of CABG model episodes, 
the anchor hospitalization portion is grouped by the CABG anchor MS-
DRG.
    (2) For the post-anchor hospitalization portion of CABG model 
episodes, the post-anchor hospitalization portion is grouped by 
episodes:
    (i) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and anchor MS-DRG with major complication or comorbidity (231, 233, or 
235).
    (ii) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and anchor MS-DRG without major complication or comorbidity (232, 234, 
or 236).
    (iii) Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (iv) Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and anchor MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (ii) After blending EPM-participant hospital-specific and regional-
specific components of the combined episodes, CMS separates episodes to 
calculate episode benchmark prices according to the episode anchor MS-
DRG, subject to adjustments described in Sec.  512.300(c)(7).
    (d) Effective discount factor. An EPM participant's quality-
adjusted target prices incorporate an effective discount factor to 
reflect Medicare's portion of reduced expenditures from the EPM as 
described in this section.
    (1) Effective discount factor for reconciliation payments. The 
effective discount factor for reconciliation payment in all performance 
years is determined by the EPM participant's quality category as 
provided in Sec.  512.315(b)(5), (c)(5), and (d)(5).
    (2) Applicable discount factor for repayment amounts. The 
applicable discount factor for repayment amounts is--
    (i) Not applicable in performance year 1, as the requirement for 
EPM participant repayment is waived.
    (ii) Not applicable in performance year 2 as the requirement for 
EPM participant repayment is waived except for an EPM participant that 
has elected downside risk for that performance year.
    (iii) In performance year 2 for an EPM participant that has elected 
downside risk and performance years 3 and 4 when partial EPM 
participant repayment applies, as determined by the EPM participant's 
quality category as provided in Sec.  512.315(b)(5), (c)(5), and 
(d)(5).
    (iv) Not applicable in performance year 5 when full EPM participant 
repayment applies, as determined by the effective discount factor that 
applies to repayment amounts as specified in paragraph (d)(1) of this 
section.
    (e) Exceptions that apply to both quality-adjusted target prices 
and actual episode payments--(1) Exception for high episode payment. 
For each EPM, actual episode payments and historical episode payments 
are capped at 2 standard deviations above the mean regional episode 
payment for the EPM-participant hospital-specific and regional 
components of the quality-adjusted target price under the EPM, as well 
as for calculating actual episode payments under the EPM during a 
performance year, subject to the exceptions noted in paragraphs 
(e)(1)(i) through (iii) of this section.
    (i) For AMI model episodes with anchor MS-DRGs 280-282 or PCI 
anchor MS-DRGs 246 through 251 without readmission for CABG MS-DRGs 231 
through 236, payments are capped separately based on the anchor MS-DRG.
    (ii) For CABG model episodes with CABG MS-DRGs 231 through 236, 
episode payments during the anchor hospitalization portion are capped 
separately from episode payments during the post-anchor hospitalization 
portion as follows.
    (A) Payments during the anchor hospitalization portion are capped 
based on the CABG anchor MS-DRGs 231 through 236.
    (B) Payments during the post-anchor hospitalization portion are 
capped separately for episodes:
    (1) With an AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (2) With an AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG anchor MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (3) Without an AMI ICD-CM diagnosis code on the anchor inpatient 
claim and CABG anchor MS-DRG with major complication or comorbidity 
(231, 233, or 235).
    (4) Without an AMI ICD-CM diagnosis code on the anchor inpatient 
claim and CABG anchor MS-DRG without major complication or comorbidity 
(232, 234, or 236).
    (iii) For AMI episodes with either AMI anchor MS-DRGs 280 through 
282 or PCI anchor MS-DRGs 246 through 251 and with readmission for a 
CABG MS-DRG 231-236, the cap is applied separately to the payments 
during the CABG readmission and all other payments during the episode.
    (A) For payments during the CABG readmission portion of the 
episode, the cap is applied for the anchor hospitalization portion of a 
CABG

[[Page 632]]

episode for the corresponding CABG readmission MS-DRG.
    (B) For all other payments during the episode, the cap is applied 
to the AMI model episodes with AMI anchor MS-DRGs 280 through 282 or 
PCI anchor MS-DRGs 246 through 251 and without readmission for CABG MS-
DRGs corresponding to the AMI anchor MS-DRG.
    (2) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain incentive programs and add-
on payments are excluded by CMS' application of the CMS Price (Payment) 
Standardization Detailed Methodology used for the Medicare spending per 
beneficiary measure in the Hospital Value-Based Purchasing Program and 
Physician Value-Based Payment Modifier Program as specified in Sec.  
414.1235(a)(6) and (c)(1) of this chapter.
    (f) Allocation of payments for services that straddle the episode--
(1) General. Services included in the episode that begin before the 
start of or continue beyond the end of an EPM episode are prorated so 
that only the portion attributable to care furnished during the episode 
are included in the calculation of actual episode payments.
    (2) Proration of services. Payments for services that straddle the 
episode are prorated using the following methodology:
    (i) 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.
    (ii) 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 
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 is 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 is 
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 
(determined in Sec.  512.307(c)).


Sec.  512.305  Determination of the NPRA and reconciliation process.

    (a) General. Providers and suppliers furnishing items and services 
included in the EPM episode bill for such items and services in 
accordance with existing rules and as if this part were not in effect.
    (b) Annual reconciliation. CMS annually performs the processes 
described in paragraphs (c) and (d) of this section to determine actual 
episode payments for each EPM episode for the performance year (except 
for episodes that have been canceled in accordance with Sec.  
512.240(a)(2), (b)(2), and (c)(2)) and determines the amount of a 
reconciliation payment to or Medicare repayment amount from EPM 
participants, if any, for that performance year.
    (c) Annual reconciliation to establish NPRA. (1) Beginning 2 months 
after the end of each performance year and using the most recent claims 
data and non-claims-based payment data available, CMS performs a 
reconciliation calculation to establish an NPRA for each EPM 
participant based on the following process.
    (2) CMS--
    (i) Assesses whether EPM participants are in an acceptable or 
better quality category under Sec.  512.315; and
    (ii) Calculates the NPRA for each EPM participant for each 
performance year by comparing the quality-adjusted target prices and 
the EPM participant's actual episode payments for the performance year 
or portion of that performance year as described in Sec.  512.300 as 
follows:
    (A) Determines actual EPM episode payments for each EPM episode 
included in the performance year or portion of that performance year.
    (B) Multiplies the quality-adjusted target price by the number of 
non-canceled EPM episodes included in the performance year or portion 
of that performance year to which that episode quality-adjusted price 
applies and aggregates these amounts.
    (C) Subtracts the amount determined under paragraph (c)(2)(ii)(A) 
of this section from the amount determined under paragraph 
(c)(2)(ii)(B) of this section.
    (iii) Applies the following:
    (A) Limitation on loss. Except as provided in paragraphs 
(c)(2)(iii)(C) and (D) of this section, the total amount of the NPRA 
and subsequent reconciliation calculation for a performance year or 
portion of that performance year cannot exceed the following:
    (1) For performance year 2--
    (i) Five percent of the amount calculated in paragraph 
(c)(2)(ii)(B) of this section for the performance year if the EPM 
participant elected downside risk for that year.
    (ii) Zero percent of the amount calculated in paragraph 
(c)(2)(ii)(B) of this section for the performance year for all other 
EPM participants.
    (2) For performance year 3, 5 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (3) For performance year 4, 10 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (4) For performance year 5, 20 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (B) Limitation on gain. The total amount of the NPRA and subsequent 
reconciliation calculation for a performance year cannot exceed the 
following:
    (1) For performance years 1, 2, and 3, 5 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (2) For performance year 4, 10 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (3) For performance year 5, 20 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (C) Financial loss limits for rural hospitals, SCHs, MDHs, and 
RRCs. The total amount of the NPRA and subsequent reconciliation 
calculation for a performance year cannot exceed the following:
    (1) For performance year 2--
    (i) Three percent of the amount calculated in paragraph 
(c)(2)(ii)(B) of this section for the performance year if the EPM 
participant elected downside risk for that year.
    (ii) Zero percent of the amount calculated in paragraph 
(c)(2)(ii)(B) of this section for the performance year for all other 
EPM participants.
    (2) For performance year 3, 3 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.

[[Page 633]]

    (3) For performance years 4 and 5, 5 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (D) Financial loss limits for EPM volume protection hospitals. EPM 
participants may be determined to be an EPM volume protection hospital 
under an EPM.
    (1) An EPM participant is determined to be an EPM volume protection 
hospital under a model if their total volume of EPM historical episodes 
is at or below the 10th percentile of hospital-specific historical EPM 
episodes for hospitals with one or more episodes located in the MSAs 
eligible for selection into that specific EPM.
    (2) CMS establishes thresholds as specified in paragraph 
(c)(2)(iii)(D)(1) of this section based on episodes beginning in the 
time period specified in Sec.  512.300(c)(1)(i).
    (3) For an EPM participant determined to have a low volume of 
episodes within a model as specified in paragraph (c)(2)(iii)(D)(1) but 
not paragraph (c)(2)(iii)(C) of this section, then the financial loss 
limits specified under paragraph (c)(2)(iii)(C) of this section are 
applied.
    (iv) CMS posts to the CMS Web site the threshold established in 
this section and a list of CCNs of EPM participants that are classified 
as EPM volume protection hospitals.
    (v) CMS communicates to each EPM participant whether it is 
classified as an EPM volume protection hospital at the same time that 
CMS communicates quality-adjusted target prices as described in Sec.  
512.300(c)(9).
    (E) Application of limitations on losses and gains. CMS establishes 
limits on losses and gains specifically with respect to and separately 
for each EPM.
    (d) Determination of reconciliation or repayment amount--(1) 
General. (i) Subject to paragraphs (c)(2)(iii)(B) and (d)(1)(iii) of 
this section, for performance year 1, the reconciliation payment (if 
any) is equal to the NPRA.
    (ii) Subject to paragraphs (c)(2)(iii)(A) through (D) and 
(d)(1)(iii) of this section, for performance years 2 through 5, results 
from the subsequent reconciliation calculation for a prior year's 
reconciliation, as described in Sec.  512.307, and the post-episode 
spending and ACO overlap calculations, as described in Sec.  512.307(b) 
and (c), are added to the current year's NPRA in order to determine the 
reconciliation or repayment amount.
    (iii) The reconciliation or repayment amount may be adjusted as 
described in Sec.  512.460(b).
    (2) Reconciliation payment. If the amount described in paragraph 
(d)(1) of this section is positive and the EPM participant quality 
category as described in Sec.  512.315 is acceptable, good, or 
excellent, Medicare pays the EPM participant a reconciliation payment 
in an amount equal to the amount described in paragraph (d)(1) of this 
section. If the EPM participant's quality category as described in 
Sec.  512.315 is unacceptable, the EPM participant is not eligible to 
be paid a reconciliation payment.
    (3) Repayment amount. If the amount described in paragraph (d)(1) 
of this section is negative, the EPM participant pays to Medicare an 
amount equal to the amount described in paragraph (d)(1) of this 
section, in accordance with Sec.  405.371 of this chapter. CMS waives 
this requirement for performance year 1.
    (e) EPM participants found to be engaged in inappropriate and 
systemic under delivery of care. If the EPM participant is found to be 
engaged in an inappropriate and systemic under delivery of care as 
specified in Sec.  512.460(b)(1)(i)(C), the quality of the care 
provided must be considered to be seriously compromised and the EPM 
participant must be ineligible to receive or retain a reconciliation 
payment for any period in which such under delivery of care was found 
to occur.
    (f) Reconciliation report. (1) CMS issues each EPM participant a 
reconciliation report for the performance year. Each reconciliation 
report contains the following:
    (i) Information on the EPM participant's composite quality score 
described in Sec.  512.315.
    (ii) The total actual episode payments for the EPM participant.
    (iii) The NPRA.
    (iv) Whether the EPM participant is eligible for a reconciliation 
payment or must make a repayment to Medicare.
    (v) The NPRA and subsequent reconciliation calculation amount for 
the previous performance year, as applicable.
    (vi) The post-episode spending amount and ACO overlap calculation 
for the previous performance year, as applicable.
    (vii) The reconciliation payment or repayment amount.
    (2) For performance year 2, the reconciliation report would also 
include information separately for the performance year 2 (DR) and 
performance year 2 (NDR) portions of that year.


Sec.  512.307  Subsequent calculations.

