# Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2015-17190 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** July 14, 2015 - **Citation:** 80 FR 41198 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 510 [CMS-5516-P] RIN 0938-AS64 Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: This proposed rule proposes to implement a new Medicare Part A and B payment model under section 1115A of the Social Security Act, called the Comprehensive Care for Joint Replacement (CCJR) model, in which acute care hospitals in certain selected geographic areas will receive retrospective bundled payments for episodes of care for lower extremity joint replacement or reattachment of a lower extremity. All related care within 90 days of hospital discharge from the joint replacement procedures will be included in the episode of care. We believe this model will further our goals in improving the efficiency and quality of care for Medicare beneficiaries for these common medical procedures. DATES: Comment period: To be assured consideration, comments on this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EDT on September 8, 2015. ADDRESSES: In commenting, please refer to file code CMS-5516-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab. 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5516-P, P.O. Box 8013, Baltimore, MD 21244-1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5516-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, we refer readers to the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Claire Schreiber, Claire.Schreiber@cms.hhs.gov, 410-786-8939 Gabriel Scott, Gabriel.Scott@cms.hhs.gov, 410-786-3928 SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments. Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EDT. To schedule an appointment to view public comments, phone 1-800-743-3951. Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/. Alphabetical List of Acronyms Because of the many terms to which we refer by acronym, abbreviation, or short form in this proposed rule, we are listing the acronyms, abbreviations and short forms used and their corresponding terms in alphabetical order. µSA Micropolitan Statistical Area ACO Accountable Care Organization ASPE Assistant Secretary for Planning and Evaluation BPCI Bundled Payments for Care Improvement CBSA Core-Based Statistical Area CMS Centers for Medicare & Medicaid Services CPT Current Procedural Terminology CCJR Comprehensive Care for Joint Replacement CSA Combined Statistical Area DME Durable Medical Equipment FFS Fee-for-service HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HHA Home health agency HOPD Hospital outpatient department HHPPS Home Health Prospective Payment System HIQR Hospital Inpatient Quality Reporting HRRP Hospital Readmissions Reductions Program HRR Hospital Referral Region HVBP Hospital Value Based Purchasing Program ICD-9-CM International Classification of Diseases, 9th Revision, Clinical Modification IPPS Inpatient Prospective Payment System IPF Inpatient psychiatric facility IRF Inpatient rehabilitation facility LEJR Lower extremity joint replacement LOS Length of stay LTCH Long term care hospital LUPA Low Utilization Payment Adjustment MAC Medicare Administrative Contractor MCC Major complications or comorbidities MSA Metropolitan Statistical Area MS-DRG Medical Severity Diagnosis-Related Group MP Malpractice NPP Nonphysician Practitioner NPRA Net Payment Reconciliation Amount OPPS Outpatient Prospective Payment System PAC Post-acute care SNF Skilled nursing facility THA Total hip arthroplasty TKA Total knee arthroplasty Table of Contents I. Executive Summary A. Purpose B. Summary of the Major Provisions 1. Model Overview: LEJR Episodes of Care 2. Model Scope 3. Payment 4. Similar Previous and Concurrent Models 5. Overlap With Ongoing CMS Efforts 6. Quality Measures and Reporting Requirements 7. Data Sharing Process 8. Beneficiary Protections C. Summary of Economic Effects II. Background III. Provisions of the Proposed Rule A. Proposed Definition of the Episode Initiator and Selected Geographic Areas 1. Background 2. Proposed Definition of Episode Initiator 3. Financial Responsibility for the Episode of Care 4. Proposed Geographic Unit of Selection and Exclusion of Selected Hospitals a. Overview and Options for Geographic Area Selection b. MSA Selection Methodology (1) Exclusion of Certain MSAs (2) Proposed Selection Strata (a) MSA Average Wage-adjusted Historic LEJR Episode Payments (b) MSA Population Size (c) Analysis of Strata (3) Factors Considered but Not Used in Creating Proposed Strata (4) Sample Size Calculations and the Number of Selected MSAs (5) Method of Selecting MSAs B. Episode Definition for the Comprehensive Care for Joint Replacement (CCJR) Model 1. Background 2. Clinical Dimension of Episodes of Care a. Definition of the Clinical Conditions Included in the Episode b. Definition of Related Services Included in the Episode 3. Duration of Episodes of Care a. Beginning the Episode and Beneficiary Care Inclusion Criteria b. Middle of the Episode c. End of the Episode C. Proposed Methodology for Setting Episode Prices and Paying Model Participants Under the CCJR Model 1. Background 2. Performance Years, Retrospective Episode Payment, and Two-Sided Risk Model a. Performance Period b. Proposed Retrospective Payment Methodology c. Proposed Two-Sided Risk Model 3. Adjustments to Payments Included in Episode a. Proposed Treatment of Special Payment Provisions Under Existing Medicare Payment Systems b. Proposed Treatment of Payment for Services That Extend Beyond the Episode c. Proposed Pricing Adjustment for High Payment Episodes 4. Proposed Episode Price Setting Methodology a. Overview b. Proposed Pricing Features (1) Different Target Prices for Episodes Anchored by MS-DRG 469 vs. MS-DRG 470 (2) Three Years of Historical Data (3) Proposed Trending of Historical Data to the Most Recent Year of the Three (4) Update Historical Episode Payments for Ongoing Payment System Updates (a) Proposed Inpatient Acute Services Update Factor (b) Proposed Physician Services Update Factor (c) Proposed IRF Services Update Factor (d) Proposed SNF Services Update Factor (e) Proposed HHA Services Update Factor (f) Proposed Other Services Update Factor (5) Blend Hospital-Specific and Regional Historical Data (6) Define Regions as U.S. Census Divisions (7) Normalize for Provider-Specific Wage Adjustment Variations (8) Proposed Combination of CCJR Episodes Anchored by MS-DRGs 469 and 470 (9) Discount Factor c. Proposed Approach To Combine Pricing Features 5. Proposed Use of Quality Performance in the Payment Methodology a. Background b. Proposed Implementation of Quality Measures for Reconciliation Payment Eligibility (1) General Selection of Proposed Quality Measures (2) Proposal To Adjust the Payment Methodology for Voluntary Submission of Data for Patient-Reported Outcome Measure (3) Measure Risk-Adjustment and Calculations (4) Applicable Time Period (5) Criteria for Applicable Hospitals and Performance Scoring (a) Identification of Applicable Hospitals for the CCJR Model (b) Methodology to Determine Performance on the Quality Measures (c) Proposed Methodology To Link Quality and Payment (i) Background (ii) Alternatives Considered To Link Quality and Payment (iii) Proposal To Link Quality and Payment through Thresholds for Reconciliation Payment Eligibility 6. Proposed Process for Reconciliation a. Net Payment Reconciliation Amount b. Payment Reconciliation 7. Proposed Adjustments for Overlaps With Other Innovation Center Models and CMS Programs a. Overview b. CCJR Beneficiary Overlap With BPCI Episodes c. Accounting for CCJR Reconciliation Payments and Recoupments in Other Models and Programs d. Accounting for Per Beneficiary Per Month (PBPM) Payments in the Episode Definition e. Accounting for Overlap With Shared Savings Programs and Total Cost of Care Models 8. Proposals To Limit or Adjust Hospital Financial Responsibility a. Overview b. Proposed Limit on Raw NPRA Contribution to Repayment Amounts and Reconciliation Payments (1) Proposed Limit on Raw NPRA Contribution to Repayment Amounts (2) Proposed Limit on Raw NPRA Contribution to Reconciliation Payments c. Proposed Policies for Certain Hospitals to Further Limit Repayment Responsibility d. Proposed Hospital Responsibility for Increased Post-Episode Payments 9. Proposed Appeal Procedures for Reconciliation a. Payment Processes b. Calculation Error c. Dispute Resolution (1) Limitations on Review (2) Matters Subject to Dispute Resolution. (3) Dispute Resolution Process. 10. Proposed Financial Arrangements, Beneficiary Incentives, and Proposed Program Rule Waivers and Amendments a. Financial Arrangements and Beneficiary Incentives (1) Financial Arrangements Permitted Under the CCJR Model (a) CCJR Sharing Arrangement Requirements. (b) Participation Agreements Requirements. (c) Gainsharing Payment and Alignment Payment Conditions and Restrictions. (d) Documentation and Maintenance of Records (2) Beneficiary Incentives Permitted Under the CCJR Model (3) Compliance with Fraud and Abuse Laws 11. Proposed Waivers of Medicare Program Rules a. Overview b. Post-Discharge Home Visits c. Billing and Payment for Telehealth Services d. SNF 3-Day Rule e. Waivers of Medicare Program Rules To Allow Reconciliation Payment or Recoupment Actions Resulting From the Net Payment Reconciliation Amount12. Proposed Enforcement Mechanisms D. Quality Measures and Display of Quality Metrics Used in the CCJR Model 1. Background a. Purpose of Quality Measures in the CCJR Model b. Public Display of Quality Measures in the CCJR Model 2. Proposed Quality Measures for Performance Year 1 (CY 2016) and Subsequent Years a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550) (1) Background (2) Data Sources (3) Cohort (4) Inclusion and Exclusion Criteria (5) Risk-Adjustment (6) Calculating the Risk-Standardized Complication Rate and Performance Period b. Hospital-Level 30-day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551) (1) Background (2) Data Sources (3) Cohort (4) Inclusion and Exclusion Criteria (5) Risk-Adjustment (6) Calculating the Risk-Standardized Readmission Rate and Performance Period c. Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey (1) Background (2) Data Sources (3) Cohort (4) Inclusion and Exclusion Criteria (5) Case-Mix-Adjustment (6) HCAHPS Scoring (7) Performance period d. Applicable Time Period 3. Possible New Outcomes for Future Measures a. Hospital-Level Performance Measure(s) of Patient-Reported Outcomes Following Elective Primary Total Hip and/or Total Knee Arthroplasty (1) Background (2) Data Sources (3) Cohort (4) Inclusion and Exclusion Criteria (5) Outcome (6) Risk-Adjustment (if Applicable) (7) Calculating the Risk-Standardized Rate (8) Performance Period (9) Requirements for Successful Submission of THA/TKA Voluntary Data b. Measure that Captures Shared Decision-Making Related to Elective Primary Total Hip and/or Total Knee Arthroplasty c. Future Measures Around Care Planning d. Future Considerations for Use of Electronic Health Records 4. Form, Manner and Timing of Quality Measure Data Submission 5. Proposed Display of Quality Measures and Availability of Information for the Public From the CCJR Model E. Data Sharing 1. Overview 2. Beneficiary Claims Data 3. Aggregate Regional Data 4. Timing and Period of Baseline Data 5. Frequency and Period of Claims Data Updates for Sharing Beneficiary-Identifiable Claims Data During the Performance Period 6. Legal Permission to Share Beneficiary-Identifiable Data F. Monitoring and Beneficiary Protection 1. Introduction and Summary 2. Beneficiary Choice and Beneficiary Notification 3. Monitoring for Access to Care 4. Monitoring for Quality of Care 5. Monitoring for Delayed Care G. Coordination With Other Agencies IV. Evaluation Approach A. Background B. Design and Evaluation Methods C. Data Collection Methods D. Key Evaluation Research Questions E. Evaluation Period and Anticipated Reports V. Collection of Information Requirements VI. Response to Comments VII. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Anticipated Effects 1. Overall Magnitude of the Model and its Effects on the Market 2. Effects on the Medicare Program a. Assumptions and Uncertainties b. Analyses c. Further Consideration 3. Effects on Beneficiaries 4. Effects on Small Entities 5. Effects on Small Rural Hospitals 6. Unfunded Mandates D. Alternatives E. Accounting Statement F. Conclusion Regulations Text I. Executive Summary A. Purpose The purpose of this proposed rule is to propose the creation and testing of a new payment model called the Comprehensive Care for Joint Replacement (CCJR) Model under the authority of the Center for Medicare and Medicaid Innovation (Innovation Center or CMMI). Section 1115A of the Social Security Act (the Act) authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries. The intent of the CCJR model is to promote quality and financial accountability for episodes of care surrounding a lower-extremity joint replacement (LEJR) or reattachment of a lower extremity procedure. 