CMS finalizes rules on episode payment models

On January 3, 2017, the Centers for Medicare and Medicaid Services (CMS) published final rules on new Medicare episode payment models (EPMs) to be implemented on July 1, 2017. The EPMs are designed to encourage participating hospitals to devise strategies to improve discharge planning, adherence to treatment and medication regimens, and coordination among all providers and suppliers, in order to upgrade quality of care and to reduce overall Medicare spending.
EPMs will include Medicare inpatient hospital stays as well as nearly all care provided under Medicare Part A and Part B within 90 days following hospital discharge. CMS will test EPMs for five performance years beginning July 1, 2017. During each performance year, Medicare will pay hospitals as well as other providers and suppliers for care within the episodes under the current Medicare fee-for-service system, subject to later payment adjustments tied to quality and spending.
Participating hospitals will have an opportunity after each performance year to earn additional Medicare payments through an annual reconciliation process if they appropriately contained Medicare expenditures for episodes during the year while meeting specified quality of care metrics relevant to each episode type. Cost-containment will be measured using EPM target prices for each episode type and year. Quality of care will be measured using composite quality scores applied to each participating hospital. Episode types to be used in 2017 relate to: acute myocardial infarction, coronary bypass, surgery for hip/femur fractures, joint replacements, and cardiac rehabilitation.
For performance years three and beyond, participating hospitals will also be at risk of repayments to CMS to the extent that Medicare fee-for-service payments exceed EPM target prices. Approximately 1,120 hospitals in 98 geographic areas will participate in the acute myocardial infarction and coronary bypass EPMs. CMS estimates that cost-avoidance and repayments will generate $159 million in Medicare savings for care provided in the five performance years. Additional information is available here and here.

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