    (a) Subsequent reconciliation calculation. (1) Fourteen months 
after the end of each performance year, CMS performs an additional 
calculation, which accounts for changes since the calculation of the 
initial NPRA, using claims data and non-claims-based payment data 
available at that time, to account for final claims run-out, final 
changes in non-claims-based payment data, and any additional episode 
cancellations due to overlap or other reasons as specified in Sec.  
512.240(a)(2), (b)(2), and (c)(2).
    (2) The additional calculation occurs concurrently with the 
reconciliation process for the most recent performance year and 
determines the subsequent calculation amount as follows:
    (i) If the result of the subsequent reconciliation calculation is 
different than zero, CMS applies the stop-loss and stop-gain limits in 
Sec.  512.305(c)(2)(iii)(A) through (D) to the calculations in 
aggregate for that performance year (the initial reconciliation from 
Sec.  512.305(c)(2)(ii)(C), before application of the stop-loss and 
stop-gain limits, and the subsequent reconciliation calculation) to 
ensure the calculations in aggregate do not exceed the stop-loss or 
stop-gain limits. CMS then takes the difference between that amount and 
the initial NPRA after application of the stop-loss and stop-gain 
limits in Sec.  512.305(c)(2)(iii)(A) through (D) to determine the 
subsequent calculation amount.
    (ii) CMS then applies the subsequent calculation 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.
    (iii) Because EPM participants that elected downside risk in 
performance year do not have financial repayment responsibility for 
performance year 1, 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 zero.
    (iv) Because EPM participants that have not elected downside risk 
in performance year 2 do not have financial repayment responsibility 
for performance years 1 or 2, for the performance year 2 and 
performance year 3 reconciliation reports only, the subsequent 
calculation amount (for performance year 1 or performance year 2) is 
applied to the performance year 1 NPRA or performance year 2 NPRA to 
ensure that the combined amount is not less than zero.
    (b) Additional calculations to determine the reconciliation payment 
or repayment amount. CMS reduces the reconciliation payment or increase 
the

[[Page 634]]

repayment amount for the subsequent performance year to account for 
shared savings paid to the ACO in the prior performance year by the 
amount of the EPM discount factor paid out to the ACO as shared savings 
in the prior performance year. This adjustment is only made when the 
EPM participant is a participant or provider/supplier in the ACO and 
the EPM beneficiary is not prospectively assigned to one of the 
following:
    (1) An ACO in the Next Generation ACO model.
    (2) An ACO in Track 3 of the Medicare Shared Savings Program.
    (3) An ACO in the Comprehensive ESRD Care Model that includes 
downside risk.
    (c) Increases in post-episode spending. If the average post-episode 
Medicare Parts A and B payments for an EPM participant in the prior 
performance year is greater than 3 standard deviations above the 
regional average post-episode payments for the same performance year, 
then the spending amount exceeding 3 standard deviations above the 
regional average post-episode payments for the same performance year is 
added to the calculation of the reconciliation or repayment amount for 
the subsequent performance year.


Sec.  512.310  Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart D of this part, if an EPM 
participant wishes to dispute calculations involving a matter related 
to payment, a CR incentive payment, reconciliation amounts, repayment 
amounts, the use of quality measure results in determining the 
composite quality score, or the application of the composite quality 
score during reconciliation, the EPM participant is required to provide 
written notice of the calculation error, in a form and manner specified 
by CMS.
    (1) Unless the EPM participant provides such notice, CMS deems 
final the reconciliation report and CR incentive payment report 45 
calendar days after the reconciliation report or CR incentive payment 
report is issued and proceeds with the payment or repayment processes 
as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report or CR 
incentive payment report, CMS responds in writing within 30 calendar 
days to either confirm that there was an error in the calculation or 
verify that the calculation is correct, although CMS reserves the right 
to an extension upon written notice to the EPM participant.
    (3) Only EPM participants may use the notice of calculation error 
process described in this part.
    (b) Dispute resolution process (second level of appeal). (1) If the 
EPM participant is dissatisfied with CMS' response to the notice of a 
calculation error, the EPM participant may request a reconsideration 
review in a form and manner as specified by CMS.
    (2) The reconsideration request must provide a detailed explanation 
of the basis for the dispute and include supporting documentation for 
the EPM participant's assertion that CMS or its representatives did not 
accurately calculate the NPRA, the reconciliation payment, the CR 
incentive payment, or the repayment amount in accordance with subpart D 
of this part.
    (3) If CMS does not receive a request for reconsideration from the 
EPM participant within 10 calendar days of the issue date of CMS' 
response to the EPM participant's notice of calculation error, then 
CMS' response to the calculation error is deemed final and CMS proceeds 
with the applicable processes, as described in subpart D of this part.
    (4) The CMS reconsideration official notifies the EPM participant 
in writing within 15 calendar days of receiving the EPM participant's 
review request of the following:
    (i) The date, time, and location of the review.
    (ii) The issues in dispute.
    (iii) The review procedures.
    (iv) The procedures (including format and deadlines) for submission 
of evidence.
    (5) 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.
    (6) 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 the EPM.
    (7) The CMS reconsideration official issues a written determination 
within 30 days of the review. The determination is final and binding.
    (8) Only EPM participants may use the dispute resolution process 
described in this part.
    (c) Exception to the notice of calculation error process. If the 
EPM participant contests a matter that does not involve an issue 
contained in, or a calculation which contributes to, a reconciliation 
report or CR incentive payment report a notice of calculation error is 
not required. In these instances, if CMS does not receive a request for 
reconsideration from the EPM participant within 10 calendar days of the 
notice of the initial determination, the initial determination is 
deemed final and CMS proceeds with the action indicated in the initial 
determination. This does not apply to the limitations on review in 
paragraph (e) of this section.
    (d) Notice of an EPM participant's termination from the EPM. If an 
EPM participant receives notification that it has been terminated from 
the EPM and wishes to appeal such termination, it must provide a 
written request for reconsideration to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the EPM participant's request for review. If the EPM 
participant fails to notify CMS, the termination is deemed final.
    (e) 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:
    (1) The selection of models for testing or expansion under section 
1115A of the Act.
    (2) The selection of organizations, sites, or participants to test 
those models selected.
    (3) The elements, parameters, scope, and duration of such models 
for testing or dissemination.
    (4) Determinations regarding budget neutrality under section 
1115A(b)(3) of the Act.
    (5) The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of Act.
    (6) Decisions to expand 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.  512.315  Composite quality scores for determining reconciliation 
payment eligibility and effective and applicable discount factors.

    (a) General. An EPM participant's eligibility for a reconciliation 
payment under Sec.  512.305, and the determination of effective 
discount factors and applicable discount factors for reconciliation and 
repayment, respectively, under paragraphs (b)(5), (c)(5), and (d)(5) of 
this section, for a performance year depend on the EPM participant's 
EPM composite quality score (including any quality performance points 
and quality improvement points earned) for that performance year.

[[Page 635]]

    (b) AMI model--(1) AMI model composite quality score. CMS 
calculates an AMI model composite quality score for each AMI model 
participant for each performance year, which equals the sum of the 
following:
    (i) The AMI model participant's quality performance points for the 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Acute Myocardial Infarction (NQF #0230) measure described in 
Sec.  512.411(a)(1). This measure is weighted at 50 percent of the AMI 
model composite quality score.
    (ii) The AMI model participant's quality performance points for the 
Excess Days in Acute Care after Hospitalization for AMI measure 
described in Sec.  512.411(a)(2). This measure is weighted at 20 
percent of the AMI model composite quality score.
    (iii) The AMI model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.411(a)(3). This 
measure is weighted at 20 percent of the AMI model composite quality 
score.
    (iv) Any additional quality improvement points the AMI model 
participant may earn as a result of demonstrating improvement on the 
quality measures in Sec.  512.411(a), as described in paragraph (b)(3) 
of this section.
    (v) If applicable, 2 additional points for successful Hybrid 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 
Acute Myocardial Infarction (AMI) Hospitalization (NQF #2473) measure 
voluntary data submission as described in Sec.  512.411(b)(2). 
Successful submission is weighted at 10 percent of the AMI model 
composite quality score.
    (2) AMI model quality performance points. CMS computes quality 
performance points for each quality measure based on the AMI model 
participant's performance percentile relative to the national 
distribution of all subsection (d) hospitals that are eligible for 
payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) measure 
described in Sec.  512.411(a)(1), CMS assigns the AMI model participant 
measure value to a performance percentile and then quality performance 
points are assigned based on the following performance percentile 
scale:
    (A) 10.00 points for >= 90th.
    (B) 9.25 points for >= 80th and < 90th.
    (C) 8.50 points for >= 70th and < 80th.
    (D) 7.75 points for >= 60th and < 70th.
    (E) 7.00 points for >= 50th and < 60th.
    (F) 6.25 points for >= 40th and < 50th.
    (G) 5.50 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Excess Days in Acute Care after Hospitalization for 
AMI measure described in Sec.  512.411(a)(2), CMS assigns the AMI model 
participant measure value to a performance percentile and then quality 
performance points are assigned based on the following performance 
percentile scale:
    (A) 4.00 points for >= 90th.
    (B) 3.70 points for >= 80th and < 90th.
    (C) 3.40 points for >= 70th and < 80th.
    (D) 3.10 points for >= 60th and < 70th.
    (E) 2.80 points for >= 50th and < 60th.
    (F) 2.50 points for >= 40th and < 50th.
    (G) 2.20 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (iii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.411(a)(3), CMS assigns the AMI model participant measure value to a 
performance percentile and then quality performance points are assigned 
based on the following performance percentile scale:
    (A) 4.00 points for >= 90th.
    (B) 3.70 points for >= 80th and < 90th.
    (C) 3.40 points for >= 70th and < 80th.
    (D) 3.10 points for >= 60th and < 70th.
    (E) 2.80 points for >= 50th and < 60th.
    (F) 2.50 points for >= 40th and < 50th.
    (G) 2.20 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) AMI model quality improvement points. If an AMI model 
participant's own improvement in the participant's measure point 
estimate from the previous year on an individual measure described in 
Sec.  512.411(a), regardless of the participant's measure point 
estimate starting and ending values, falls into the top 10 percent of 
all subsection (d) hospitals that are eligible for payment under the 
IPPS based on the national distribution of measure improvement over the 
most recent 2 years, then the AMI model participant is eligible to 
receive quality improvement points up to 10 percent of the total 
available points for that measure. The AMI model composite quality 
score is capped at 20 points.
    (4) Exception for AMI model participants without a measure value. 
In the case of an AMI model participant without a measure value that 
would allow CMS to assign quality performance points for that quality 
measure, CMS assigns the 50th percentile quality performance points to 
the AMI model participant for the individual measure.
    (i) An AMI model participant does not have a measure value for 
the--
    (A) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Acute Myocardial Infarction (NQF #0230) measure 
described in Sec.  512.411(a)(1) if the participant does not meet the 
minimum 25 case count.
    (B) Excess Days in Acute Care after Hospitalization for AMI measure 
described in Sec.  512.411(a)(2) if the participant does not meet the 
minimum 25 case count.
    (C) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey (NQF #0166) measure described in Sec.  512.411(a)(3) if 
the participant does not meet the minimum of 100 completed surveys and 
does not have 4 consecutive quarters of HCAHPS data.
    (D) Measures described in paragraphs (4)(i)(A) through (C) of this 
section, if CMS identifies an error in the data used to calculate the 
measure and suppresses the measure value.
    (5) Establishing AMI model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation payment eligibility and the effective discount factor 
for reconciliation payments in all performance years and repayment 
amounts in performance year 5, as well as the applicable discount 
factor for repayment amounts in performance year 2 for AMI model 
participants who elect early downside risk, and performance years 3 and 
4 for all AMI model participants based on the AMI model composite 
quality score described in paragraph (b)(1) of this section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as an AMI model composite quality 
score of greater than or equal to 3.8.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for AMI model 
participants in the unacceptable or acceptable category, defined as an 
AMI model composite quality score that is less than 6.3.
    (B) A 2.0 percentage point effective discount factor for AMI model 
participants in the good quality category, defined as an AMI model 
composite quality score that is greater than or equal to 6.3 and less 
than or equal to 15.0.
    (C) A 1.5 percentage point effective discount factor for AMI model 
participants in the excellent quality category, defined as an AMI model 
composite quality score that is greater than 15.0.
    (iii) Applicable discount factor for repayment amount in 
performance year 2 for AMI model participants who elect