1 CCJR will test whether bundled payments to acute care hospitals for LEJR episodes of care will reduce Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. We anticipate the CCJR model being proposed would benefit Medicare beneficiaries by improving the coordination and transition of care, improving the coordination of items and services paid for through Medicare Fee-For-Service (FFS), encouraging more provider investment in infrastructure and redesigned care processes for higher quality and more efficient service delivery, and incentivizing higher value care across the inpatient and post-acute care spectrum spanning the episode of care. We propose to test CCJR for a 5 year performance period, beginning January 1, 2016, and ending December 31, 2020. Under FFS, Medicare makes separate payments to providers and suppliers for the items and services furnished to a beneficiary over the course of treatment (an episode of care). With the amount of payments dependent on the volume of services delivered, providers may not have incentives to invest in quality improvement and care coordination activities. As a result, care may be fragmented, unnecessary, or duplicative. 1 In this proposed rule, we use the term LEJR to refer to all procedures within the Medicare Severity-Diagnosis Related Groups (MS-DRGs) we propose to select for the model, including reattachment of a lower extremity, as described in section III.B. of this proposed rule. We have previously used our statutory authority under section 1115A of the Act to test bundled payment models such as the Bundled Payments for Care Improvement (BPCI) initiative. Bundled payments for multiple services in an episode of care hold participating organizations financially accountable for an episode of care. They also allow participants to receive payment in part based on the reduction in expenditures for Medicare arising from their care redesign efforts. We believe the CCJR model being proposed would further the mission of the Innovation Center and the Secretary's goal of increasingly paying for value and outcomes, rather than for volume, 2 because it would promote the alignment of financial and other incentives for all health care providers caring for a beneficiary during an LEJR episode. In the proposed CCJR model, the acute care hospital that is the site of surgery would be held accountable for spending during the episode of care. Participant hospitals would be afforded the opportunity to earn performance-based payments by appropriately reducing expenditures and meeting certain quality metrics. They would also gain access to data and educational resources to better understand post-acute care and associated spending. Payment approaches that reward providers that assume financial and performance accountability for a particular episode of care create incentives for the implementation and coordination of care redesign between hospitals and other providers. 2 Sylvia Mathews Burwell, HHS Secretary, Progress Towards Achieving Better Care, Smarter Spending, Healthier People, http://www.hhs.gov/blog/2015/01/26/progress-towards-better-care-smarter-spending-healthier-people.html (Jan 26, 2015). The proposed model would require the participation of hospitals in multiple geographic areas that might not otherwise participate in the testing of bundled payments for episodes of care for LEJR procedures. Other episode-based, bundled payment models being tested by Centers for Medicare & Medicaid Services (CMS), such as the BPCI initiative, are voluntary in nature. Interested participants must apply to such models to participate. To date, we have not tested an episode payment model with bundled payments in which providers are required to participate. We recognize that realizing the full potential of new payment models will require the engagement of an even broader set of providers than have participated to date, providers who may only be reached when new payment models are applied to an entire class of providers of a service. As such, we are interested in testing and evaluating the impact of a bundled payment approach for LEJR procedures in a variety of circumstances, especially among those hospitals that may not otherwise participate in such a test. This proposed model would allow CMS to gain experience with making bundled payments to hospitals who have a variety of historic utilization patterns; different roles within their local markets; various volumes of services; different levels of access to financial, community, or other resources; and various levels of population and health provider density including local variations in the availability and use of different categories of post-acute care providers. We believe that by requiring the participation of a large number of hospitals with diverse characteristics, the proposed model would result in a robust data set for evaluation of this bundled payment approach, and would stimulate the rapid development of new evidence-based knowledge. Testing the model in this manner would also allow us to learn more about patterns of inefficient utilization of health care services and how to incentivize the improvement of quality for common LEJR procedure episodes. This learning potentially could inform future Medicare payment policy. Within this proposed rule we propose a model focused on episodes of care for LEJR procedures. We chose LEJR episodes for the proposed model because as discussed in depth in section III.C. of this proposed rule, these are high-expenditure, high utilization procedures commonly furnished to Medicare beneficiaries, 3 where significant variation in spending for procedures is currently observed. The high volume of episodes and variation in spending for LEJR procedures create a significant opportunity to test and evaluate the proposed model that specifically focuses on a defined set of procedures. Moreover, there is substantial regional variation in post-acute care referral patterns and the intensity of post-acute care provided for LEJR patients, thus resulting in significant variation in post-acute care expenditures across LEJR episodes initiated at different hospitals. The proposed model would enable hospitals to consider the most appropriate post-acute care for their LEJR patients. The proposed model additionally would offer hospitals the opportunity to better understand their own processes with regard to LEJR, as well as the processes of post-acute providers. Finally, while many LEJR procedures are planned, the proposed model would provide a useful opportunity to identify efficiencies both for when providers can plan for LEJR procedures and for when the procedure must be performed urgently. 3 For example, Total Hip Arthroplasty and Total Knee Arthroplasty procedures are very high volume LEJR procedures that together represent the largest payments for procedures under Medicare. Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-Standardized Readmission Measure (Version 2.0). 2013. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html; Bozic KJ, Rubash HE, Sculco TP, Berry DJ., An analysis of Medicare payment policy for total joint arthroplasty. J Arthroplasty. Sep 2008; 23(6 Suppl 1):133-138. We note that we seek public comment on the proposals contained in this proposed rule, and also on any alternatives considered as well. B. Summary of the Major Provisions 1. Model Overview: LEJR Episodes of Care LEJR procedures are currently paid under the Inpatient Prospective Payment System (IPPS) through one of two Medicare Severity-Diagnosis Related Groups (MS-DRGs): MS-DRG 469 (Major joint replacement or reattachment of lower extremity with Major Complications or Comorbidities (MCC)) or MS-DRG 470 (Major joint replacement or reattachment of lower extremity without MCC). Under the proposed model, as described further in section III.B of this proposed rule, episodes would begin with admission to an acute care hospital for an LEJR procedure that is assigned to MS-DRG 469 or 470 upon beneficiary discharge and paid under the IPPS and would end 90 days after the date of discharge from the acute care hospital. This episode of care definition offers operational simplicity for providers and CMS. The episode would include the LEJR procedure, inpatient stay, and all related care covered under Medicare Parts A and B within the 90 days after discharge, including hospital care, post-acute care, and physician services. 2. Model Scope We propose that participant hospitals would be the episode initiators and bear financial risk under the proposed CCJR model. In comparison to other health care facilities, hospitals are more likely to have resources that would allow them to appropriately coordinate and manage care throughout the episode, and hospital staff members are already involved in hospital discharge planning and post-acute care recommendations for recovery, key dimensions of high quality and efficient care for the episode. We propose to require all hospitals paid under the IPPS and physically located in selected geographic areas to participate in the CCJR model, with limited exceptions. Eligible beneficiaries who receive care at these hospitals will automatically be included in the model. We propose to select geographic areas through a stratified random sampling methodology within strata based on the following criteria: Historical wage adjusted episode payments and population size. Our proposed geographic area selection process is detailed further in section III.A of this proposed rule. 3. Payment We propose to test the CCJR model for 5 performance years. During these performance years we propose to continue paying hospitals and other providers according to the usual Medicare FFS payment systems. However, after the completion of a performance year, the Medicare claims payments for services furnished to the beneficiary during the episode, based on claims data, would be combined to calculate an actual episode payment. The actual episode payment is defined as the sum of related Medicare claims payments for items and services furnished to a beneficiary during a CCJR episode. The actual episode payment would then be reconciled against an established CCJR target price, with consideration of additional payment adjustments based on quality performance and post-episode spending. The amount of this calculation, if positive, would be paid to the participant hospital. This payment would be called a reconciliation payment. If negative, we would require repayment from the participant hospital. We propose Medicare would require repayment of the difference between the actual episode payments and the CCJR target price from a participant hospital if the CCJR target price is exceeded. We propose to make reconciliation payments to participant hospitals that achieve quality outcomes and cost efficiencies relative to the established CCJR target prices in all performance years of the model. We also propose to phase in the requirement that participant hospitals whose actual episode payments exceed the applicable CCJR target price pay the difference back to Medicare beginning in performance year 2. Under this proposal, Medicare would not require repayment from hospitals for performance year 1 for actual episode payments that exceed their target price in performance year 1. We also propose to limit how much a hospital can gain or lose based on its actual episode payments relative to target prices. We also propose additional policies to further limit the risk of high payment cases for all participant hospitals and for special categories of participant hospitals as described in section III.C. of this proposed rule. 4. Similar Previous and Concurrent Models This proposed model is informed by other models and demonstrations currently and previously conducted by CMS and would explore additional ways to enhance coordination of care and improve the quality of services through bundled payments. We recently announced the Oncology Care Model (OCM), a new voluntary payment model for physician practices administering chemotherapy. Under OCM, practices will enter into payment arrangements that include financial and performance accountability for episodes of care surrounding chemotherapy administration to cancer patients. We plan to coordinate with other payers to align with OCM in order to facilitate enhanced services and care at participating practices. More information on the OCM can be found on the Innovation Center's Web site at: http://innovation.cms.gov/initiatives/Oncology-Care/. Medicare tested innovative approaches to paying for orthopedic services in the Medicare Acute Care Episode (ACE) demonstration, a prior demonstration, and is currently testing additional approaches under BPCI. Both of these models have also informed the design of the CCJR model. Under the authority of section 1866C of the Act, we conducted a 3-year demonstration, the Medicare