Mandatory bundled payment models are expanding
On Dec. 20, 2016, the Centers for Medicare & Medicaid Services (CMS) issued the Final Rule (CMS-5519-F) for new mandatory bundled payments focused on cardiac care. The rule also expanded the mandatory Comprehensive Care For Joint Replacement (CJR) model for orthopaedic care. The new programs were originally scheduled to begin July 1, 2017; however, a recent rule has delayed the models until Oct. 1, 2017, and potentially to Jan. 1, 2018.

These new, mandatory bundled payment programs were developed by the CMS Innovation Center under section 115A of the Social Security Act. Hospitals will assume financial responsibility for the cost of care, reaping rewards for coordinating care with physicians and other providers to avoid complications, reduce hospital readmissions, appropriately use postacute care, and optimize patient recovery. This is a continuation of the desire by CMS to shift Medicare payments from rewarding quantity to rewarding quality, with incentives for providers to deliver better patient care at lower costs.

The cardiac care models include three mandatory hospital programs—the Acute Myocardial Infarction (AMI) model, the Coronary Artery Bypass Graft (CABG) model, and the Cardiac Rehabilitation (CR) Incentive Payment Model. The models employ retrospective payments for treating patients with acute heart attacks and those undergoing coronary artery bypass surgery, as well as rehabilitation after cardiac care.

Like the CJR program, these bundles include the cost of care during the hospitalization and for 90 days following hospital discharge. The orthopaedic care model—the Surgical Hip and Femur Fracture Treatment (SHFFT) model—expands the CJR program. Currently, CJR includes patients with hip or proximal femur fractures who are treated with arthroplasty. SHFFT will include patients with hip and femur fractures that are not treated with arthroplasty and are typically treated with internal fixation.

Hospital selection
The selection of hospitals participating in these new bundled payment programs is random and is based on geographic areas known as Metropolitan Statistical Areas (MSAs). MSAs are delineated by the Office of Management and Budget (OMB) and are typically used by federal statistical agencies in collecting, tabulating, and publishing federal statistics.

An MSA is a geographic region that contains a core urban area of 50,000 or more population. Each MSA area includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core. For an MSA to be eligible for the orthopaedic care models (CJR and SHFFT), the area must have at least 400 eligible CJR cases per year. MSAs need to have at least 75 AMIs/CABGs to qualify for the cardiac care models. Nearly half (180 or 47 percent) of the 382 MSAs in the United States will be included in at least one of the orthopaedic or cardiac episodic care models.

Two cardiac bundled payment models (AMI and CABG) will affect hospitals in 98 randomly selected MSAs; the CR model will affect hospitals in 90 selected MSAs. Of these, 45 MSAs will be randomly selected from the AMI and CABG MSAs and 45 MSAs not in the other cardiac models will be added.

The CJR/SHFFT models will continue to apply to 67 MSAs. Several MSAs will be required to participate in more than one program, and 6 MSAs are mandated to participate in all three programs. Overall, approximately 860 hospitals will participate in the orthopaedic bundles (CJR and SHFFT), 1,320 hospitals will participate in the two cardiac bundles (AMI and CABG), and 1,320 hospitals will be required to participate in the CR bundle.

Impact of programs
The greatest opportunities for savings in these programs appear to be in postacute care spending and reducing readmissions. However, the CR program provides incentives to hospitals to increase the utilization of cardiac rehabilitative services. The ultimate savings in the CR program will be to reduce the costs associated with future treatment for heart disease and to improve mortality rates and quality of life.

These new bundled payment models build on earlier initiatives, beginning with the Acute Care Episode (ACE) in 2009 and the Bundled Payment for Care Improvement (BPCI) in 2012 (Table 1). As CMS continues to evolve its bundled payment models, several trends can be identified, including the following:

• continued expansion of bundled payments to replace traditional fee-for-service
• moving from voluntary to mandatory participation
• increasing scale, with a more national footprint of participation
• smaller scope (more focused on care that is highly variable and ideal for cost reductions
• concentration on orthopaedic and cardiac care
• a continuum of care that includes 90 days posthospital discharge
• two-sided risk with an opportunity to receive reconciliation payments (profit) if actual costs of care are less than that the target price or repayment (loss) if actual payments are above the target price
• making hospitals financially accountable for the cost of the bundle
• increasing program duration to approximately 5 years
• continued flexibility via waivers that allow collaboration with Medicare beneficiaries and other providers
• elimination of required intermediaries or "conveners"

All four new payment models—AMI, CABG, CR, and SHFFT—as well as adjustments to CJR enable hospitals to qualify as Advanced Alternative Payment Models (APM), entities under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which is being implemented as the Quality Payment Program (QPP). This will present an opportunity for physicians, including some orthopaedic surgeons, who participate with hospitals in mandated bundled payment MSAs to qualify for a potential 5 percent incentive payment. (For more information, see "Orthopaedic Participation in APMs: What Are the Options ?")

John Cherf, MD, MPH, MBA, is a member of the AAOS Now Editorial Board and Practice Management Section Leader of the AAOS Health Care Systems Committee.