[[Page 636]]

early downside risk, and years 3 and 4 for all AMI model participants.
    (A) A 2.0 percentage point applicable discount factor for AMI model 
participants in the unacceptable or acceptable quality category, 
defined as an AMI model composite quality score of less than 6.3.
    (B) A 1.0 percentage point applicable discount factor for AMI model 
participants in the good quality category, defined as an AMI model 
composite quality score that is greater than or equal to 6.3 and less 
than or equal to 15.0.
    (C) A 0.5 percentage point applicable discount factor for AMI model 
participants in the excellent quality category, defined as an AMI model 
composite quality scores that is greater than 15.0.
    (iv) Effective discount factor for repayment amount in performance 
year 5 for all AMI model participants.
    (A) A 3.0 percentage point applicable discount factor for AMI model 
participants in the unacceptable or acceptable quality category, 
defined as an AMI model composite quality score of less than 6.3.
    (B) A 2.0 percentage point applicable discount factor for AMI model 
participants in the good quality category, defined as an AMI model 
composite quality score that is greater than or equal to 6.3 and less 
than or equal to 15.0.
    (C) A 1.5 percentage point applicable discount factor for AMI model 
participants in the excellent quality category, defined as an AMI model 
composite quality scores that is greater than 15.0.
    (c) CABG model--(1) CABG model composite quality score. CMS 
calculates a CABG model composite quality score for each CABG model 
participant for each performance year, which equals the sum of the 
following:
    (i) The CABG model participant's quality performance points for the 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2558) 
measure described in Sec.  512.412(a)(1). This measure is weighted at 
70 percent of the CABG model composite quality score.
    (ii) The CABG model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.412(a)(2). This 
measure is weighted at 20 percent of the CABG model composite quality 
score.
    (iii) If applicable, 2 additional points for successful submission 
of the STS CABG data that supports the following 7 measures:
    (A) NQF #0134--CABG: Use of Internal Mammary Artery in Patients 
with Isolated CABG Surgery.
    (B) NQF #0236--CABG: Preoperative Beta Blocker in Patients with 
Isolated CABG Surgery.
    (C) NQF #0129--CABG: Prolonged Intubation (defined as >24hrs post 
surgery).
    (D) NQF #0130--CABG: Deep Sternal Wound Infection Rate.
    (E) NQF #0131--CABG: Stroke.
    (F) NQF #0114--CABG: Postoperative Renal Failure.
    (G) NQF #0115--CABG: Surgical Re-Exploration. The submission of 
this measure data is weighted at 10 percent of the CABG model composite 
quality score.
    (iv) Any additional quality improvement points the CABG model 
participant may earn as a result of demonstrating improvement on the 
quality measures in paragraphs (b)(1)(i) and (ii) of this section, as 
described in paragraph (c)(3) of this section.
    (2) CABG model quality performance points. CMS computes quality 
performance points for each quality measure based on the CABG model 
participant's performance percentile relative to the national 
distribution of all subsection (d) hospitals that are eligible for 
payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF 
#2558) measure described in Sec.  512.412(a)(1), CMS assigns the CABG 
model participant measure value to a performance percentile and then 
quality performance points are assigned based on the following 
performance percentile scale:
    (A) 14.00 points for >= 90th.
    (B) 12.95 points for >= 80th and < 90th.
    (C) 11.90 points for >= 70th and < 80th.
    (D) 10.85 points for >= 60th and < 70th.
    (E) 9.80 points for >= 50th and < 60th.
    (F) 8.75 points for >= 40th and < 50th.
    (G) 7.70 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.412(a)(2), CMS assigns the CABG model participant measure value to 
a performance percentile and then quality performance points are 
assigned based on the following performance percentile scale:
    (A) 4.00 points for >= 90th.
    (B) 3.70 points for >= 80th and < 90th.
    (C) 3.40 points for >= 70th and < 80th.
    (D) 3.10 points for >= 60th and < 70th.
    (E) 2.80 points for >= 50th and < 60th.
    (F) 2.50 points for >= 40th and < 50th.
    (G) 2.20 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) CABG model quality improvement points. If a CABG model 
participant's own improvement in the participant's measure point 
estimate from the previous year on an individual measure described in 
Sec.  512.412(a), regardless of the participant's measure point 
estimate starting and ending values, falls into the top 10 percent of 
all subsection (d) hospitals that are eligible for payment under the 
IPPS based on the national distribution of measure improvement over the 
most recent 2 years, then the CABG model participant is eligible to 
receive quality improvement points up to 10 percent of the total 
available points for that measure. The total CABG model composite 
quality score is capped at 20 points.
    (4) Exception for CABG model participants without a measure value. 
In the case of a CABG model participant without a measure value that 
would allow CMS to assign quality performance points for that quality 
measure, CMS assigns the 50th percentile quality performance points to 
the hospital for the individual measure.
    (i) A CABG model participant does not have a measure value for 
the--
    (A) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF 
#2558) measure described in Sec.  512.412(a)(1) if the CABG model 
participant does not meet the minimum 25 case count.
    (B) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey (NQF #0166) measure described in Sec.  512.412(a)(2) if 
the CABG model participant does not meet the minimum of 100 completed 
surveys and does not have 4 consecutive quarters of HCAHPS data.
    (C) Measures described in paragraphs (c)(4)(i)(A) and (c)(4)(i)(B) 
of this section, if CMS identifies an error in the data used to 
calculate the measure and suppresses the measure value.
    (5) Establishing CABG model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation payment eligibility and the effective discount factor 
for reconciliation payments in all performance years and repayment 
amounts in performance year 5, as well as applicable discount factor 
for repayment amounts in performance years 2 for CABG model 
participants who elect early downside risk, and for performance years 3 
and 4 for all CABG model participants, based on the CABG

[[Page 637]]

model composite quality score described in paragraph (c)(1) of this 
section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as a CABG model composite quality 
score of greater than 2.2.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for CABG model 
participants in the unacceptable or acceptable quality category, 
defined as a CABG model composite quality score that is less than or 
equal to 3.4.
    (B) A 2.0 percentage point effective discount factor for CABG model 
participants in the good quality category, defined as a CABG model 
composite quality score that is greater than 3.4 and less than or equal 
to 16.2.
    (C) A 1.5 percentage point effective discount factor for CABG model 
participants in the excellent quality category, defined as a CABG model 
composite quality score that are greater than 16.2.
    (iii) Applicable discount factor for repayment amount in 
performance year 2 for CABG model participants who elect early downside 
risk, and years 3 and 4 for all EPM participants.
    (A) A 2.0 percentage point applicable discount factor for CABG 
model participants in the unacceptable or acceptable quality category, 
defined as a CABG model composite quality score of less than or equal 
to 3.4.
    (B) A 1.0 percentage point applicable discount factor for CABG 
model participants in the good quality category, defined as a CABG 
model composite quality score that is greater than 3.4 and less than or 
equal to 16.2.
    (C) A 0.5 percentage point applicable discount factor for CABG 
model participants in the excellent quality category, defined as a CABG 
model composite quality scores that is greater than 16.2.
    (iv) Effective discount factor for repayment amount in performance 
year 5 for all CABG model participants.
    (A) A 3.0 percentage point applicable discount factor for CABG 
model participants in the unacceptable or acceptable quality category, 
defined as a CABG model composite quality score of less than or equal 
to 3.4.
    (B) A 2.0 percentage point applicable discount factor for CABG 
model participants in the good quality category, defined as a CABG 
model composite quality score that is greater than 3.4 and less than or 
or equal to 16.2.
    (C) A 1.5 percentage point applicable discount factor for CABG 
model participants in the excellent quality category, defined as a CABG 
model composite quality scores that is greater than 16.2.
    (d) SHFFT model--(1) SHFFT model composite quality score. CMS 
calculates a SHFFT model composite quality score for each SHFFT model 
participant for each performance year, which equals the sum of the 
following:
    (i) The SHFFT model participant's quality performance points for 
the Hospital-Level Risk-Standardized Complication Rate following 
Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty 
(NQF #1550) measure described in Sec.  512.413(a)(1). This measure is 
weighted at 50 percent of the SHFFT model composite quality score.
    (ii) The SHFFT model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.413(a)(2). This 
measure is weighted at 40 percent of the SHFFT model composite quality 
score.
    (iii) Any additional quality improvement points the SHFFT model 
participant may earn as a result of demonstrating improvement on either 
or both of the quality measures in paragraphs (d)(1)(i) and (ii) of 
this section, as described in paragraph (d)(3) of this section.
    (iv) If applicable, 2 additional points for successful THA/TKA 
voluntary data submission of patient-reported outcomes and limited risk 
variable data, as described in Sec.  512.413(b)(2). Successful 
submission is weighted at 10 percent of the SHFFT model composite 
quality score.
    (2) SHFFT model quality performance points. CMS computes quality 
performance points for each quality measure based on the SHFFT model 
participant's performance percentile on that measure relative to the 
national distribution of all subsection (d) hospitals that are eligible 
for payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital-Level Risk-Standardized Complication Rate 
Following Elective Primary Total Hip Arthroplasty and/or Total Knee 
Arthroplasty (NQF #1550) measure described in Sec.  512.413(a)(1), CMS 
assigns the SHFFT model participant measure value to a performance 
percentile and then quality performance points are assigned based on 
the following performance percentile scale:
    (A) 10.00 points for >= 90th.
    (B) 9.25 points for >= 80th and < 90th.
    (C) 8.50 points for >= 70th and < 80th.
    (D) 7.75 points for >= 60th and < 70th.
    (E) 7.00 points for >= 50th and < 60th.
    (F) 6.25 points for >= 40th and < 50th.
    (G) 5.50 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.413(a)(2), CMS assigns the SHFFT model participant measure value to 
a performance percentile and then quality performance points are 
assigned based on the following performance percentile scale:
    (A) 8.00 points for >= 90th.
    (B) 7.40 points for >= 80th and < 90th.
    (C) 6.80 points for >= 70th and < 80th.
    (D) 6.20 points for >= 60th and < 70th.
    (E) 5.60 points for >= 50th and < 60th.
    (F) 5.00 points for >= 40th and < 50th.
    (G) 4.40 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) SHFFT quality improvement points. If a SHFFT model 
participant's quality performance percentile on an individual measure 
described in Sec.  512.413(a) increases from the previous performance 
year by at least 2 deciles on the performance percentile scale, then 
the SHFFT model participant is eligible to receive quality improvement 
points up to 10 percent of the total available points for that 
individual measure. The total SHFFT model composite quality score is 
capped at 20 points.
    (4) Exception for SHFFT model participants without a measure value. 
In the case of a SHFFT model participant without a measure value that 
would allow CMS to assign quality performance points for that quality 
measure, CMS assigns the 50th percentile quality performance points to 
the participant for the individual measure.
    (i) A SHFFT model participant does not have a measure value for 
the--
    (A) Hospital-Level Risk-Standardized Complication Fate Following 
Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty 
(NQF #1550) measure described in Sec.  510.413(a)(1) if the participant 
does not meet the minimum 25 case count; or
    (B) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey measure (NQF #0166) described in Sec.  510.413(a)(2) if 
the participant does not meet the minimum of 100 completed surveys and 
does not have 4 consecutive quarters of HCAHPS data.
    (C) Measures described in paragraphs (d)(4)(i)(A) and (d)(4)(i)(B) 
of this section, if CMS identifies an error in the data used to 
calculate the measure and suppresses the measure value.
    (5) Establishing SHFFT model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation

[[Page 638]]

payment eligibility and the effective discount factor for 
reconciliation payments in all performance years and repayment amounts 
in performance year 5, as well as applicable discount factor for 
repayment amounts in performance year 2 for SHFFT model participants 
who elect early downside risk and for performance years 3 and 4 for all 
SHFFT model participants, based on the SHFFT model composite quality 
score described in paragraph (d)(1) of this section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as a SHFFT model composite quality 
score of greater than or equal to 5.0.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for SHFFT 
model participants in the unacceptable or acceptable quality category, 
defined as a SHFFT model composite quality score that is less than 6.9.
    (B) A 2.0 percentage point effective discount factor for SHFFT 
model participants in the good quality category, defined as a SHFFT 
model composite quality score that is greater than or equal to 6.9 and 
less than or equal to 15.0.
    (C) A 1.5 percentage point effective discount factor for SHFFT 
model participants in the excellent quality category, defined as a 
SHFFT model composite quality score that are greater than 15.0.
    (iii) Applicable discount factor for repayment amount in 
performance year 2 for SHFFT model participants who elect early 
downside risk, and years 3 and 4 for all EPM participants.
    (A) A 2.0 percentage point applicable discount factor for SHFFT 
model participants in the unacceptable or acceptable quality category, 
defined as a SHFFT model composite quality score of less than 6.9.
    (B) A 1.0 percentage point applicable discount factor for SHFFT 
model participants in the good quality category, defined as a SHFFT 
model composite quality score that is greater than or equal to 6.9 and 
less than or equal to 15.0.
    (C) A 0.5 percentage point applicable discount factor for SHFFT 
model participants in the excellent quality category, defined as a 
SHFFT model composite quality scores that is greater than 15.0.
    (iv) Effective discount factor for repayment amount in performance 
year 5 for all SHFFT model participants.
    (A) A 3.0 percentage point applicable discount factor for SHFFT 
model participants in the unacceptable or acceptable quality category, 
defined as a SHFFT model composite quality score of less than 6.9.
    (B) A 2.0 percentage point applicable discount factor for SHFFT 
model participants in the good quality category, defined as a SHFFT 
model composite quality score that is greater than or equal to 6.9 and 
less than or equal to 15.0.
    (C) A 1.5 percentage point applicable discount factor for SHFFT 
model participants in the excellent quality category, defined as a 
SHFFT model composite quality score that is greater than 15.0.