Acute Care Episode (ACE) Demonstration. The demonstration used a prospective global payment for a single episode of care as an alternative approach to payment for service delivery under traditional Medicare FFS. The episode of care was defined as a combination of Part A and Part B services furnished to Medicare FFS beneficiaries during an inpatient hospital stay for any one of a specified set of cardiac and orthopedic MS-DRGs. The MS-DRGs tested included 469 and 470, those proposed for inclusion in the CCJR model. The discounted bundled payments generated an average gross savings to Medicare of $585 per episode for a total of $7.3 million across all episodes (12,501 episodes) or 3.1 percent of the total expected costs for these episodes. After accounting for increased post-acute care costs that were observed at two sites, Medicare saved approximately $4 million, or 1.72 percent of the total expected Medicare spending. More information on the ACE Demonstration can be found on the Innovation Center's Web site at: http://innovation.cms.gov/initiatives/ACE/. We are currently testing the BPCI initiative. The BPCI initiative is comprised of four related payment models, which link payments for multiple services that Medicare beneficiaries receive during an episode of care into a bundled payment. Under the initiative, entities enter into payment arrangements with CMS that include financial and performance accountability for episodes of care. Episodes of care under the BPCI initiative begin with either—(1) an inpatient hospital stay or (2) post-acute care services following a qualifying inpatient hospital stay. The BPCI initiative is evaluating the effects of episode-based payment approaches on patient experience of care, outcomes, and cost of care for Medicare FFS beneficiaries. Each of the four models tests LEJR episodes of care. While final evaluation results for the models within the BPCI initiative are not yet available, we believe that CMS' experiences with BPCI support the design of the CCJR model. Under section 1115A(c) of the Act, the Secretary may, taking into consideration an evaluation conducted under section 1115A(b)(4) of the Act, “through rulemaking, expand (including implementation on a nationwide basis) the duration and the scope of a model that is being tested under” the Innovation Center's authority. CCJR is not an expansion of BPCI, and BPCI may be expanded in the future. CMS published a discussion item soliciting public comment on a potential future expansion of one or more of the models within BPCI in the CY2016 IPPS rule, 80 FR 24414 through 24418. CCJR would not be not an expansion or modification of BPCI; nor does it reflect comments received in response to the NPRM for the 2016 IPPS Rule. CCJR is a unique model that tests a broader, different group of hospitals than BPCI. It is necessary to provide CMS with information about testing bundled payments to hospitals that are required to participate in an alternative payment model. For a discussion of why we are requiring hospitals to participate in the CCJR model, see section III.A of this proposed rule. The CCJR model's design was informed to a large degree by our experience with BPCI Model 2. BPCI's Model 2 is a voluntary episode payment model in which a qualifying acute care hospitalization initiates a 30, 60 or 90 day episode of care. The episode of care includes the inpatient stay in an acute care hospital and all related services covered under Medicare Parts A and B during the episode, including post-acute care services. More information on BPCI Model 2 can be found on the Innovation Center's Web site at: http://innovation.cms.gov/initiatives/BPCI-Model-2/. Further information of why elements of the OCM, the ACE Demonstration, and BPCI Model 2 were incorporated into the design of the CCJR model is discussed later in this proposed rule. 5. Overlap With Ongoing CMS Efforts We propose to exclude from participation in CCJR certain hospitals participating in the risk-bearing phase of BPCI Models 2 and 4 for LEJR episodes, as well as acute care hospitals participating in BPCI Model 1. We propose not to exclude beneficiaries in CCJR model episodes from being included in other Innovation Center models or CMS programs, such as the Medicare Shared Savings Program, as detailed later in this proposed rule. We propose to account for overlap, that is, where CCJR beneficiaries are also included in other models and programs to ensure the financial policies of CCJR are maintained and results and spending reductions are attributed to the correct model or program. 6. Quality Measures and Reporting Requirements We are proposing to adopt three hospital-level quality of care measures for the CCJR model. Those measures include a complication measure, readmission measure, and a patient experience survey measure. We propose to use these measures to test the success of the model in achieving its goals under section 1115A of the Act and to monitor for beneficiary safety. We intend to publicly report this information on the Hospital Compare Web site. Additionally, we are proposing and requesting public feedback on possible voluntary submission of data to support the development of a hospital-level measure of patient-reported outcomes following an elective Primary Total Hip (THA) or Total Knee Arthroplasty (TKA). 7. Data Sharing Process We propose to share data with participant hospitals upon request throughout the performance period of the CCJR model to the extent permitted by the HIPAA Privacy Rule and other applicable law. We propose to share upon request both raw claims-level data and claims summary data by service line with participants. This approach would allow participant hospitals without prior experience analyzing claims to use summary data to receive useful information, while allowing those participant hospitals who prefer raw claims-level data the opportunity to analyze claims. We propose to provide hospitals with up to 3 years of retrospective claims data upon request that will be used to develop their target price, as described in section III.C of this proposed rule. In accordance with the HIPAA Privacy Rule, we would limit the content of this data set to the minimum data necessary for the participant hospital to conduct quality assessment and improvement activities and effectively coordinate care of its patient population. 8. Beneficiary Protections Under the CCJR model, beneficiaries retain the right to obtain health services from any individual or organization qualified to participate in the Medicare program. Under the CCJR model, eligible beneficiaries who receive services from a participant hospital would not have the option to opt out of inclusion in the model. We propose to require participant hospitals to supply beneficiaries with written information regarding the design and implications of this model as well as their rights under Medicare, including their right to use their provider of choice. We will also make a robust effort to reach out to beneficiaries and their advocates to help them understand the CCJR model. We also propose to use our existing authority, if necessary, to audit participant hospitals if claims analysis indicates an inappropriate change in delivered services. Beneficiary protections are discussed in greater depth in section III.E. of this proposed rule. 9. Financial Arrangements and Program Policy Waivers We propose to hold participant hospitals financially responsible for CCJR LEJR episodes as participants in the model as discussed in section III.C.10.a. of this proposed rule. Specifically, only these hospital participants would be directly subject to the requirements of this proposed rule for the CCJR model. Participant hospitals would be responsible for ensuring that other providers and suppliers collaborating with the hospital on LEJR episode care redesign are in compliance with the terms and conditions of the model. Several of the proposed Medicare program policy waivers outline the conditions under which skilled nursing facilities (SNFs) and physicians could furnish and bill for certain services furnished to CCJR beneficiaries where current Medicare programs rules would not permit such billing. We draw the attention of SNFs and physicians to these proposals that are included in section III.C.10.b.(5). of this proposed rule. C. Summary of Economic Effects As shown in our impact analysis, we expect the proposed model to result in savings to Medicare of $153 million over the 5 years of the model. More specifically, in performance year 1 of the model, we estimate a Medicare cost of approximately $23 million, as we have proposed that hospitals will not be subject to downside risk in the first year of the model. As we introduce downside risk beginning in performance year 2 of the model, we estimate Medicare savings of approximately $29 million. In performance year 3 of the model, we estimate Medicare savings of $43 million. In performance years 4 and 5 of the model, as we have proposed to move from target episode pricing that is based on a hospital's experience to target pricing based on regional experience, we estimate Medicare savings of $50 million and $53 million, respectively. Additionally, hospitals must meet or exceed specific thresholds on performance on certain quality of care measures in order to be eligible for a reconciliation payment and as the performance threshold increases in performance years 4 through 5, we estimate additional savings. As a result, we estimate the net savings to Medicare to be $153 million over the 5 years of the model. We anticipate there would be a broader focus on care coordination and quality improvement for LEJR episodes among hospitals and other providers within the Medicare program that would lead to both increased efficiency in the provision of care and improved quality of the care provided to beneficiaries. We note that under section 1115A(b)(3)(B) of the Act, the Secretary is required to terminate or modify a model unless certain findings can be made with respect to savings and quality after the model has begun. If during the course of testing the model it is determined that termination or modification is necessary, such actions would be undertaken through rulemaking. II. Background This proposed rule proposes the implementation of a new innovative health care payment model under the authority of section 1115A of the Act. Under the model, called the CCJR model, acute care hospitals in certain selected geographic areas will receive bundled payments for episodes of care where the diagnosis at discharge includes a lower extremity joint replacement or reattachment of a lower extremity that was furnished by the hospital. We are proposing that the bundled payment will be paid retrospectively through a reconciliation process; hospitals and other providers and suppliers will continue to submit claims and receive payment via the usual Medicare FFS payment systems. All related care covered under Medicare Part A and Part B within 90 days after the date of hospital discharge from the joint replacement procedure will be included in the episode of care. We believe this model will further our goals of improving the efficiency and quality of care for Medicare beneficiaries for these common medical procedures. III. Provisions of the Proposed Rule A. Proposed Definition of the Episode Initiator and Selected Geographic Areas 1. Background The CCJR model is different from BPCI because it would require participation of all hospitals (with limited exceptions) throughout selected geographic areas, which would result in a model that includes varying hospital types. However, a discussion of BPCI is relevant because its design informs and supports the proposed CCJR model. The BPCI model is voluntary, and under that model we pay a bundled payment for an episode of care only to entities that have elected to participate in the model. We are interested in testing and evaluating the impact of an episode payment approach for LEJRs in a variety of other circumstances, including among those hospitals that have not chosen to voluntarily participate because we have not tested bundled payments for these hospitals previously. This would allow CMS and participants to gain experience testing and evaluating episode-based payment for LEJR procedures furnished by hospitals with a variety of historic utilization patterns; roles within their local markets; volume of services provided; access to financial, community, or other resources; and population and health care provider density. Most importantly, participation of hospitals in selected geographic areas will allow CMS to test bundled payments without introducing selection bias such as the selection bias inherent in the BPCI model due to self-selected participation. 2. Proposed Definition of Episode Initiator In BPCI Model 2, LEJR episode initiators are either acute care hospitals where the LEJR procedure is performed or physician group practices whose physician members are the admitting or operating physician for the hospital stay. Thus, under BPCI, it is possible that only some Medicare cases that could potentially be included in an LEJR episode at a specific hospital are actually being tested in BPCI. For example, if the hospital itself is not participating as an episode initiator under BPCI, yet some physicians who admit patients to the hospital are members of physician group practices participating in BPCI, not all of the hospital's possible LEJR episodes are tested and paid under BPCI. Under the proposed CCJR model, as described further in section III.B of this proposed rule, episodes would begin with admission to an acute care hospital for an LEJR procedure that is paid under the IPPS through Medical Severity Diagnosis-Related Group (MS-DRG) 469 (Major joint replacement or reattachment of lower extremity with MCC) or 470 (Major joint replacement or reattachment of lower extremity without MCC) and end 90 days after the date of discharge from the hospital. For the CCJR model, we propose that hospitals would be the only episode initiators. For purposes of CCJR, the term “hospital” means a hospital as defined in section 1886(d)(1)(B) of the Act. This statutory definition of hospital includes only acute care hospitals paid under the IPPS. Under this proposal, all acute care hospitals in Maryland would be excluded from CCJR. The state of Maryland entered into an agreement with CMS, effective January 1, 2014, to participate in CMS' new Maryland All-Payer Model. In order to implement the Maryland All-Payer Model, CMS waived certain requirements of the Act, and the corresponding implementing regulations, as set forth in the agreement between CMS and Maryland. Specifically, under the Maryland All-Payer Model, Maryland acute care hospitals are not paid under the IPPS or OPPS but rather are paid under rates set by the state. Following the model's performance period, Maryland will transition to a new model that incorporates the full spectrum of care, not just hospital services. As such, with respect to Maryland hospitals, CMS intends to test and develop new payment and delivery approaches that can incorporate non-hospital services in a manner that accounts for Maryland's unique hospital rate setting system and permit Maryland to develop its own strategy to incentivize higher quality and more efficient care across clinical situations within and beyond hospitals, including but not limited to LEJR episodes of care. We are proposing that payments to Maryland hospitals would be excluded in the regional pricing calculations as described in section III.C.4 of this proposed rule. We seek comment on this proposal and whether there are potential approaches for including Maryland acute care hospitals in CCJR. In addition, we seek comment on whether Maryland hospitals should be included in CCJR in the future upon any termination of the Maryland All-Payer Model. We propose to designate IPPS hospitals as the episode initiators to ensure that all Medicare FFS LEJR services furnished by participant hospitals in selected geographic areas to beneficiaries who do not meet the exclusion criteria specified in section III.B.3 of this proposed rule and are not BPCI episodes that we are proposing to exclude as outlined in this section and also in section III.C.7 of this proposed rule are included in the CCJR model. We are proposing certain exceptions to the inclusion of hospitals in the CCJR Model, as discussed in section III.C. of this proposed rule. Given that our proposal to initiate the LEJR episode begins with an admission to a hospital paid under the IPPS that results in a discharge assigned to MS-DRG 469 or 470, we believe that utilizing the hospital as the episode initiator is a straightforward approach for this model because the hospital furnishes the LEJR procedure. In addition, we are interested in testing a broad model in a number of hospitals under the CCJR model in order to examine results from a more generalized payment model. Thus, we believe it is important that, in a model where hospital participation is not voluntary, all Medicare FFS LEJR episodes that begin at the participant hospital in a selected geographic area are included in the model for beneficiaries that do not meet the exclusion criteria specified in section III.B.3 of this proposed rule and are not BPCI episodes that we are proposing to exclude as outlined in this section and also in section III.C.7 of this proposed rule. This is best achieved if the hospital is the episode initiator. Finally, as described in the following sections that present our proposed approach to geographic area selection, this geographic area selection approach relies upon our definition of hospitals as the entities that initiate episodes. We seek comment on our proposal to define the episode initiator as the hospital under CCJR. 3. Financial Responsibility for the Episode of Care BPCI Model 2 participants that have entered into agreements with CMS to bear financial responsibility for an episode of care include acute care hospitals paid under the IPPS, health systems, physician-hospital organizations, physician group practices, and non-provider business entities that act as conveners by coordinating multiple health care providers' participation in the model. Thus, our evaluation of BPCI Model 2 will yield information about how results for LEJR episodes may differ based on differences in which party bears financial responsibility for the episode of care. For the CCJR model, we propose to make hospitals financially responsible for the episode of care for several reasons. We recognize that ideally all of the providers involved in the continuum of care for Medicare beneficiaries in a 90-day post-discharge LEJR episode would work together to determine the best structure for managing the LEJR episode, develop an efficient process that leads to high quality care, track information across the episode about quality and Medicare expenditures, and align financial incentives using a variety of approaches, including gainsharing. However, because the proposed CCJR model is testing a more generalizable model by including hospitals that might not participate in a voluntary model and includes episodes initiated at a wide variety of hospitals, we believe it is most appropriate to identify a single type of provider to bear financial responsibility for making repayment to CMS under the model. Hospitals play a central role in coordinating episode-related care and ensuring smooth transitions for beneficiaries undergoing LEJR procedures. Moreover, the episode always begins with an acute care hospital stay, IPPS payments for LEJRs comprise about 50 percent of Medicare payments for a 90-day episode, and the beneficiary's recovery from surgery begins during the hospital stay. Most hospitals already have some infrastructure related to health information technology, patient and family education, and care management and discharge planning. This includes post-acute care (PAC) coordination infrastructure and resources such as case managers, which hospitals can build upon to achieve efficiencies under this episode payment model. Many hospitals also have recently heightened their focus on aligning their efforts with those of community providers to provide an improved continuum of care due to the incentives under other CMS models and programs, including Accountable Care Organization (ACO) initiatives such as the Medicare Shared Savings Program (MSSP), and the Hospital Readmissions Reduction Program (HRRP), establishing a base for augmenting these efforts under the CCJR model. In view of our proposal that hospitals be the episode initiators under this model, we believe that hospitals are more likely than other providers to have an adequate number of episode cases to justify an investment in episode management for this model. We also believe that hospitals are most likely to have access to resources that would allow them to appropriately manage and coordinate care throughout the LEJR episode. Finally, the hospital staff is already involved in discharge planning and placement recommendations for Medicare beneficiaries, and more efficient PAC service delivery provides substantial opportunities for improving quality and reducing costs under CCJR. We considered requiring treating physicians (orthopedic surgeons or others) or their associated physician group practices, if applicable, to be financially responsible for the episode of care under the CCJR Model. We expect that every Medicare beneficiary discharged with a diagnosis grouped under MS-DRG 469 or 470 would have an operating physician and an admitting physician for the hospital stay. However, the services of providers other than the hospital where the acute care hospital stay for the LEJR procedure (hereinafter “the anchor hospitalization”) occurs would not necessarily be furnished in every LEJR episode. For example, that physicians of different specialties play varying roles in managing patients during an acute care hospitalization for a surgical procedure and during the recovery period, depending on the hospital and community practice patterns and the clinical condition of the beneficiary and could not be assumed to be included in every LEJR episode. This variability would make requiring a particular physician or physician group practice to be financially responsible for a given episode very challenging. If we were to assign financial responsibility to the operating physician, it is likely that there would be significant variation in the number of relevant episodes that could be assigned to an individual person. Where the physician was included in a physician group practice, episodes could be aggregated to this group level but this would not be possible for all cases and would likely still have low volume concerns. We believe that the small sample sizes accruing to individual physician and physician group practices would make systematic care redesign inefficient and more burdensome, given that we are proposing to test all episodes occurring at hospitals selected for participation for beneficiaries that do not meet the exclusion criteria specified in section III.B.3 of this proposed rule and are not BPCI episodes that we are proposing to exclude as outlined in this section and also in section III.C.7 of this proposed rule. Finally, we note that although the BPCI initiative includes the possibility of a physician group practice as a type of initiating participant, the physician groups electing to participate in BPCI have done so because their practice structure supports care redesign and other infrastructure necessary to bear financial responsibility for episodes and is not necessarily representative of the typical group practice. In addition, most of the physician group practices in BPCI are not bearing financial responsibility, but are participating in BPCI as partners with convener organizations (discussed later in this section), which enter into agreements with CMS, on behalf of health care providers such as physician group practices, through which they accept financial responsibility for the episode of care. The infrastructure necessary to accept financial responsibility for episodes is not present across all physician group practices, and thus we do not believe it would be appropriate to designate physician group practices to bear the financial responsibility for making repayments to CMS under the proposed CCJR model. We seek comment on our proposal to require the hospital to bear the financial responsibility for the episodes of care under CCJR. We are proposing that hospitals will bear the financial responsibility for LEJR episodes of care under CCJR. However, because there are LEJR episodes currently being tested in BPCI Model 1, 2, 3 or 4, we believe that participation in CCJR should not be required if it would disrupt testing of LEJR episodes already underway in BPCI models. Therefore, we are proposing that IPPS hospitals located in an area selected for the model that are active Model 1 BPCI participant hospitals as of July 1, 2015 or episode initiators for LEJR episodes in the risk-bearing phase of Model 2 or 4 of BPCI as of July 1, 2015, would be excluded from participating in CCJR during the time that their qualifying episodes are included in one of the BPCI models. Likewise, we are proposing that if the participant hospital is not an episode initiator for LEJR episodes under BPCI Model 2, then LEJR episodes initiated by other providers or suppliers under BPCI Model 2 or 3 (where the surgery takes place at the participant hospital) would be excluded from CCJR. Otherwise qualifying LEJR episodes (that is, those that are not part of a Model 3 BPCI LEJR episode or a Model 2 physician group practice-initiated LEJR episode) at the participant hospital would be included in CCJR. While we propose that the participant hospital be financially responsible for the episode of care under CCJR, we