Sec.  512.320  Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.

    No EPM replaces any existing Medicare incentive programs or add-on 
payments. The quality-adjusted target prices and NPRAs for an EPM 
participant under such models are independent of, and do not affect, 
any incentive programs or add-on payments under existing Medicare 
payment systems.


Sec.  512.350  Data sharing.

    (a) General. CMS makes available to EPM participants, through the 
most appropriate means, data that CMS determines may be useful to EPM 
participants to do the following:
    (1) Determine appropriate ways to increase the coordination of 
care.
    (2) Improve quality.
    (3) Enhance efficiencies in the delivery of care.
    (4) Otherwise achieve the goals of the models described in this 
section.
    (b) Beneficiary-identifiable data. (1) CMS makes beneficiary-
identifiable data available to an EPM participant in accordance with 
applicable privacy and security laws and only in response to the EPM 
participant's request for such data for a beneficiary who has been 
furnished a billable service by the EPM participant corresponding to 
the episode definitions for the EPM.
    (2) The minimum data necessary to achieve the goals of the EPM, as 
determined by CMS, may be provided under this section for an EPM 
participant's baseline period and no less frequently than on a 
quarterly basis throughout the EPM participant's participation in an 
EPM.

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


Sec.  512.400  Quality measures and reporting--general.

    (a) Reporting of quality measures. Quality measures are used for 
public reporting, for determining whether an EPM participant is 
eligible for reconciliation payments under Sec.  512.305(d)(1)(iii), 
and for assigning the effective and applicable discount factors for the 
performance year to an EPM participant as described in Sec.  
512.315(b)(5), (c)(5), and (d)(5).
    (b) Quality measures. Quality measures differ by EPM.
    (c) Public reporting. CMS--
    (1) Makes the required quality measurement results for each EPM 
participant in each performance year publicly available on the CMS Web 
site in a form and manner as determined by CMS;
    (2) Shares each EPM participant's quality metrics with the 
participant prior to display on the CMS Web site; and
    (3) Does not publicly report the voluntary measure data submitted 
under an EPM in Sec.  512.411(b) or Sec.  512.413(b) but does indicate 
whether an EPM participant has voluntarily submitted such data.


Sec.  512.411  Quality measures and reporting for AMI model.

    (a) Required measures. (1) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Acute Myocardial 
Infarction (NQF #0230) (MORT-30-AMI).
    (2) Excess Days in Acute Care after Hospitalization for AMI (AMI 
Excess Days).
    (3) HCAHPS Survey (NQF #0166).
    (b) Voluntary measure. (1) Voluntary Hybrid Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate Following Acute Myocardial 
Infarction (AMI) Hospitalization (NQF #2473) (Hybrid AMI Mortality).
    (2) To be eligible to receive the additional points added to the 
AMI composite quality score for successful voluntary data submission of 
clinical electronic health record data, as described in Sec.  
512.411(b)(1), AMI model participants must submit the clinical 
electronic health record data requested by CMS related to each eligible 
AMI anchor hospitalization during the performance period. The data must 
be submitted within 60 days of the end of the most recent performance 
period and be accompanied by the limited risk variable data (five 
elements finalized) as outlined in Sec.  512.315(b)(1)(iv).
    (i) For each eligible AMI anchor hospitalization, all five risk 
variable data elements are required to be submitted. The five risk 
variables are as follows:
    (A) Age.
    (B) First-captured heart rate measured within 2 hours of a patient 
presenting to the hospital.

[[Page 639]]

    (C) First-captured systolic blood pressure measured within 2 hours 
of a patient presenting to the hospital.
    (D) First-captured troponin values measured within 24 hours of a 
patient presenting to the hospitals.
    (E) First-captured creatinine values measured within 24 hours of a 
patient presenting to the hospitals.
    (ii) For each eligible AMI anchor hospitalization, six linking 
variables are required to merge the electronic health record data with 
the CMS claims data:
    (A) AMI model participant CCN.
    (B) Medicare Health Insurance Claim Number.
    (C) Sex.
    (D) Date of birth.
    (E) Admission date.
    (F) Discharge date.
    (iii) For years 1 through 5 of the AMI model an increasing amount 
of data are requested by CMS for each performance period as follows:
    (A) Year 1. Submit electronic health record data on > 50 percent of 
eligible AMI anchor hospitalizations between July 1, 2017 and August 
31, 2017.
    (B) Year 2. Submit electronic health record data on over 90 percent 
of eligible AMI anchor hospitalizations between September 1, 2017 and 
June 30, 2018.
    (C) Year 3. Submit electronic health record data on over 90 percent 
of eligible AMI anchor hospitalizations between July 1, 2018 and June 
30, 2019.
    (D) Year 4. Submit electronic health record data on over 90 percent 
of eligible AMI anchor hospitalizations between July 1, 2019 and June 
30, 2020.
    (E) Year 5. Submit electronic health record data on over 90 percent 
of eligible AMI anchor hospitalizations between July 1, 2020 and June 
30, 2021.


Sec.  512.412  Quality measures and reporting for CABG model.

    (a) Required measures. (1) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass 
Graft (CABG) Surgery (NQF #2558) (MORT-30-CABG).
    (2) HCAHPS Survey (NQF #0166).
    (b) [Reserved]


Sec.  512.413  Quality measures and reporting for SHFFT model.

    (a) Required measures. (1) Hospital-Level Risk-Standardized 
Complication Rate Following Elective Primary Total Hip Arthroplasty 
and/or Total Knee Arthroplasty (NQF #1550) (Hip/Knee Complications).
    (2) HCAHPS Survey (NQF #0166).
    (b) Voluntary measure. (1) Patient-reported outcomes and limited 
risk variable data following elective primary THA/TKA.
    (2) To be eligible to receive the additional points added to the 
SHFFT model composite quality score for successful voluntary data 
submission of patient-reported outcomes and limited risk variable data, 
as described in Sec.  512.315(d)(1)(iv), SHFFT model participants must 
submit the THA/TKA patient-reported outcome and limited risk variable 
data requested by CMS related to the pre- and post-operative periods 
for elective primary total hip and/or total knee arthroplasty 
procedures. The data must be submitted within 60 days of the end of the 
most recent performance period and be accompanied by the patient-
reported outcomes and limited risk variable data (eleven elements 
finalized) as outlined in Sec.  512.315(d)(1)(iv).
    (i) For each eligible procedure all eleven risk variable data 
elements are required to be submitted. The eleven risk variables are as 
follows:
    (A) Date of birth.
    (B) Race.
    (C) Ethnicity.
    (D) Date of admission to anchor hospitalization.
    (E) Date of eligible THA/TKA procedure.
    (F) Medicare Health Insurance Claim Number.
    (G) Body mass index.
    (H) Use of chronic (>= 90 days) narcotics.
    (I) Total painful joint count.
    (J) Quantified spinal pain.
    (K) Single Item Health Literacy Screening (SILS2) questionnaire.
    (ii) Participants must also submit the amount of requested THA/TKA 
patient-reported outcomes data required for each year of the SHFFT 
model in order to be considered successful in submitting voluntary 
data.
    (A) The amount of requested THA/TKA patient-reported outcomes data 
to submit, in order to be considered successful increases each 
subsequent year of the SHFFT model over the 5 years of the model.
    (B) A phase-in approach that determines the amount of requested 
THA/TKA patient-reported outcomes data to submit over the 5 years of 
the SHFFT model is applied so that in year 1 successful submission of 
data would mean CMS received all requested THA/TKA patient-reported 
outcomes and limited risk variable data on both of the following:
    (1) Greater than or equal to 60 percent of eligible procedures or 
greater than or equal to 75 percent eligible patients during the data 
collection period.
    (2) Submission of requested THA/TKA PRO and limited risk variable 
data is completed within 60 days of the most recent performance period.
    (iii) For years 1 through 5 of the model an increasing amount of 
data is requested by CMS for each performance period as follows:
    (A) Year 1 (2017). Submit pre-operative data on primary elective 
THA/TKA procedures for >= 60 percent or >= 75 procedures performed 
between September 1, 2016 through June 30, 2017, unless CMS requests a 
more limited data set, in which case, submit all requested data 
elements.
    (B) Year 2 (2018). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 60 percent or >= 75 procedures performed between September 1, 2016 
and June 30, 2017; and
    (2) Pre-operative data on primary elective THA/TKA procedures for 
>= 70 percent or >= 100 procedures performed between July 1, 2017 and 
June 30, 2018, unless CMS requests a more limited data set, in which 
case, submit all requested data elements.
    (C) Year 3 (2019). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 70 percent or >= 100 procedures performed between July 1, 2017 and 
June 30, 2018; and
    (2) Pre-operative data on primary elective THA/TKA procedures for 
>= 80 percent or >= 200 procedures performed between July 1, 2018 and 
June 30, 2019, unless CMS requests a more limited data set, in which 
case, submit all requested data elements.
    (D) Year 4 (2020). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 80 percent or >= 200 procedures performed between July 1, 2018 and 
June 30, 2019; and
    (2) Pre-operative data on primary elective THA/TKA procedures for 
>= 80 percent or >= 200 procedures performed between July 1, 2019 and 
June 30, 2020, unless CMS requests a more limited data set, in which 
case, submit all requested data elements.
    (E) Year 5 (2021). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 80 percent or >= 200 procedures performed between July 1, 2019 and 
June 30, 2020; and
    (2) Pre-operative data on primary elective THA/TKA procedures for 
>= 80 percent or >= 200 procedures performed between July 1, 2020 and 
June 30, 2021, unless CMS requests a more limited data set, in which 
case, submit all requested data elements.


Sec.  512.450  Beneficiary choice and beneficiary notification.