also believe that effective care redesign for LEJR episodes requires meaningful collaboration among acute care hospitals, PAC providers, physicians, and other providers and suppliers within communities to achieve the highest value care for Medicare beneficiaries. We believe it may be essential for key providers to be aligned and engaged, financially and otherwise, with the hospitals, with the potential to share financial responsibility with those hospitals. We note that all relationships between and among providers and suppliers must comply with all relevant laws and regulations, including the fraud and abuse laws and all Medicare payment and coverage requirements unless otherwise specified further later in this section and in section III.C.10 of this proposed rule. Depending on a hospital's current degree of clinical integration, new and different contractual relationships among hospitals and other health care providers may be important, although not necessarily required, for CCJR model success in a community. We acknowledge that financial incentives for other providers may be important aspects of the model in order for hospitals to partner with these providers and incentivize certain strategies to improve episode efficiency. In the BPCI initiative, participants have entered a variety of relationships with entities above the hospital level. Some of these relationships are ones where the financial risk is borne by the entity other than the hospital, such as a parent organization (known as awardee conveners) and others have managerial or other responsibility relationships with other organizations (known as facilitator conveners) but financial responsibility remains with the episode initiator . We acknowledge the important role that conveners play in the BPCI initiative with regard to providing infrastructure support to hospitals and other entities initiating episodes in BPCI. The convener relationship (where another entity assumes financial responsibility) may take numerous forms, including contractual (such as a separate for-profit company that agrees to take on a hospital's financial risk in the hopes of achieving financial gain through better management of the episodes) and through ownership (such as when risk is borne at a corporate level within a hospital chain). However, we are proposing that for the CCJR model, we would hold only the participant hospitals financially responsible for the episode of care. This is consistent with the goal of evaluating the impact of bundled payment and care redesign across a broad spectrum of hospitals with varying levels of infrastructure and experience in entering into risk-based reimbursement arrangements. If conveners were included as participants in CCJR, we may not gain the knowledge of how a variety of hospitals can succeed in relationship with CMS in which they bear financial risk for the episode of care. We acknowledge that CCJR hospitals may wish to enter into relationships with other entities in order to manage the episode of care or distribute risk. We do not intend to restrict the ability of hospitals to enter into administrative or risk sharing arrangements related to this model. We refer readers to section III.C.10 of this proposed rule for further discussion of model design elements that may outline financial arrangements between participant hospitals and other providers and suppliers. 4. Proposed Geographic Unit of Selection and Exclusion of Selected Hospitals In determining which hospitals to include in the CCJR model, we considered whether the model should be limited to hospitals where a high volume of LEJRs are performed, which would result in a more narrow test on the effects of an episode-based payment, or whether to include all hospitals in particular geographic areas, which would result in testing the effects of an episode-based payment approach more broadly across an accountable care community seeking to coordinate care longitudinally across settings. Selecting certain hospitals where a high volume of LEJRs are performed may allow for fewer hospitals to be selected as model participants, but still result in a sufficient number of CCJR episodes to evaluate the success of the model. However, there would be more potential for behavioral changes that could include patient shifting and steering between hospitals in a given geographic area that could impact the test. Additionally, this approach would provide less information on testing episode payments for LEJR procedures across a wide variety of hospitals with different characteristics. Selecting geographic areas and including all IPPS hospitals in those areas not otherwise excluded due to BPCI overlap as previously described and in section III.C.7 of this proposed rule as model participants would help to minimize the risk of participant hospitals shifting higher cost cases out of the CCJR model. Moreover, in selecting geographic areas we could choose certain characteristics, stratify geographic areas according to these characteristics, and randomly select geographic areas from within each stratum. Such a stratified random sampling method based on geographic area would allow us to observe the experiences of hospitals with various characteristics, such as variations in size, profit status, and episode utilization patterns, and examine whether these characteristics impact the effect of the model on patient outcomes and Medicare expenditures within episodes of care. Stratification would also substantially reduce the extent to which the selected hospitals will differ from non-selected hospitals on the characteristics used for stratification, which would improve the statistical power of the subsequent model evaluation, improving our ability to reach conclusions about the model's effects on episode costs and the quality of patient care. Therefore, given the authority in section 1115A(a)(5) of the Act, which allows the Secretary to elect to limit testing of a model to certain geographic areas, we propose to use a stratified random sampling method to select geographic areas and require all hospitals paid under the IPPS in those areas to participate in the CCJR model and be financially responsible for the cost of the episode, with certain exceptions as previously discussed and in sections III.B.3 and III.C.7 of this proposed rule. a. Overview and Options for Geographic Area Selection In determining the geographic unit for the geographic area selection for this model, we considered using a stratified random sampling methodology to select (1) certain counties based on their Core-Based Statistical Area (CBSA) status, (2) certain zip codes based on their Hospital Referral Regions (HRR) status or (3) certain states. We address each geographic unit in turn. We considered selecting certain counties based on their CBSA status. The general concept of a CBSA is that of a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration within that core. Counties are designated as part of a CBSA when the county or counties or equivalent entities are associated with at least one core (urbanized area or urban cluster) of at least 10,000 in population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties associated with the core. There are 929 CBSAs currently used for geographic wage adjustment purposes across Medicare payment systems. 4 The 929 CBSAs include 388 Metropolitan Statistical Areas (MSAs), which have an urban core population of at least 50,000, and the 541 Micropolitan Statistical Areas (µSA), which have an urban core population of at least 10,000 but less than 50,000. CBSAs may be further combined into a Combined Statistical Area (CSA) which consists of two or more adjacent CBSAs (MSAs or µSAs or both) with substantial employment interchange. Counties not classified as a CBSA are typically categorized and examined at a state level. 4 As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB issued OMB Bulletin No. 13-01, which established revised delineations for MSAs, µSAs, and CSAs, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. The choice of a geographical unit based on CBSA status could mean selection of a CBSA, an MSA, or a CSA. We propose basing the selection on an MSA, which we will discuss later in this section. In determining which geographic areas will be potentially subject to selection, we focused on MSAs, which is a subcategory within CBSA characterized by counties associated with an urban core population of at least 50,000. It is our intention at this time that counties not in an MSA would not be subject to the selection process. These counties not subject to selection would include the µSA counties and the counties without a core urban area of at least 10,000. These areas are largely rural areas and have a limited number of qualifying LEJR cases. Relatively few of these areas would be able to qualify for inclusion based on the minimum number of LEJR episodes in year requirement discussed later in this section. We considered, but ultimately decided against, using CSA designation instead of MSAs as a potential unit of selection. Under this scenario, we would look at how OMB classifies counties. We would first assess whether a county has been identified as belonging to a CSA, a unit which consists of adjacent MSAs or µSAs or both. If the county was not in a CSA, we would determine if it was in an MSA that is not part of a larger CSA. Counties not associated with a CSA or an MSA would be unclassified and excluded from selection. These unclassified areas would include the counties in a state that were either not a CBSA (no core area of at least 10,000) or associated with a µSA (core area of between 10,000 and 50,000) but unaffiliated with a CSA. Whether to select on the basis of CSA/MSAs or just on MSAs was influenced by a number of factors including an assessment with respect to the anticipated degree to which LEJR patients would be willing to travel for their initial hospitalization, the extent to which surgeons are expected to have admitting privileges in multiple hospitals located in different MSAs and considerations related to the degree to which we desire to include hospitals within µSAs that are part of a larger CSA. It was believed that the anticipated risk for patient shifting and steering between MSAs within a CSA was not severe enough to warrant selecting CSAs. However, for these same reasons, we believe that selecting complete MSAs is preferable to selecting metropolitan divisions of MSAs for inclusion in the CCJR model. We use the metropolitan divisions to set wage indices for its prospective payment systems. Of the 388 MSAs, there are 11 MSAs that contain multiple metropolitan divisions. For example, the Boston-Cambridge-Newton, MA-NH MSA is divided into the following metropolitan divisions: • Boston, MA. • Cambridge-Newton-Framingham, MA. • Rockingham County-Strafford County, NH. The Seattle-Tacoma-Bellevue, WA MSA is divided into the following metropolitan divisions: • Seattle-Bellevue-Everett, WA. • Tacoma-Lakewood, WA. We propose selecting entire MSAs rather than sub-divisions within an MSA. We next considered selecting hospital referral regions (HRRs). HRRs represent regional health care markets for tertiary medical care. There are 306 HRRs with at least one city where both major cardiovascular surgical procedures and neurosurgery are performed. HRRs are defined by determining where the majority of patients were referred for major cardiovascular surgical procedures and for neurosurgery. 5 Compared to MSAs, HRRs are classified based on where the majority of beneficiaries within a zip code receive their hospital services for selected tertiary types of care. The resulting HRRs represent the degree to which people travel for tertiary care that generally requires the services of a major referral center and not the size of the referral network for more routine services, such as knee and hip arthroplasty procedures. In addition, because HRRs are defined based on referrals for cardiovascular surgical procedures and neurosurgery, they may not reflect referrals for orthopedic procedures. Therefore, we believe that MSAs as a geographic unit are preferable over HRRs for this model. 