    (a) Beneficiary choice. The EPMs do not restrict Medicare 
beneficiaries'

[[Page 640]]

ability to choose any Medicare enrolled provider or supplier, or any 
physician or practitioner who has opted out of Medicare.
    (1) As part of discharge planning and referral, EPM participants 
must provide a complete list of HHAs, SNFs, IRFs, or LTCHs that are 
participating in the Medicare program, and that serve the geographic 
area (as defined by the HHA) in which the patient resides, or in the 
case of a SNF, IRF, or LTCH, in the geographic area requested by the 
patient.
    (i) This list must be presented to EPM beneficiaries for whom home 
health care, SNF, IRF, or LTCH services are medically necessary.
    (ii) EPM participants must specify on the list those post-acute 
care providers on the list with whom they have a sharing arrangement.
    (iii) EPM participants may recommend preferred providers and 
suppliers, consistent with applicable statutes and regulations.
    (iv) EPM participants may not limit beneficiary choice to any list 
of providers or suppliers in any manner other than that permitted under 
applicable statutes and regulations.
    (v) EPM participants must take into account patient and family 
preferences when they are expressed.
    (2) EPM participants may not charge any EPM collaborator a fee to 
be included on any list of preferred providers or suppliers, nor may 
the EPM participant accept such payments.
    (b) Required beneficiary notification--(1) EPM participant detailed 
notification. Each EPM participant must provide written notification to 
any Medicare beneficiary that meets the criteria in Sec.  512.240 of 
his or her inclusion in the EPM. The notification must be provided upon 
admission to the EPM participant if the admission that initiates the 
EPM episode is not scheduled with the EPM participant in advance. If 
the admission is scheduled in advance, then the EPM participant must 
provide notice as soon as the admission is scheduled. In circumstances 
where, due to the patient's condition, it is not feasible to provide 
notification at such times, the notification must be provided to the 
beneficiary or his or her representative as soon as is reasonably 
practicable but no later than discharge from the EPM participant 
accountable for the EPM episode. The EPM participant must be able to 
generate a list of all beneficiaries receiving such notification, 
including the date on which the notification was provided to the 
beneficiary, to CMS upon request. The beneficiary notification must 
contain all of the following:
    (i) A detailed explanation of the EPM 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 or the 1-800-MEDICARE helpline.
    (v) A list of the providers, suppliers, and ACOs with whom the EPM 
participant has a sharing arrangement. This requirement may be 
fulfilled by the EPM participant including in the detailed notification 
a web address where beneficiaries may access the list.
    (2) EPM collaborator notice. An EPM participant must require every 
EPM collaborator to provide written notice to applicable EPM 
beneficiaries of the structure of the EPM and the existence of its 
sharing arrangement with the EPM participant.
    (i) An EPM participant must require every EPM collaborator that 
furnishes an item or service to an EPM beneficiary during an EPM 
episode to provide written notice to the beneficiary of the structure 
of the EPM and the existence of the individual's or entity's sharing 
arrangement. The notice must be provided no later than the time at 
which the beneficiary first receives an item or service from the EPM 
collaborator during an EPM episode. In circumstances where, due to the 
patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The EPM 
collaborator must be able to generate a list of all beneficiaries who 
received such a notice, including the date on which the notice was 
provided to the beneficiary, to CMS upon request.
    (ii) An EPM participant must require every EPM collaborator that is 
a PGP, NPPGP, or TGP where a member of the PGP, member of the NPPGP, or 
member of the TGP furnishes an item or service to an EPM beneficiary 
during an EPM episode to provide written notice to the beneficiary of 
the structure of the EPM and the existence of the entity's sharing 
arrangement. The notice must be provided no later than the time at 
which the beneficiary first receives an item or service from any member 
of the PGP, member of the NPPGP, or member of the TGP, and the required 
notice may be provided by that member. In circumstances where, due to 
the patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The PGP, NPPGP, or 
TGP must be able to generate a list of all beneficiaries who received 
such a notice, including the date on which the notice was provided to 
the beneficiary, to CMS upon request.
    (iii) An EPM participant must require every EPM collaborator that 
is an ACO where an ACO participant bills for or ACO provider/supplier 
furnishes an item or service to an EPM beneficiary during an EPM 
episode to provide written notice to the beneficiary of the structure 
of the EPM and the existence of the entity's sharing arrangement. The 
notice must be provided no later than the time at which the beneficiary 
first receives an item or service from any ACO participant or ACO 
provider/supplier and the required notice may be provided by that ACO 
participant or ACO provider/supplier. In circumstances where, due to 
the patient's condition, it is not feasible to provide notice at such 
times, the notice must be provided to the beneficiary or his or her 
representative as soon as is reasonably practicable. The ACO must be 
able to generate a list of all beneficiaries who received such a 
notice, including the date on which the notice was provided to the 
beneficiary, to CMS or its designee upon request.
    (3) Discharge planning notice. An EPM participant must provide the 
beneficiary with a written notice of any potential financial liability 
associated with non-covered services recommended or presented as an 
option as part of discharge planning, no later than at the time that 
the beneficiary discusses a particular post-acute care option or at the 
time the beneficiary is discharged, whichever occurs earlier.
    (i) If the EPM participant knows or should have known that the 
beneficiary is considering or has decided to receive a non-covered 
post-acute care service or other non-covered associated service or 
supply, the EPM participant must notify the beneficiary that the 
service would not be covered by Medicare.
    (ii) If the EPM participant is discharging a beneficiary to a SNF 
prior to the occurrence of a 3-day hospital stay, and the beneficiary 
is being transferred to or is considering a SNF that would not qualify 
under the SNF 3-day waiver in Sec.  512.610, the EPM

[[Page 641]]

participant must notify the beneficiary in accordance with paragraph 
(b)(3)(i) of this section that the beneficiary will be responsible for 
payment for the services furnished by the SNF during that stay, except 
those services that would be covered by Medicare Part B during a non-
covered inpatient SNF stay.
    (4) Access to records and retention. Lists of beneficiaries that 
receive notifications or notices must be retained and access provided 
to CMS, or its designees, in accordance with Sec.  512.110.


Sec.  512.460  Compliance enforcement.

    (a) General. EPM participants must comply with all of the 
requirements outlined in this part. Except as specifically noted in 
this part, the regulations under this part must not be construed to 
affect the applicable payment, coverage, program integrity, or other 
requirements under this chapter (such as those in parts 412 and 482 of 
this chapter).
    (b) Failure to comply. (1) CMS may take one or more of the remedial 
actions set forth in paragraph (b)(2) of this section if an EPM 
participant or its related EPM collaborator, collaboration agent, or 
downstream collaboration agent does any of the following:
    (i) Fails to comply with any requirements of this part or is 
identified as noncompliant through monitoring by HHS (including CMS and 
OIG) of the EPM, including, but not limited to, any of the following:
    (A) Avoiding potentially high-cost or high-severity patients.
    (B) Targeting potentially low-cost or low-severity patients.
    (C) Failing to provide medically appropriate services or 
systematically engaging in the over- or under-delivery of appropriate 
care.
    (D) Failing to provide beneficiaries with complete and accurate 
information, including required notices.
    (E) Failing to allow beneficiary choice of medically necessary 
options, including non-surgical options.
    (F) Failing to follow the requirements related to sharing 
arrangements.
    (ii) Has signed a sharing arrangement, distribution arrangement, or 
downstream distribution arrangement that is noncompliant with the 
requirements of this part.
    (iii) Takes any action that threatens the health or safety of 
patients.
    (iv) Avoids at-risk Medicare beneficiaries, as this term is defined 
in Sec.  425.20 of this chapter.
    (v) Avoids patients on the basis of payer status.
    (vi) 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.
    (vii) Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the EPM, or fails to take any 
action that CMS determines for program integrity reasons should have 
been taken to further the best interests of the EPM.
    (viii) 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.
    (ix) Is subject to action involving violations of the physician 
self-referral law, civil monetary penalties law, Federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the EPM.
    (2) Remedial actions include the following:
    (i) Issuing a warning letter to the EPM participant.
    (ii) Requiring the EPM participant to develop a corrective action 
plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating the EPM participant's reconciliation 
payment.
    (iv) Reducing or eliminating the EPM participant's CR incentive 
payment.
    (v) Requiring the EPM participant to terminate a sharing 
arrangement with an EPM collaborator and prohibit further engagement by 
the EPM participant in sharing arrangements with the EPM collaborator.
    (vi) Terminating the EPM participant's participation in the EPM. 
Where a participant is terminated from an EPM, the EPM participant will 
remain liable for all negative NPRA generated from EPM episodes that 
ended prior to termination.
    (3) CMS may add a 25-percent penalty to a repayment amount on the 
EPM participant's reconciliation report if all of the following 
conditions are met:
    (i) CMS has required a corrective action plan from the EPM 
participant.
    (ii) The EPM participant owes a repayment amount to CMS.
    (iii) The EPM participant fails to timely comply with the 
corrective action plan or is noncompliant with the EPM's requirements.

Subpart F--Financial Arrangements and Beneficiary Incentives


Sec.  512.500  Sharing arrangements under the EPM.

    (a) General. (1) An EPM participant may enter into a sharing 
arrangement with an EPM collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. An EPM participant must not 
make a gainsharing payment or receive an alignment payment except in 
accordance with a sharing arrangement.
    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) The EPM participant must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be EPM 
collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential EPM 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent. A selection criterion that considers whether a 
potential EPM collaborator has performed a reasonable minimum number of 
services that would qualify as EPM activities will be deemed not to 
violate the volume or value standard if the purpose of the criterion is 
to ensure the quality of care furnished to EPM beneficiaries.
    (4) If an EPM participant enters into a sharing arrangement, its 
compliance program must include oversight of sharing arrangements and 
compliance with the applicable requirements of the EPM.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to EPM 
beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the EPM collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with all of the following:
    (i) The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation,

[[Page 642]]

monitoring, compliance, and enforcement activities performed by CMS or 
its designees).
    (ii) All applicable Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the sharing arrangement.
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the EPM collaborator to 
have or be covered by a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the EPM 
that apply to its role as an EPM collaborator, including any 
distribution arrangements.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (6) The board or other governing body of the EPM participant must 
have responsibility for overseeing the EPM participant's participation 
in the EPM, its arrangements with EPM collaborators, its payment of 
gainsharing payments, its receipt of alignment payments, and its use of 
beneficiary incentives in the EPM.
    (7) The written agreement memorializing a sharing arrangement must 
specify the following:
    (i) The purpose and scope of the sharing arrangement;
    (ii) The identities and obligations of the parties, including 
specified EPM activities and other services to be performed by the 
parties under the sharing arrangement;
    (iii) The date of the sharing arrangement.
    (iv) The financial or economic terms for payment, including the 
following:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payment.
    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment that is substantially based on quality of care 
and the provision of EPM activities.
    (E) Methodology and accounting formula for determining the amount 
of an alignment payment.
    (8) The sharing arrangement must not--
    (i) Induce the EPM participant, EPM collaborator, or any employees, 
contractors, or subcontractors of the EPM participant or EPM 
collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary; or
    (ii) Restrict the ability of an EPM collaborator to make decisions 
in the best interests of its patients, including the selection of 
devices, supplies, and treatments.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payments, or internal 
cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, an EPM 
collaborator must meet quality of care criteria for the performance 
year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment. The quality of care criteria must be established by the EPM 
participant and directly related to EPM episodes.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator other than 
an ACO, PGP, NPPGP, or TGP must have directly furnished a billable item 
or service to an EPM beneficiary during an EPM episode that occurred in 
the same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is a 
PGP, NPPGP, or TGP must meet the following criteria:
    (A) The PGP, NPPGP, or TGP must have billed for an item or service 
that was rendered by one or more PGP member, NPPGP member, or TGP 
member respectively to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount.
    (B) The PGP, NPPGP, or TGP must have contributed to EPM activities 
and been clinically involved in the care of EPM beneficiaries during 
the same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
For example, a PGP, NPPGP, or TGP might have been clinically involved 
in the care of EPM beneficiaries by--
    (1) Providing care coordination services to EPM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with an EPM participant in care redesign strategies, 
and actually performing a role in implementing such strategies, that 
are designed to improve the quality of care for EPM episodes and reduce 
EPM episode spending; or
    (3) In coordination with other providers and suppliers (such as PGP 
members, NPPGP members, or TGP members; the EPM participant; and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of EPM beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount; and
    (B) The ACO must have contributed to EPM activities and been 
clinically involved in the care of EPM beneficiaries during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount. For example, an 
ACO might be have been clinically involved in the care of EPM 
beneficiaries by--
    (1) Providing care coordination services to EPM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with an EPM participant in care redesign strategies, 
and actually performing a role in implementing such strategies, that 
are designed to improve the quality of care and reduce spending for EPM 
episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the EPM participant, and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of EPM beneficiaries.
    (3)(i) The methodology for accruing, calculating and verifying 
internal cost savings must be transparent, measurable, and verifiable 
in