5 The Dartmouth Atlas of Healthcare, http://www.dartmouthatlas.org/data/region/ . Accessed on April 9, 2015. We also considered selecting states for the CCJR model. However, we concluded that MSAs as a geographic unit are preferable over states for the CCJR model. As mentioned in section III.A.4.b of this proposed rule, we anticipate that hospitals that would otherwise be required to participate in the CCJR model would be excluded from the model because their relevant LEJR episodes are already being tested in BPCI. If we were to select states as the geographic unit, there is a potential that an entire state would need to be excluded because a large proportion of hospitals in that state are episode initiators of LEJR episodes in BPCI. In contrast, if we excluded a specific MSA due to BPCI participation, as discussed in the next section, we could still select another MSA within that same state. Likewise, if we chose states as the geographic unit, we would automatically include hospitals in all rural areas within the state selected. If MSAs are selected for the geographic unit, we anticipate that fewer small rural hospitals would be included in the model. Using a unit of selection smaller than a state would allow for a more deliberate choice about the extent of inclusion of rural or small population areas. Selecting states rather than MSAs would also greatly reduce the number of independent geographic areas subject to selection under the model, which would decrease the statistical power of the model evaluation. Finally, MSAs straddle state lines where providers and Medicare beneficiaries can easily cross these boundaries for health care. Choosing states as the geographic unit would potentially divide a hospital market and set up a greater potential for patient shifting and steering to different hospitals under the model. The decision that the MSA-level analysis was more analytically appropriate was based on the specifics of this model and not meant to imply that other levels of selection would not be appropriate in a different model such as the proposed Home Health Value Based Purchasing (HHVBP) model. For the reasons previously discussed, we propose to require participation in the CCJR model of all hospitals, with limited exceptions as previously discussed in section III.A.2.of this proposed rule, paid under the IPPS that are physically located in a county in an MSA selected through a stratified random sampling methodology, outlined in section III.A.3.b in this proposed rule, to test and evaluate the effects of an episode-based payment approach for an LEJR episodes. We propose to determine that a hospital is located in an area selected if the hospital is physically located within the boundary of any of the counties in that MSA as of the date the selection is made. Although MSAs are revised periodically, with additional counties added or removed from certain MSAs, we propose to maintain the same cohort of selected hospitals throughout the 5 year performance period of the model with limited exceptions as described later in this section. Thus, we propose not to add hospitals to the model if after the start of the model new counties are added to one of the selected MSAs or remove hospitals from the model if counties are removed from one of the selected MSAs. We believe that this approach will best maintain the consistency of the participants in the model, which is crucial for our ability to evaluate the results of the model. However, we retain the possibility of adding a hospital that is opened or incorporated within one of the selected counties after the selection is made and during the period of performance. (See section III.C.of this proposed rule for discussion of how target prices will be determined for such hospitals.) Although we considered including hospitals in a given MSA based on whether the hospitals were classified into the MSA for IPPS wage index purposes, this process would be more complicated, and we could not find any compelling reasons favoring this approach. For example, we assign hospitals to metro divisions of MSAs when those divisions exist. See our previous discussion of this issue. In addition, there is the IPPS process of geographic reclassification by which a hospital's wage index value or standardized payment amount is based on a county other than the one where the hospital is located. For the purpose of this model, it is simpler and more straightforward to use the hospital's physical location as the basis of assignment to a geographic unit. This decision would have no impact on a hospital's payment under the IPPS. We seek comment on our proposal to include participant hospitals for the CCJR model based on the physical location of the hospital in one of the counties included in a selected MSA. b. MSA Selection Methodology We propose to select the MSAs to include in the CCJR model by stratifying all of the MSAs nationwide according to certain characteristics. (1) Exclusion of Certain MSAs Prior to assigning an MSA to a selection stratum, we examined whether the MSA met specific proposed exclusion criteria. MSAs were evaluated sequentially using the following 4 exclusion criteria: First, MSAs in which fewer than 400 LEJR episodes (determined as we propose to determine episodes included in this model, as discussed in section III.B.2) occurred from July 1, 2013 through June 30, 2014 were removed from possible selection. The use of the 400 LEJR cases in a year was based on a simple one-sided power calculation to assess the number of episodes that would be needed to detect a 5 percent reduction in episode expenditures. Accordingly, cases in hospitals paid under either the critical access hospital (CAH) methodology or the Maryland All-Payer Model are not included in the count of eligible episodes. This criterion removed 156 MSAs from possible selection. Second, MSAs were removed from possible selection if there were fewer than 400 non-BPCI LEJR episodes in the MSA in the reference year. For the purposes of this exclusion, the number of BPCI episodes was estimated as the number of potentially eligible cases during the reference year that occurred in acute care hospitals participating in BPCI Model 1, or in phase 2 of BPCI Models 2 or 4 as of July 1, 2015 and the number of LEJRs in 2013 and 2014 associated with these hospitals was examined. This criterion removed an additional 24 MSAs from potential selection. Third, MSAs were also excluded from possible selection if the MSA was dominated by BPCI Models 1, 2, 3, or 4 episodes to such a degree that it would impair the ability of participants in either the CCJR model or the BPCI models to succeed in the objectives of the initiative or impair the ability to set accurate and fair prices. We anticipate that some degree of overlap in the two programs will be mutually helpful for both models. There are two steps to this exclusion. First, we looked at the number of LEJR episodes at BPCI Model 1, 2 or 4 initiating hospitals and second, the number of LEJR episodes among BPCI Model 3 SNF and HHA episode initiators. We set the first cut off for this exclusion if, within an MSA, more than 50 percent of otherwise qualifying proposed CCJR episodes were in Phase 2 of BPCI Model 2 or 4 with hospital initiators. We set the second cut off for BPCI Model 3, based on if either SNF or HHA BPCI Model 3 initiating providers accounted for more than 50 percent of LEJR referrals to that provider type, the MSA would be eliminated from the possibility of selection. As a result of this third criterion, 4 additional MSAs were removed from possible selection. No MSAs were excluded based on Skilled Nursing Facility (SNF) or Health Home Agency (HHA) participation in Model 3. Finally, MSAs were removed if, after applying the previous 3 criteria they remained eligible for selection, but more than 50 percent of estimated eligible episodes during the reference year were not paid under the IPPS system. Please refer to the appenda for this proposed rule for the status of each MSA based on these exclusion criteria, available at http://innovation.cms.gov/initiatives/ccjr/. After applying these four exclusions, 196 MSAs remained to be stratified for purposes of our proposed selection methodology. (2) Proposed Selection Strata Numerous variables were considered as potential strata for classifying MSAs included in the model. However, our proposal is intended to give priority to transparency and understandability of the strata. We propose creating selection strata based on the following two dimensions: MSA average wage-adjusted historic LEJR episode payments and MSA population size. (a) MSA Average Wage-adjusted Historic LEJR Episode Payments. We were interested in being able to classify and divide MSAs according to their typical patterns of care associated with LEJR episodes. As a straightforward measure of LEJR patterns of care, we selected the mean MSA episode payment, as defined in this proposed rule. MSAs vary in their average episode payments. The average episode payments in an area may vary for a variety of reasons including—1) in response to the MS-DRG mix and thus the presence of complicating conditions; 2) readmission rates; 3) practice patterns associated with type of PAC provider(s) treating beneficiaries; 4) variations of payments within those PAC providers, and 5) the presence of any outlier payments. The measure of both mean episode payments and median episode payments within the MSA was considered. We propose to stratify by mean because it would provide more information on the variation in episode payments at the high end of the range of payments. We are interested in the lower payment areas for the purpose of informing decisions about potential future model expansion. However, the CCJR model is expected to have the greatest impact in areas with higher average episode payments. The average episode payments used in this analysis were calculated based on the proposed episode definition for CCJR using Medicare claims accessed through the Chronic Conditions Warehouse for 3 years with admission dates from July 1, 2011 through June 30, 2014. Episode payments were wage-adjusted using the FY 2014 hospital wage index contained in the FY 2014 IPPS Final Rule, downloaded at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Data-Files.html. The adjusted payment was calculated by dividing the unadjusted payment by a factor equal to the sum of 0.3 plus the multiplicative product of 0.7 and the wage index value of the hospital where the LEJR was performed. Episodes in the database with IPPS payments less than $4,000 for the DRG 469 or 470 case were deleted as indicating that the hospital did not receive full payment for the LEJR procedure. We also truncated the episode payment at the 99.9th percentile of the distribution ($135,000) to limit the impact of extreme outliers. (b) MSA Population Size The second dimension proposed for the CCJR selection strata is the number of persons in the MSA. In deciding how best to incorporate the dimensions of urban density and availability of medical resources, a variety of measures were considered, including overall population in the included counties, overall population in the core area of the MSA, population over the age of 65 in the MSA, the number of hospital beds and the number of Medicare FFS LEJR procedures in a year. The reason we decided to include this dimension in the strata definition is that these factors are believed to be associated with the availability of resources and variations in practice and referral patterns by the size of the healthcare market. When examined, these alternative measures were all very highly correlated with one another, which allowed the use of one of these measures to be able to substitute for the others in the definition of the stratum. From these alternative approaches, we choose to use MSA population. In operationalizing this measure, MSAs were classified according to their 2010 census population. (c) Analysis of Strata The two proposed domains, MSA population and MSA historic LEJR episode spending, were examined using a K-Means factor analysis. The purpose of this factor analysis was to inform the process of which cut points most meaningfully classify MSAs. Factor analysis attempts to identify and isolate the underlying factors that explain the data using a matrix of associations. Factor analysis is an interdependence technique. Essentially, variables are entered into the model and the factors (or clusters) are identified based on how the input variables correlate to one another. The resulting clusters of MSAs produced by this methodology suggested natural cut points for average episode payments at $25,000 and $28,500. While not intentional, these divisions correspond roughly to the 25th and 75th percentiles of the MSA distribution. Cut points based on these percentiles seemed reasonable from statistical and face validity perspectives in the sense that they created groups that included an adequate number of MSAs and a meaningful range of costs. As a result of this analysis, we propose to classify MSAs according to their average LEJR episode payment into four categories based the on the 25th, 50th and 75th percentiles of the distribution of the 196 potentially selectable MSAs. This approach ranks the MSAs relative to one another and creates four equally sized groups of 49. The population distribution was divided at the median point for the MSAs eligible for potential selection. This resulted in MSAs being divided into two equal groups of 98. The characteristics of the resulting strata are shown in Table 1. Table 1—Summary Population and Episode Payment Statistics by MSA Group Payment in lowest quarter Payment in 2nd lowest quarter Payment in 3rd lowest quarter Payment in highest quarter Total eligilble MSAs with population less than median: Number of Eligible MSAs 33 19 22 24 98 Average of Population 251,899 238,562 268,331 254,154 253,554 Minimum MSA Population 96,275 55,274 106,331 96,024 55,274 Maximum MSA Population 425,790 416,257 424,858 428,185 428,185 Average Episode Payments ($) $22,994 $25,723 $27,725 $30,444 $26,410 Minimum Episode Payments $18,440 $24,898 $26,764 $29,091 $18,440 Maximum Episode Payments $24,846 $26,505 $28,679 $32,544 $32,544 MSAs with population more than median: Number of Eligible MSAs 16 30 27 25 98 Average of Population 1,530,083 1,597,870 1,732,525 2,883,966 1,951,987 Minimum MSA Population 464,036 436,712 434,972 439,811 434,972 Maximum MSA Population 4,335,391 5,286,728 12,828,837 19,567,410 19,567,410 Average Episode Payments ($) $23,192 $25,933 $27,694 $30,291 $27,082 Minimum Episode Payments $16,504 $25,091 $26,880 $28,724 $16,504 Maximum Episode Payments $24,819 $26,754 $28,659 $33,072 $33,072 Total Eligible MSAs 49 49 49 49 Note: Population and episode payment means are un-weighted averages of the MSA values within each of the eight MSA groups. Please refer to the addenda for this proposed rule for information on the non-excluded MSAs, their wage adjusted average LEJR episode spending, their population and their resultant group assignment at: http://innovation.cms.gov/initiatives/ccjr/ . (3) Factors Considered but Not Used in Creating Proposed Strata In addition to the two dimensions we are proposing to use for the selection groups previously discussed, a variety of possible alternative measures and dimensions were considered. Many of these variables are considered to be important but it was believed that it was important to have a fairly straightforward and easily understandable stratum definition. Simplicity, by definition, required that only the most important variables would be used. If a market characteristic under consideration was correlated with one of the chosen dimensions or it was believed that variations in the characteristic could be adequately captured by random selection within the strata, is was not prioritized for inclusion. Some of the factors considered that we are not proposing as dimensions are— • Measures associated with variation in practice patterns associated with LEJR episodes. In considering how to operationalize this measure, a number of alternatives were considered including total PAC LEJR payments in an MSA, percent of LEJR episodes with a SNF claim in an MSA, percent of LEJR episodes with an initial discharge to HHA, percent of LEJR episodes with an IRF claim, and percent of LEJR episodes with claims for two or more types of PAC providers; • Measures associated with relative market share of providers with respect to LEJR episodes; • Healthcare supply measures of providers in the MSA including counts of IRF beds, SNF beds, hospital beds, and number of orthopedic surgeons; • MSA level demographic measures such as; average income, distributions of population by age, gender or race, percent dually eligible, percent of population with specific health conditions or other demographic composition measures; and • Measures associated with the degree to which a market might be more capable or ready to implement care redesign activities. Examples of market level characteristics that might be associated with anticipated ease of implementation include the MSA-level EHR meaningful use levels, managed care penetration, ACO penetration and experience with other bundling efforts. It should be noted that, while these measures are proposed to be part of the selection stratus, we acknowledge that these and other market-level factors may be important to the proper understanding of the evaluation of the impact of CCJR. It is the intention that these and other measures will be considered in determining which MSAs are appropriate comparison markets for the evaluation as well as considered for possible subgroup analysis or risk adjustment purposes. The evaluation will include beneficiary, provider, and market level characteristics in how it examines the performance of this proposed model. (4) Sample Size Calculations and the Number of Selected MSAs Analyses of the necessary sample size led us to conclude that we need to select 75 MSAs of the 384 MSAs with eligible LEJR episodes to participate in CCJR. The number and method of selection of these 75 MSAs from the 8 proposed groups is addressed in the following section. In coming to the decision to target 75 MSAs, we are proposing a conservative approach. Going below this threshold would jeopardize our ability to be confident in our results and to be able to generalize from the model to the larger national context. We discuss the assumptions and modeling that went into our proposal to test the model in 75 MSAs later in this section. In calculating the necessary size of the model, a key consideration was to have sufficient power to be able to detect the desired size impact. The larger the anticipated size of the impact, the fewer MSAs we would have to sample in order to observe it. However, a model sized to be able to only detect large impacts runs the risk of not being able to draw conclusions if the size of the change is less than anticipated. The measure of interest used in estimating sample size requirements for the CCJR model was wage-adjusted total episode spending. The data used for the wage-adjusted total episode spending is the 3 year data pull previously described that covers LEJR episodes with admission dates from July 1, 2011 through June 30, 2014. For the purposes of the sample size calculation the impact estimate assumed we wanted to be able to detect a 2 percent reduction in wage adjusted episode spending after 1 year of experience. This amount was chosen because it is the anticipated amount of the discount we propose to apply to target prices in CCJR. The next consideration in calculating the necessary sample size is the degree of certainty we will need for the statistical tests that will be performed. In selecting the right sample size, there are two types of errors that need to be considered “false negatives” and “false positives”. A false positive occurs if a statistical test concludes that the model was successful (the model saved money) when it was, in fact, not. A false negative occurs if a statistical test fails to find statistically significant evidence that the model was successful, but it was, in fact, successful. In considering the minimum sample size needs of a model, a standard guideline in the statistical literature suggests calibrating statistical tests to generate no more than a 5 percent chance of a false positive and selecting the sample size to ensure no more than a 20 percent chance of a false negative. In contrast, the proposed sample size for this project was based on a 20 percent chance of a false positive and a 30 percent chance of a false negative in order to be as conservative as was practicable. A third consideration in the sample size calculation was the appropriate unit of selection and whether it is necessary to base the calculation on the number of MSAs, the number of hospitals, or the number of episodes. As discussed later in this section, we are proposing to base the sample size calculation at the MSA level. The CCJR model is a nested comparative study, which has two key features. First, the unit of assignment (to treatment and comparison groups) is an identifiable group; such groups are not formed at random, but rather through some physical, social, geographic, or other connection among their members. Second, the units of observation are members of those groups. In such designs, the major analytic problem is that there is an expectation for a positive correlation (intra-class correlation (ICC)) among observations of members of the same group (MSA). That ICC reflects an extra component of variance attributable to the group above and beyond the variance attributable to its members. This extra variation will increase the variance of any aggregate statistic beyond what would be expected with random assignment of beneficiaries or hospitals to the treatment group. In determining the necessary sample size, we need to take into consideration the degrees of freedom. As part of this process, we examined the number of beneficiaries, the number of hospitals, and the number of MSAs and the level of correlation in episode payments between each level. For example, while each beneficiary has their own episode expenditure level, there are commonalities between those expenditure amounts at the hospital level, based on hospital-specific practice and referral patterns. The number of degrees of freedom needed for any aggregate statistic is related to the number of groups (MSAs or hospitals), not the number of observations (beneficiary episodes). If we were to base the determination of the size of the model on beneficiary episodes where correlation exists, we would have an inflated false positive error rate and would overstate the impact of the model. We empirically examined the level of correlation between beneficiaries and hospitals and between hospitals and MSAs and determined that the correlation was high enough to be of concern and necessitate a MSA level unit of selection. Using the aforementioned assumptions, a power calculation was run which indicated we would need between 50 and 150 treatment MSAs to be able to reliably detect a 2 percent reduction in payments after 1 year. The lower end of this range assumes the ability of evaluation models to substantially reduce variation through risk adjustment and modeling. We anticipate that we will be able to use the conservative end of this range, but assuming that evaluation modeling can achieve “best” results poses a real risk to our ability to draw conclusions. We want to allow for some degree of flexibility and are thus proposing proceeding with 75 MSAs. The 75 MSA number is at the 25th percentile between the 50 and 150 treatment MSA range. We narrowed the acceptable range to between 50 and 100, based on the assumption that we will be able substantial improve our estimates through modeling, and then chose a number in the middle of this reduced range. (5) Method of Selecting MSAs As previously discussed, we are seeking to choose 75 MSAs from our proposed 8 selection groups. We examined and considered a number of possible approaches including equal selection in each of the eight groups, equal selection in the four payment groups, selection proportionate to the number of MSAs in each group, and a number of approaches that differentially weighted the payment categories. After consideration, it was decided that a methodology that proportionally under-weighted more efficient MSAs and over-weighted more expensive MSAs was the most appropriate approach to fulfilling the overall priorities of this model to increase efficiencies and savings for LEJR cases while maintaining or improving the overall quality of care. This approach would make it less likely for the MSAs in the lowest spending category to be selected for inclusion. We thought this appropriate because the MSAs in the lowest expenditure areas have the least room for possible improvement and are already performing relatively efficiently compared to other geographic areas, which means that experience with the model in these areas may be relatively less valuable for evaluation purposes. At the same time, we believed it was important to include some MSAs in this group in order to assess the performance of this model in this type of circumstance. We also believe it is appropriate for higher payment areas to be disproportionately included because they are most likely to have significant room for improvement in creating efficiencies. We expect more variation in practice patterns among the more expensive areas. There are multiple ways an MSA can be more relatively expensive, including through outlier cases, higher readmission rates, greater utilization of physician services, or through PAC referral patterns. A larger sample of MSAs within the higher payment areas will allow for us to observe the impact of the CCJR model on areas with these various practice patterns in the baseline period. The proposed method of disproportionate selection between the strata is to choose 30 percent of the MSAs in the two groups in the bottom quarter percentile of the payment distribution, 35 percent of the MSAs in the two groups in the second lowest quartile, 40 percent in the third quartile, and 45 percent in the highest episode payment quartile. This proportion works out to an average of 38 percent overall, which corresponds to 75 selected MSAs out of the 196 eligible. The number of MSAs to be chosen in the eight selection groups is shown in Table 2. Table 2—Number of MSAs To Be Chosen From the Eight Selection Groups Payment in lowest quarter Payment in 2nd lowest quarter Payment in 3rd lowest quarter Payment in highest quarter Total eligible MSAs Selection Proportion 