[[Page 643]]

accordance with generally accepted accounting principles (GAAP) and 
Government Auditing Standards (The Yellow Book).
    (ii) The methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the EPM 
participant through the documented implementation of EPM activities 
identified by the EPM participant and must exclude:
    (A) Any savings realized by any individual or entity that is not 
the EPM participant; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.
    (4) The total amount of a gainsharing payment for a performance 
year paid to certain individuals and entities that are EPM 
collaborators must not exceed the following:
    (i) In the case of an EPM collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the EPM participant's EPM beneficiaries 
during EPM episodes that occurred during the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment being 
made.
    (ii) In the case of an EPM collaborator that is a PGP or NPPGP, 50 
percent of the Medicare-approved amounts under the PFS for items and 
services billed by that PGP or NPPGP and furnished to the EPM 
participant's EPM beneficiaries by the PGP members or NPPGP members 
respectively during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being made.
    (5) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is substantially based on quality of 
care and the provision of EPM activities. The methodology may take into 
account the amount of such EPM activities provided by an EPM 
collaborator relative to other EPM collaborators.
    (6) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from a reconciliation payment the EPM 
participant receives from CMS must not exceed the amount of that 
reconciliation payment.
    (7) No entity or individual, whether a party to a sharing 
arrangement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent.
    (8) An EPM participant must not make a gainsharing payment to an 
EPM collaborator if CMS has notified the EPM participant that such 
collaborator is subject to any action for noncompliance with this part 
or the fraud and abuse laws, or for the provision of substandard care 
to EPM beneficiaries or other integrity problems.
    (9) The sharing arrangement must require the EPM participant to 
recoup any gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation report or was based on the submission 
of false or fraudulent data.
    (10) Alignment payments from an EPM collaborator to an EPM 
participant may be made at any interval that is agreed upon by both 
parties, and must not be--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by an EPM participant if it does not owe a repayment 
amount.
    (11) The EPM participant must not receive any amounts under a 
sharing arrangement from an EPM collaborator that are not alignment 
payments.
    (12) For a performance year, the aggregate amount of all alignment 
payments received by the EPM participant must not exceed 50 percent of 
the EPM participant's repayment amount.
    (13) The aggregate amount of all alignment payments from an EPM 
collaborator to the EPM participant may not be greater than--
    (i) With respect to an EPM collaborator other than an ACO, 25 
percent of the EPM participant's repayment amount; or
    (ii) With respect to an EPM collaborator that is an ACO, 50 percent 
of the EPM participant's repayment amount.
    (14) The amount of any alignment payments must be determined in 
accordance with a methodology that does not directly account for the 
volume or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent.
    (15) All gainsharing payments and any alignment payments must be 
administered by the EPM participant in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (16) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) The EPM participant must do all 
of the following:
    (i) Document the sharing arrangement contemporaneously with the 
establishment of the arrangement.
    (ii) Publicly post (and update on at least a quarterly basis) on a 
Web page on the EPM participant's Web site:
    (A) Accurate current and historical lists of all EPM collaborators, 
including EPM collaborator names and addresses.
    (B) Written policies for selecting individuals and entities to be 
EPM collaborators required by Sec.  512.500(a)(3).
    (iii) Maintain and require each EPM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
all of the following:
    (A) Nature of the payment (gainsharing payment or alignment 
payment).
    (B) Identity of the parties making and receiving the payment.
    (C) Date of the payment.
    (D) Amount of the payment.
    (E) Date and amount of any recoupment of all or a portion of an EPM 
collaborator's gainsharing payment.
    (F) Explanation for each recoupment, such as whether the EPM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation report, or was based 
on the submission of false or fraudulent data.
    (2) The EPM participant must keep records of the following:
    (i) Its process for determining and verifying its potential and 
current EPM collaborators' eligibility to participate in Medicare.
    (ii) Its plan to track internal cost savings.

[[Page 644]]

    (iii) Information on the accounting systems used to track internal 
cost savings.
    (iv) A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The EPM participant must retain and provide access to, and must 
require each EPM collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.


Sec.  512.505  Distribution arrangements under the EPM.

    (a) General. (1) An ACO, PGP, NPPGP, or TGP that has entered into a 
sharing arrangement with an EPM participant may distribute all or a 
portion of any gainsharing payment it receives from the EPM participant 
only in accordance with a distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the parties, contain the date of the agreement, 
and be entered into before care is furnished to EPM beneficiaries under 
the distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO, from an 
NPPGP to an NPPGP member, or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision EPM activities and that may take 
into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on quality of care and the provision EPM activities and that may 
take into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents.
    (7) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g) of this chapter, a collaboration 
agent is eligible to receive a distribution payment only if the 
collaboration agent furnished or billed for an item or service rendered 
to an EPM beneficiary during an EPM episode that occurred during the 
same performance year for which the EPM participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    (8) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g) of this chapter, the total amount 
of distribution payments for a performance year paid to a collaboration 
agent must not exceed the following:
    (i) In the case of a collaboration agent that is a physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
distributed.
    (ii) In the case of a collaboration agent that is a PGP or NPPGP, 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services billed by that PGP or NPPGP for items and services 
furnished by PGP members or NPPGP members respectively to the EPM 
participant's EPM beneficiaries during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    (9) With respect to the distribution of any gainsharing payment 
received by an ACO, PGP, NPPGP, or TGP, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the EPM collaborator from the EPM participant.
    (10) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (11) The collaboration agent must retain the ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments.
    (12) The distribution arrangement must not--
    (i) Induce the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The EPM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.110, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any distribution payment(s).
    (iii) The identity of each collaboration agent that received a 
distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (14) The EPM collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same EPM participant.
    (15) The EPM collaborator must retain and provide access to, and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.


Sec.  512.510  Downstream distribution arrangements under the EPM.

    (a) General. (1) An ACO participant that is a PGP, NPPGP, or TGP 
and that has entered into a distribution arrangement with an EPM 
collaborator that is an ACO may distribute all or a portion of any 
distribution payment it receives from the EPM collaborator only in 
accordance with a downstream distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the date of the 
agreement, and be entered into before care is furnished to EPM 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.

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    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any downstream distribution payments from an 
NPPGP to an NPPGP member or from a TGP to a TGP member must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision EPM activities and that may take 
into account the amount of such EPM activities provided by a downstream 
collaboration agent relative to other downstream collaboration agents.
    (6) The amount of any downstream distribution payments from a PGP 
must be determined either in a manner that complies with Sec.  
411.352(g) of this chapter or in accordance with a methodology that is 
substantially based on quality of care and the provision EPM activities 
and that may take into account the amount of such EPM activities 
provided by a downstream collaboration agent relative to other 
downstream collaboration agents.
    (7) Except for a downstream distribution payment from a PGP to a 
PGP member that complies with Sec.  411.352(g) of this chapter, a 
downstream collaboration agent is eligible to receive a downstream 
distribution payment only if the downstream collaboration agent 
furnished an item or service to an EPM beneficiary during an EPM 
episode that occurred during the same performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment from 
which the ACO made the distribution payment to the PGP, NPPGP, or TGP 
that is an ACO participant.
    (8) Except for a downstream distribution payment from a PGP to a 
PGP member that complies with Sec.  411.352(g) of this chapter, the 
total amount of downstream distribution payments for a performance year 
paid to a downstream collaboration agent who is a physician or 
nonphysician practitioner and is either a PGP member or NPPGP member 
must not exceed 50 percent of the total Medicare-approved amounts under 
the PFS for items and services furnished by the downstream 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the distribution payment being 
distributed.
    (9) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP, NPPGP, or TGP from the ACO.
    (10) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (11) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
    (12) The downstream distribution arrangement must not--
    (i) Induce the downstream collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The PGP, NPPGP, or TGP must maintain contemporaneous 
documentation regarding downstream distribution arrangements in 
accordance with Sec.  512.110, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (14) The PGP, NPPGP, or TGP may not enter into a downstream 
distribution arrangement with any PGP member, NPPGP member, or TGP 
member who has--
    (i) A sharing arrangement with an EPM participant; or
    (ii) A distribution arrangement with the ACO that the PGP, NPPGP, 
or TGP is a participant in.
    (15) The PGP, NPPGP, or TGP must retain and provide access to, and 
must require downstream collaboration agents to retain and provide 
access to, the required documentation in accordance with Sec.  512.110.


Sec.  512.520  Enforcement authority under the EPM.

    (a) OIG authority. OIG authority is not limited or restricted by 
the provisions of the EPM, including the authority to audit, evaluate, 
investigate, or inspect the EPM participant, EPM collaborators, or any 
other person or entity or their records, data, or information, without 
limitation.
    (b) Other authorities. None of the provisions of the EPM limits or 
restricts the authority of any other government agency permitted by law 
to audit, evaluate, investigate, or inspect the EPM participant, EPM 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.


Sec.  512.525  Beneficiary engagement incentives under the EPM.

    (a) General. EPM participants may choose to provide in-kind patient 
engagement incentives to beneficiaries in an EPM episode, subject to 
the following conditions:
    (1) The incentive must be provided directly by the EPM participant 
or by an agent of the EPM participant under the EPM participant's 
direction and control to the EPM beneficiary during an EPM episode.
    (2) The item or service provided must be reasonably connected to 
medical care provided to an EPM beneficiary during an EPM episode.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (c) of this section, for a beneficiary in an EPM episode by 
engaging the beneficiary in better managing his or her own health.
    (4) The item or service must not be tied to the receipt of items or 
services outside the EPM episode.
    (5) The item or service must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (6) The availability of the items or services must not be 
advertised or promoted except that a beneficiary may be made aware of 
the availability of the items or services at the time the beneficiary 
could reasonably benefit from them.
    (7) The cost of the items or services must not be shifted to 
another federal health care program, as defined at section 1128B(f) of 
the Act.
    (b) Technology provided to an EPM beneficiary. Beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (1) Items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one EPM episode.

[[Page 646]]

    (2) Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an EPM 
episode.
    (3) Items of technology exceeding $100 in retail value must--
    (i) Remain the property of the EPM participant; and
    (ii) Be retrieved from the beneficiary at the end of the EPM 
episode. The EPM participant must document all retrieval attempts, 
including the ultimate date of retrieval. Documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement.
    (c) Clinical goals of the EPM. The following are the clinical goals 
of the EPM, which may be advanced through beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications resulting from 
treatment for the EPM clinical condition.
    (4) Management of chronic diseases and conditions that may be 
affected by treatment for the EPM clinical condition.
    (d) Documentation of beneficiary engagement incentives. (1) EPM 
participants must maintain documentation of items and services 
furnished as beneficiary engagement incentives that exceed $25 in 
retail value.
    (2) The documentation established contemporaneously with the 
provision of the items and services must include at least the 
following:
    (i) The date the incentive is provided.
    (ii) The identity of the beneficiary to whom the item or service 
was provided.
    (3) The documentation regarding items of technology exceeding $100 
in retail value must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an EPM episode as 
described in paragraph (b)(3) of this section.
    (4) The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.

Subpart G--Waivers


Sec.  512.600  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 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 
of 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 clinical staff under the general 
supervision of a physician or non-physician practitioner. Clinical 
staff are individuals who work under the supervision of a physician or 
other qualified health care professional, and who are allowed by law, 
regulation, and facility policy to perform or assist in the performance 
of a specific professional service, but do not individually report that 
professional service.
    (5) The number of visits that are furnished to the beneficiary 
during--
    (i) An AMI episode, is up to 13 post-discharge home visits;
    (ii) A CABG episode, is up to 9 post-discharge home visits; and
    (iii) A SHFFT episode, is up to 9 post-discharge home visits.
    (c) Payment. Up to the maximum post-discharge home visits for a 
specific EPM episode, as described in paragraph (b)(5) of this section, 
may be billed under Part B by the physician or non-physician 
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.  512.605  Waiver of certain telehealth requirements.

    (a) Waiver of the geographic site requirements. Except for the 
geographic site requirements for a face-to-face encounter for home 
health certification, CMS waives the geographic site requirements of 
section 1834(m)(4)(C)(i)(I) through (III) of the Act for episodes being 
tested in an EPM, 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.  512.210.
    (b) Waiver of the originating site requirements. Except for the 
originating site requirements for a face-to-face encounter for home 
health certification, CMS waives the originating site requirements 
under section 1834(m)(4)(C)(ii)(I) through (VIII) of the Act for 
episodes being tested in an EPM 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 an EPM episode in accordance with Sec.  
512.210.
    (c) Waiver of selected payment provisions. (1) CMS waives the 
payment requirements under section 1834(m)(2)(A) so that 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 or place of residence.
    (2) CMS waives the payment requirements under section 1834(m)(2)(B) 
to allow the distant site payment for telehealth home visit HCPCS codes 
unique to this model to more accurately reflect the resources involved 
in furnishing these services in the home by basing payment upon the 
comparable office visit relative value units for work and malpractice 
under the Physician Fee Schedule.
    (d) 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.  512.610  Waiver of SNF 3-day rule.

    (a) Applicability of the SNF 3-day rule waiver. CMS determines that 
the SNF 3-day rule is--
    (1) Waived for the AMI model;
    (2) Not waived for the CABG model; and
    (3) Not waived for the SHFFT model.
    (b) Waiver of the SNF 3-day rule. For episodes being tested in 
those EPMs where the SNF 3-day rule is waived under paragraph (a) of 
this section, CMS waives the SNF 3-day rule for coverage of a SNF stay 
for a beneficiary who is an EPM beneficiary on the date of discharge 
from the anchor hospitalization on or after October 4, 2018, but only 
if the SNF is identified on the applicable calendar quarter list of 
qualified SNFs at the time of EPM beneficiary admission to the SNF.
    (1) CMS determines the qualified SNFs for each calendar quarter 
based on a review of the most recent rolling 12 months of overall star 
ratings on the

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Five-Star Quality Rating System for SNFs on the Nursing Home Compare 
Web site. Qualified SNFs are rated an overall of 3 stars or better for 
at least 7 of the 12 months.
    (2) CMS posts to the CMS Web site the list of qualified SNFs in 
advance of the calendar quarter and the waiver only applies for a 
beneficiary who has been discharged from an anchor hospitalization if 
the SNF is included on the applicable calendar quarter list for the 
date of the beneficiary's admission to the SNF.
    (c) Financial liability for uncovered SNF services. CMS will 
determine the financial liability for uncovered SNF services if, 
subsequent to an EPM hospital applying the SNF 3-day rule waiver under 
this section, an EPM hospital incorrectly applies the SNF 3-day rule 
waiver.
    (1) If the EPM hospital discharges a beneficiary to a SNF that is 
not a qualified SNF under paragraph (b) of this section and provides 
the beneficiary with a discharge planning notice, as described at Sec.  
512.450(b)(3), to the beneficiary at the time of discharge to a SNF 
then the SNF coverage requirements apply and the beneficiary may be 
financially liable for uncovered SNF services.
    (2) The EPM hospital will be financially liable for the SNF stay 
and the SNF must not bill the beneficiary for the costs of the 
uncovered SNF services furnished during the SNF stay if, subsequent to 
an EPM hospital applying the SNF 3-day rule waiver under this section, 
CMS determines the EPM hospital discharges a beneficiary--
    (i) To a SNF that is not a qualified SNF under paragraph (b) of 
this section and the EPM hospital does not provide the beneficiary with 
a discharge planning notice, as described at Sec.  512.450(b)(3)
    (ii) That is in an EPM where the SNF 3-day rule waiver is not 
applicable under paragraph (a) of this section; or
    (iii) Prior to October 4, 2018, where the SNF 3-day rule waiver is 
not applicable under paragraph (b) of this section.
    (d) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered SNF services continue to apply.


Sec.  512.615  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 described under Sec.  512.600, 
including those related to recovery from the surgery, as described in 
paragraph (b) of this section, for episodes being tested in an EPM.
    (b) Services to which the waiver applies. Up to the maximum post-
discharge home visits for a specific EPM episode, as described in Sec.  
512.600(b)(5), including those related to recovery from the surgery, 
per EPM episode may be billed separately under Medicare Part B by the 
physician or non-physician practitioner, or by the participant hospital 
to which the physician or non-physician 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.


Sec.  512.620  Waiver of deductible and coinsurance that otherwise 
apply to reconciliation payments or repayments.

    (a) Waiver of deductible and coinsurance. CMS waives the 
requirements of sections 1813 and 1833(a) of the Act for 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 the final payment model 
for EPM participant hospitals.
    (b) Reconciliation payments or repayments. Reconciliation payments 
or repayments do not affect the beneficiary cost-sharing amounts for 
the Medicare Part A and Part B services provided under an EPM.


Sec.  512.630  Waiver of physician definition for furnishing cardiac 
rehabilitation and intensive cardiac rehabilitation services to an EPM 
beneficiary.

    (a) General. Section 410.49 of this chapter requires cardiac 
rehabilitation (CR) and intensive cardiac rehabilitation (ICR) services 
to be furnished under the direction of a physician as defined in Sec.  
410.49(a) of this chapter.
    (b) Waiver of the physician definition. For a provider or supplier 
of CR and ICR services to an EPM beneficiary during an AMI and CABG 
episode, as defined in Sec.  512.2, CMS waives the physician definition 
to allow the functions of supervising physician, prescribing exercise, 
and establishing, reviewing, and signing an individualized treatment 
plan for CR and ICR services to be furnished under the direction of--
    (1) A physician, as defined in section 1861(r)(1) of the Act; or
    (2) A qualified nonphysician practitioner, as defined by CMS.
    (c) Other definitions and requirements. All other definitions and 
requirements in Sec.  410.49 of this chapter related to a physician or 
supervising physician continue to apply.

Subpart H--CR Incentive Payment Model for EPM and Medicare Fee-for-
Service Participants


Sec.  512.700  Basis and scope.

    (a) Basis. This subpart implements the cardiac rehabilitation (CR) 
and intensive cardiac rehabilitation (ICR) incentive payment model 
under section 1115A of the Act.
    (b) Scope. This subpart sets forth the following:
    (1) The participants in the CR incentive payment model.
    (2) The CR/ICR services that count toward CR incentive payments.
    (3) The methodology for determining CR incentive payments.
    (4) Provisions for FFS-CR participants that are not EPM 
participants.


Sec.  512.703  CR incentive payment model participants.

    (a) Selection of CR MSAs. The MSAs eligible for selection for AMI 
and CABG models were classified into one of seven groups based on their 
historic utilization of CR/ICR services. Within each group, EPM-CR and 
FFS-CR MSAs were randomly selected. The number of EPM-CRs selected 
within each group are distributed proportionately between the groups 
based on the assignment of the 98 EPM MSAs. The same number of FFS-MSAs 
were then drawn from each group.
    (b) Hospitals eligible for CR incentive payments. (1) Hospitals 
that are AMI and CABG model participants located in the EPM-CR MSAs.
    (2) FFS-CR participants. Hospitals located in the FFS-CR MSAs that 
would meet all requirements in Sec.  512.100(b) to be an AMI or CABG 
model participant if the hospital were located in an MSA selected for 
the AMI and CABG models.


Sec.  512.705  CR/ICR services that count towards CR incentive 
payments.

    (a) Identification of CR/ICR services. CR/ICR services are 
identified by the HCPCS codes for CR/ICR services included in the CMS 
change request that implements the National Coverage Determination in 
the CR performance year.
    (b) CR participant eligibility for CR incentive payment. (1) For 
EPM-CR participants, CR/ICR services paid by Medicare under the OPPS or 
to any supplier reporting place of service code 11 on the PFS claim for 
AMI and CABG model beneficiaries during AMI and CABG model episodes 
result in eligibility for CR incentive payments.
    (2) For FFS-CR participants, CR/ICR services paid by Medicare under 
the

[[Page 648]]

OPPS or to any supplier reporting place of service code 11 on the PFS 
claim for beneficiaries during AMI care periods and CABG care periods 
that would meet the requirements to be AMI and CABG model episodes in 
accordance with all provisions in subpart B if the FFS-CR participant 
were an EPM participant result in eligibility for CR incentive 
payments.
    (c) Overlap between AMI care periods and CABG care periods with AMI 
and CABG model episodes. (1) An AMI care period or CABG care period 
does not begin if the beneficiary is in an AMI or CABG model episode 
when the AMI care period or CABG care period would otherwise begin.
    (2) An AMI care period or CABG care period is canceled if at any 
time during the AMI care period or CABG care period the beneficiary 
initiates an AMI or CABG model episode.
    (d) CR incentive payment time period. All AMI and CABG model 
episodes and AMI care periods and CABG care periods begin on or after 
July 1, 2017 and end on or before December 31, 2021.


Sec.  512.710  Determination of CR incentive payments.

    (a) General. CMS provides a CR incentive payment for each CR 
performance year to each EPM-CR participant and FFS-CR participant 
based on CR/ICR services paid by Medicare under the OPPS or to any 
supplier reporting place of service code 11 on the PFS claim for 
beneficiaries in AMI and CABG model episodes or AMI and CABG care 
periods, respectively. CMS makes CR incentive payments from the 
Medicare Part B Trust Fund to CR participants, and also submits 
beneficiary-specific CR amounts to the CMS Master Database Management 
System. The initial level of the per-service CR incentive amount is $25 
per CR/ICR service for each of up to 11 CR/ICR services paid for by 
Medicare. For those CR/ICR services in an AMI or CABG model episode or 
AMI care period or CABG care period that exceed 11, the per-service CR 
incentive amount increases to $175 per CR/ICR service for each 
additional CR/ICR service paid for by Medicare.
    (b) Determination of CR incentive payment. At the same time that 
CMS carries out the determination of NPRA and reconciliation process 
for an EPM performance year as specified in Sec.  512.305 for EPM 
participants, CMS also determines each CR participant's CR incentive 
payment for the CR performance year according to the following:
    (1) CR amount when the CR service count is less than 12. CMS 
determines the CR amount for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period with a CR service count 
less than 12 by multiplying the CR service count by $25.
    (2) CR amount when the CR service count is 12 or more. CMS 
determines the CR amount for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period with a CR service count 
of 12 or more as the sum of $275 ($25 multiplied by 11 for the first 11 
CR/ICR services paid for by Medicare) and $175 multiplied by the 
difference between the CR service count and 11.
    (3) CR incentive payment. CMS sums the CR amounts determined in 
paragraphs (b)(1) and (2) of this section across the CR participant's 
beneficiaries in AMI and CABG model episodes or AMI care periods and 
CABG care periods for a given CR performance year to determine the CR 
incentive payment for the CR performance year.
    (c) Relation of CR incentive payments to reconciliation and 
Medicare repayments under EPMs. CR incentive payments to EPM-CR 
participants determined under Sec.  512.710(b) are exclusive of 
reconciliation payments and Medicare repayment amounts determined under 
Sec.  512.305(d).
    (d) Relation of CR incentive payments to sharing arrangements for 
EPM-CR participants. CR incentive payments under Sec.  512.710(b) are 
not eligible for and may not be distributed under sharing arrangements 
specified in Sec.  512.500.
    (e) Exclusion of CR incentive payments when updating quality-
adjusted target prices for EPM-CR participants. CR incentive payments 
under Sec.  512.710(b) are excluded when updating quality-adjusted 
target prices for EPM performance years 3 through 5.
    (f) CR incentive payment report. At the same time CMS issues the 
reconciliation report as specified in Sec.  512.305(f) to EPM 
participants, CMS issues each EPM-CR participant and each FFS-CR 
participant a CR incentive payment report for the CR performance year. 
Each report contains the following:
    (1) The number of AMI and CABG model episodes or AMI care periods 
and CABG care periods attributed to the CR participant in which 
Medicare paid for 11 or fewer CR/ICR services for a beneficiary during 
the CR performance year, if any.
    (2) The total number of CR/ICR services Medicare paid for during 
AMI and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(1) of this section.
    (3) The amount of the CR incentive payment attributable to the AMI 
and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(1) of this section.
    (4) The number of AMI and CABG model episodes or AMI care periods 
and CABG care periods attributed to the CR participant in which 
Medicare paid for 12 or more CR/ICR services for a beneficiary during 
the CR performance year, if any.
    (5) The total number of CR/ICR services Medicare paid for during 
AMI and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(4) of this section.
    (6) The amount of the CR incentive payment attributable to the AMI 
and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(4) of this section.
    (7) The total amount of the CR incentive payment.
    (g) Timing of CR incentive payments. CMS makes CR incentive 
payments on a retrospective basis subject to the following:
    (1) For EPM-CR participants, CMS makes the CR incentive payment, if 
any, concurrently with EPM reconciliation payments or repayment amounts 
assessed for a specific EPM and CR performance year, subject to the 
appeals process for EPM participants in Sec.  512.310.
    (2) For FFS-CR participants, CMS makes the CR incentive payments, 
if any, at the same time as for EPM-CR participants, subject to the 
provisions in Sec.  512.720.

Provisions for FFS-CR Participants


Sec.  512.715  Access to records and retention for FFS-CR participants.

    FFS-CR participants and any other individuals or entities providing 
items or services to a FFS-CR beneficiary must do all of the following:
    (a) Allow the Government, including CMS, OIG, HHS and the 
Comptroller General or their designees, scheduled and unscheduled 
access to all books, contracts, records, documents, and other evidence 
(including data related to CR/ICR service utilization and payments, 
billings, and the documentation required under Sec.  512.740(d)) 
sufficient to enable the audit, evaluation, inspection, or 
investigation of the following:
    (1) The individual's or entity's compliance with CR incentive 
payment model requirements.

[[Page 649]]

    (2) The obligation to repay any CR incentive payments owed to CMS.
    (b) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the FFS-CR 
participant's participation in the CR incentive payment model or from 
the date of completion of any audit, evaluation, inspection, or 
investigation, whichever is later, unless--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the FFS-CR participant at 
least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the FFS-CR participant or any other individual or entity 
providing items or services to a FFS-CR beneficiary, in which case the 
records must be maintained for 6 years from the date of any resulting 
final resolution of the dispute or allegation of fraud or similar 
fault.


Sec.  512.720  Appeals process for FFS-CR participants.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart H of this part, if a FFS-CR 
participant wishes to dispute calculations involving a matter related 
to a CR incentive payment, the FFS-CR participant is required to 
provide written notice of the calculation error, in a form and manner 
specified by CMS.
    (1) Unless the FFS-CR participant provides such notice, CMS deems 
final the applicable CR incentive payment report 45 calendar days after 
the applicable CR incentive payment report is issued and proceeds with 
the payment as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the applicable CR incentive payment 
report, CMS responds in writing within 30 calendar days to either 
confirm that there was an error in the calculation or verify that the 
calculation is correct, although CMS reserves the right to an extension 
upon written notice to the FFS-CR participant.
    (3) Only FFS-CR participants may use notice of calculation error 
process described in this part.
    (b) Dispute resolution process (second level of appeal). (1) If the 
FFS-CR participant is dissatisfied with CMS' response to the notice of 
a calculation error, the FFS-CR participant may request a 
reconsideration review in a form and manner as specified by CMS.
    (2) The reconsideration request must provide a detailed explanation 
of the basis for the dispute and include supporting documentation for 
the FFS-CR participant's assertion that CMS or its representatives did 
not accurately calculate the CR incentive payment in accordance with 
subpart H of this part.
    (3) If CMS does not receive a request for reconsideration from the 
FFS-CR participant within 10 calendar days of the issue date of CMS' 
response to the FFS-CR participant's notice of calculation error, then 
CMS' response to the calculation error is deemed final and CMS proceeds 
with the applicable processes, as described in subpart H of this part.
    (4) The CMS reconsideration official notifies the FFS-CR 
participant in writing within 15 calendar days of receiving the FFS-CR 
participant's review request of the following:
    (i) The date, time, and location of the review.
    (ii) The issues in dispute.
    (iii) The review procedures.
    (iv) The procedures (including format and deadlines) for submission 
of evidence.
    (5) 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.
    (6) 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 the FFS-CR participant.
    (7) The CMS reconsideration official issues a written determination 
within 30 days of the review. The determination is final and binding.
    (8) Only FFS-CR participants may use the dispute resolution process 
described in this part.
    (c) Exception to the notice of calculation error process. If the 
FFS-CR participant contests a matter that does not involve an issue 
contained in, or a calculation which contributes to a CR incentive 
payment report a notice of calculation error is not required. In these 
instances, if CMS does not receive a request for reconsideration from 
the FFS-CR participant within 10 calendar days of the notice of the 
initial determination, the initial determination is deemed final and 
CMS proceeds with the action indicated in the initial determination. 
This does not apply to the limitations on review in paragraph (e) of 
this section.
    (d) Notice of FFS-CR participant termination from the CR incentive 
payment model. If an FFS-CR participant receives notification that it 
has been terminated from the CR incentive payment model, it must 
provide a written request for reconsideration to CMS requesting review 
of the termination within 10 calendar days of the notice. CMS has 30 
days to respond to the FFS-CR participant's request for review. If the 
FFS-CR participant fails to notify CMS, the termination is deemed 
final.
    (e) 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:
    (1) The selection of models for testing or expansion under section 
1115A of the Act.
    (2) The selection of organizations, sites, or participants to test 
those models selected.
    (3) The elements, parameters, scope, and duration of such models 
for testing or dissemination.
    (4) Determinations regarding budget neutrality under section 
1115A(b)(3) of Act.
    (5) The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of Act.
    (6) Decisions to expand 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.  512.725  Data sharing for FFS-CR participants.

    (a) General. CMS makes available to FFS-CR participants, through 
the most appropriate means, data that CMS determines may be useful to 
FFS-CR participants to do the following:
    (1) Determine appropriate ways to increase the coordination of 
care.
    (2) Improve quality.
    (3) Enhance efficiencies in the delivery of care.
    (4) Otherwise achieve the goals of the model described in this 
section.
    (b) Beneficiary-identifiable data. (1) CMS makes beneficiary-
identifiable data available to a FFS-CR participant in accordance with 
applicable privacy and security laws and only in response to the FFS-CR 
participant's request for such data for a beneficiary who has been 
furnished a billable service by the FFS-CR participant corresponding to 
the AMI care period or CABG care period definitions.
    (2) The minimum data necessary to achieve the goals of the CR 
incentive payment test, as determined by CMS, may be provided under 
this section no less frequently than on a quarterly basis throughout 
the FFS-CR participant's

[[Page 650]]

participation in the CR incentive payment test.


Sec.  512.730  Compliance enforcement for FFS-CR participants.

    (a) General. FFS-CR participants must comply with all of the 
requirements outlined in this subpart. Except as specifically noted in 
this subpart, the regulations under this subpart must not be construed 
to affect the payment, coverage, program integrity, or other 
requirements (such as those in parts 412 and 482 of this chapter) that 
apply to providers and suppliers under this chapter.
    (b) Failure to comply. (1) CMS may take one or more of the remedial 
actions set forth in paragraph (b)(2) of this section if a FFS-CR 
participant does any of the following:
    (i) Fails to comply with any requirements of this subpart or is 
identified as noncompliant through monitoring by HHS (including CMS and 
OIG) of the CR incentive payment model, including but not limited to 
the following:
    (A) Avoiding potentially high-severity patients.
    (B) Targeting potentially low-severity patients.
    (C) Failing to provide medically appropriate services or 
systematically engaging in the over or under-delivery of appropriate 
care.
    (D) Failing to provide beneficiaries with complete and accurate 
information.
    (ii) Takes any action that threatens the health or safety of 
patients.
    (iii) Avoids at risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20 of this chapter.
    (iv) Avoids patients on the basis of payer status.
    (v) 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 subpart.
    (vi) Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CR incentive payment model, 
or fails to take any action that CMS determines for program integrity 
reasons should have been taken to further the best interests of the CR 
incentive payment model.
    (viii) 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.
    (ix) Is subject to action involving violations of the physician 
self-referral law, civil monetary penalties law, Federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the CR incentive payment model.
    (2) Remedial actions include the following:
    (i) Issuing a warning letter to the FFS-CR participant.
    (ii) Requiring the FFS-CR participant to develop a corrective 
action plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating the FFS-CR participant's CR incentive 
payment.
    (iv) Terminating the FFS-CR participant from the CR incentive 
payment model.


Sec.  512.735  Enforcement authority for FFS-CR participants.

    (a) OIG authority. OIG authority is not limited or restricted by 
the provisions of the CR incentive payment model, including the 
authority to audit, evaluate, investigate, or inspect the FFS-CR 
participant, or any other person or entity or their records, data, or 
information, without limitation.
    (b) Other authorities. None of the provisions of the CR incentive 
payment model limits or restricts the authority of any other government 
agency permitted by law to audit, evaluate, investigate, or inspect the 
FFS-CR participant or any other person or entity or their records, 
data, or information, without limitation.


Sec.  512.740  Beneficiary engagement incentives for FFS-CR participant 
use.

    (a) General. FFS-CR participants may choose to provide in-kind 
patient engagement incentives to beneficiaries in an AMI care period or 
CABG care period, subject to the following conditions:
    (1) The incentive must be provided directly by the FFS-CR 
participant or by an agent of the FFS-CR participant under the FFS-CR 
participant's direction and control to the FFS-CR beneficiary during an 
AMI care period or CABG care period.
    (2) The item or service provided must be reasonably connected to 
medical care provided to a FFS-CR beneficiary during an AMI care period 
or CABG care period.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (c) of this section, for a beneficiary during an AMI care 
period or CABG care by engaging the beneficiary in better managing his 
or her own health.
    (4) The item or service must not be tied to the receipt of items or 
services outside the AMI care period or CABG care period.
    (5) The item or service must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (6) The availability of items or services must not be advertised or 
promoted except that a beneficiary may be made aware of the 
availability of items or services at the time the beneficiary could 
reasonably benefit from them.
    (7) The cost of the item or service must not be shifted to another 
federal health care program, as defined at section 1128B(f) of the Act.
    (b) Technology provided to an FFS-CR beneficiary. Beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (1) Items or services involving technology provided to a 
beneficiary may not exceed $1,000 in retail value for any one 
beneficiary in any one AMI care period or CABG care period.
    (2) Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (c) of this section, for a beneficiary in an AMI 
care period or CABG care period.
    (3) Items of technology exceeding $100 in retail value must--
    (i) Remain the property of the FFS-CR participant; and
    (ii) Be retrieved from the beneficiary at the end of the AMI care 
period or CABG care period. The FFS-CR participant must document all 
retrieval attempts, including the ultimate date of retrieval. 
Documented, diligent, good faith attempts to retrieve items of 
technology will be deemed to meet the retrieval requirement.
    (c) Clinical goals of the CR incentive payment model. The following 
are the clinical goals of the CR incentive payment model, which may be 
advanced through beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications resulting from 
treatment for AMI or CABG.
    (4) Management of chronic diseases and conditions that may be 
affected by treatment for AMI or CABG.
    (d) Documentation of beneficiary engagement incentives. (1) FFS-CR 
participants must maintain documentation of items and services 
furnished as a beneficiary engagement incentive that exceed $25 in 
retail value.
    (2) The documentation established contemporaneously with the 
provision

[[Page 651]]

of the items and services must include at least the following:
    (i) The date the incentive is provided.
    (ii) The identity of the beneficiary to whom the item or service 
was provided.
    (3) The documentation regarding items of technology exceeding $100 
in retail must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an AMI care period or CABG 
care period as described in paragraph (b)(3) of this section.
    (4) The FFS-CR participant must retain and provide access to the 
required documentation in accordance with Sec.  512.715.


Sec.  512.745  Waiver of physician definition for furnishing CR and ICR 
services to a FFS-CR beneficiary.

    (a) General. Section 410.49 of this chapter requires cardiac 
rehabilitation and intensive cardiac rehabilitation services to be 
furnished under the direction of a physician as defined in Sec.  
410.49(a) of this chapter.
    (b) Waiver of the physician definition. For a provider or supplier 
of CR or ICR services to a FFS-CR beneficiary during an AMI care period 
or CABG care period, as defined in Sec.  512.2. CMS waives the 
physician definition to allow the functions of supervising physician, 
prescribing exercise, and establishing, reviewing, and signing an 
individualized treatment plan for CR or ICR services to be furnished 
under the direction of--
    (1) A physician, as defined in section 1861(r)(1) of the Act; or
    (2) A qualified nonphysician practitioner, as defined by CMS.
    (c) Other definitions and requirements. All other definitions and 
requirements in Sec.  410.49 of this chapter related to a physician or 
supervising physician continue to apply.

Subparts I-J [Reserved]

Subpart K--Model Termination


Sec.  512.900  Termination of an episode payment model.

    CMS may terminate any EPM for reasons including but not limited to:
    (a) CMS no longer has the funds to support the EPM; or
    (b) CMS terminates the EPM in accordance with section 
1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) of the 
Act, termination of the model is not subject to administrative or 
judicial review.


Sec.  512.905  Termination of the CR incentive payment model.

    CMS may terminate the CR incentive payment model for reasons 
including, but not limited to, one of the following:
    (a) CMS no longer has the funds to support the CR incentive payment 
model.
    (b) CMS terminates the CR incentive payment model in accordance 
with section 1115A(b)(3)(B) of the Act. As provided by section 
1115A(d)(2) of the Act, termination of the model is not subject to 
administrative or judicial review.

    Dated: December 13, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: December 15, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-30746 Filed 12-20-16; 4:15 pm]
 BILLING CODE 4120-01-P