30% 35% 40% 45% Less Than Median Population (Group #) (1) (2) (3) (4) Number Eligible MSAs 33 19 22 24 98 Proportion x Number 9.9 6.65 8.8 10.8 Number to be selected from group 10 7 9 11 37 More Than Median Population (Group #) (5) (6) (7) (8) Number Eligible MSAs 16 30 27 25 98 Proportion x Number 4.8 10.5 10.8 11.25 Number to be selected from group 5 11 11 11 38 Total Eligible MSAs 49 49 49 49 196 Number to be selected 15 18 20 22 75 We selected the proposed MSAs for the CCJR model through random selection. In the proposed method of selection, each MSA was assigned to one of the eight selection groups previously identified. Based on this sampling methodology, SAS Enterprise Guide 7.1 software was used to run a computer algorithm designed to randomly select MSAs from each strata. SAS Enterprise Guide 7.1 and the computer algorithm used to conduct selection represents an industry-standard for generating advanced analytics and provides a rigorous, standardized tool by which to satisfy the requirements of randomized selection. The key SAS commands employed include a “PROC SURVEYSELECT” statement coupled with the “METHOD=SRS” option used to specify simple random sampling as the sample selection method. A random number seed was generated for each of the eight strata by using eight number seeds corresponding to birthdates and anniversary dates of parties present in the room. The random seeds for stratum one through eight were as follows: 907, 414, 525, 621, 1223, 827, 428, 524. Note that no additional stratification was used in any of the eight groupings so as to produce an equal probability of selection within each of the eight groups. For more information on this procedure and the underlying statistical methodology, please reference SAS support documentation at: http://support.sas.com/documentation/cdl/en/statug/63033/HTML/default/viewer.htm#statug_surveyselect_sect003.htm/ . We also considered a potential alternative approach to this random selection in which we would generate a starting number within SAS and then choose every third MSA within a group starting at this point until the relevant number of MSAs were chosen. We opted to not utilize this feature for simplicity's sake and alignment with other randomization methodologies used for CMS models. The selection of an MSA means that all hospitals that are physically located anywhere within the counties that make up the MSA are included. By definition, the entire county is included in an MSA and hospitals that are in the relevant counties will be impacted even if they are not part of the core urban area. The MSAs selected may change if the methodology changes in response to comments on the proposed methodology. Should the methodology we propose in this rule change as a result of comments received during the rulemaking process, it could result in different areas being selected for the model. In such an event, we would apply the final methodology and announce the selected MSAs in the final rule. Therefore we seek comment from all interested parties in every MSA on the randomized selection methodology proposed in this section. In accordance with section 1115A of the Act, we are proposing to codify these proposals in regulation in the new proposed part 510 of the Code of Federal Regulations. Table 3—Proposed MSAS Included in the CCJR Model MSA MSA Name 10420 Akron, OH. 10740 Albuquerque, NM. 11700 Asheville, NC. 12020 Athens-Clarke County, GA. 12420 Austin-Round Rock, TX. 13140 Beaumont-Port Arthur, TX. 13900 Bismarck, ND. 14500 Boulder, CO. 15380 Buffalo-Cheektowaga-Niagara Falls, NY. 16020 Cape Girardeau, MO-IL. 16180 Carson City, NV. 16740 Charlotte-Concord-Gastonia, NC-SC. 17140 Cincinnati, OH-KY-IN. 17820 Colorado Springs, CO. 17860 Columbia, MO. 18580 Corpus Christi, TX. 19500 Decatur, IL. 19740 Denver-Aurora-Lakewood, CO. 20020 Dothan, AL. 20500 Durham-Chapel Hill, NC. 21780 Evansville, IN-KY. 22420 Flint, MI. 22500 Florence, SC. 22660 Fort Collins, CO. 23540 Gainesville, FL. 23580 Gainesville, GA. 24780 Greenville, NC. 25420 Harrisburg-Carlisle, PA. 26300 Hot Springs, AR. 26900 Indianapolis-Carmel-Anderson, IN. 28140 Kansas City, MO-KS. 28660 Killeen-Temple, TX. 29820 Las Vegas-Henderson-Paradise, NV. 30700 Lincoln, NE. 31080 Los Angeles-Long Beach-Anaheim, CA. 31180 Lubbock, TX. 31540 Madison, WI. 32780 Medford, OR. 32820 Memphis, TN-MS-AR. 33100 Miami-Fort Lauderdale-West Palm Beach, FL. 33340 Milwaukee-Waukesha-West Allis, WI. 33700 Modesto, CA. 33740 Monroe, LA. 33860 Montgomery, AL. 34940 Naples-Immokalee-Marco Island, FL. 34980 Nashville-Davidson—Murfreesboro—Franklin, TN. 35300 New Haven-Milford, CT. 35380 New Orleans-Metairie, LA. 35620 New York-Newark-Jersey City, NY-NJ-PA. 35980 Norwich-New London, CT. 36260 Ogden-Clearfield, UT. 36420 Oklahoma City, OK. 36740 Orlando-Kissimmee-Sanford, FL. 37860 Pensacola-Ferry Pass-Brent, FL. 38300 Pittsburgh, PA. 38940 Port St. Lucie, FL. 38900 Portland-Vancouver-Hillsboro, OR-WA. 39340 Provo-Orem, UT. 39740 Reading, PA. 40060 Richmond, VA. 40420 Rockford, IL. 40980 Saginaw, MI. 41860 San Francisco-Oakland-Hayward, CA. 42660 Seattle-Tacoma-Bellevue, WA. 42680 Sebastian-Vero Beach, FL. 43780 South Bend-Mishawaka, IN-MI. 41180 St. Louis, MO-IL. 44420 Staunton-Waynesboro, VA. 45300 Tampa-St. Petersburg-Clearwater, FL. 45780 Toledo, OH. 45820 Topeka, KS. 46220 Tuscaloosa, AL. 46340 Tyler, TX. 47260 Virginia Beach-Norfolk-Newport News, VA-NC. 48620 Wichita, KS. B. Episode Definition for the Comprehensive Care for Joint Replacement (CCJR) Model 1. Background Coordinated Quality Care-Joint Replacement is an episode payment model, focused on incentivizing health care providers to improve the efficiency and quality of care for an episode of care as experienced by a Medicare beneficiary by bundling payment for services furnished to the beneficiary for an episode of care for a specific clinical condition over a defined period of time. Key policies of such a model include the definition of episodes of care. Episodes of care have two significant dimensions—(1) a clinical dimension that describes what clinical conditions and associated services comprise the episode; and (2) a time dimension that describes the beginning, middle, and end of an episode. We present our proposals for these two dimensions of CCJR episodes in this section. 2. Clinical Dimension of Episodes of Care a. Definition of the Clinical Conditions Included in the Episode As discussed previously in section I.A. of this proposed rule, we have identified LEJR episodes, primarily hip and knee replacements, as the focus of this model. We believe that a straightforward approach for hospitals and other providers to identify Medicare beneficiaries in this payment model is important for the care redesign that is required for model success, as well as to operationalize the proposed payment and other model policies. The vast majority of lower extremity joint replacements (LEJRs) are furnished in the inpatient hospital setting, with a small fraction of partial knee replacements occurring in the hospital outpatient department (HOPD) setting. Most of the Current Procedural Terminology (CPT) codes that physicians report for LEJR are on the hospital Outpatient Prospective Payment System (OPPS) inpatient only list. The CY 2015 OPPS inpatient only list is Addendum E of the CY 2015 Hospital Outpatient Prospective Payment-Final Rule with Comment Period, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices-Items/CMS-1613-FC.html. Thus, under current FFS payment policy, Medicare pays hospitals for the facility services required for LEJR only when those procedures are furnished in the inpatient hospital setting. Therefore, we believe an episode payment model most appropriately focuses around an inpatient hospitalization for these major surgical procedures, as there is little opportunity for shifting the procedures under this model to the outpatient setting. We note further that LEJRs are paid for under the IPPS through the following two Medicare Severity-Diagnosis Related Groups (MS-DRGs): • MS-DRG 469 (Major joint replacement or reattachment of lower extremity with Major Complications or Comorbidities (MCC)). • MS-DRG 470 (Major joint replacement or reattachment of lower extremity without MCC). Multiple ICD-9-CM procedure codes that describe LEJR procedures and other less common lower extremity procedures group to these MS-DRGs, with their percentage distribution within the IPPS MS-DRGs 469 and 470 for the past 4 years outlined in Table 4. Table 4—Distribution of Hospital Claims for Procedure Codes Mapping to MS-DRGS 469 and 470 ICD-9-CM procedure code Code descriptor FY 2014 % FY 2013 % FY 2012 % FY 2011 % 81.54 Total knee replacement 57 58 58 58 81.51 Total hip replacement 30 29 29 28 81.52 Partial hip replacement 12 13 13 14 81.56 Total ankle replacement 0 0 0 0 00.85 Resurfacing hip, total, acetabulum and femoral head 0 0 0 0 00.86 Resurfacing hip, partial, femoral head 0 0 0 0 00.87 Resurfacing hip, partial, acetabulum 0 0 0 0 84.27 Lower leg or ankle reattachment 0 N/A N/A N/A 84.28 Thigh reattachment N/A N/A N/A 0 Note: Percentages or claim counts with “N/A” had no claims. percentages of 0% represent less than 0.5% of total claims. Additionally, we note that there are various types of claims-based information available to CMS, hospitals, and other providers, that could be used to identify beneficiaries in the model who receive LEJRs, including the MS-DRGs for the acute care hospitalization for the procedure, the ICD-9-CM procedure code on the hospital claim, or the CPT code(s) reported by the orthopedic surgeon who furnishes the surgical procedure. While we could utilize ICD-9-CM procedure codes or CPT codes to identify beneficiaries included in the model, over 85 percent of procedures that group to MS-DRGs 469 and 470 are hip or knee replacements. Additionally, the hospitals that would be participating in this model receive payment under the IPPS, which is not determined by CPT codes and is based on clinical conditions and procedures that group to MS-DRGs. Finally, our review of the other low volume procedures that group to these same MS-DRGs, aside from total or partial hip and knee replacements, does not suggest that there is significant clinical or financial heterogeneity within these two MS-DRGs such that we would need to define care for included beneficiaries by ICD-9-CM procedure codes. Therefore, we propose that an episode of care in the CCJR model is triggered by an admission to an acute care hospital stay (hereinafter “the anchor hospitalization”) paid under MS-DRG 469 or 470 under the IPPS during the model performance period. This approach offers operational simplicity for providers and CMS, and is consistent with the approach taken by the BPCI initiative to identify beneficiaries whose care is included in the LEJR episode for that model. We seek public comments on this proposal to define the clinical conditions that are the target of CCJR. b. Definition of Related Services Included in the Episode For purposes of this model, as in BPCI, given the frequent comorbidities experienced by Medicare beneficiaries and the generally elective nature of LEJR, we are interested in testing inclusive episodes to incentivize comprehensive, coordinated patient-centered care for the beneficiary throughout the episode. We propose to exclude only those Medicare items and services furnished during the episode that are unrelated to LEJR procedures based on clinical justification. During our experience with BPCI implementation, we reviewed a number of narrow episode definitions for LEJR episodes that were recommended by BPCI participants and other interested parties during the design phase for this project. We concluded that these narrow definitions commonly exclude many services that may be linked to the LEJR, as LEJR beneficiaries, on average, are at higher risk for more clinical problems than Medicare beneficiaries who have not recently undergone such procedures. Therefore, we propose that all CCJR episodes, beginning with the admission for the anchor hospitalization under MS-DRG 469 or 470 through the end of the proposed episode, include all items and services paid under Medicare Part A or Part B with the exception of certain exclusions as proposed in this section that are excluded because they are unrelated to the episode. The items and services ultimately included in the episode after the exclusions are applied are called related items and services. As proposed in sections III.C.4 and III.C.6 of this proposed rule, Medicare spending for related items and services would be included in the historical data used to set target prices, as well as in the calculation of actual episode spending that would be compared against the target price to assess the performance of participant hospitals. In contrast, Medicare spending for unrelated items and services (excluded from the episode definition) would not be included in the historical data used to set target prices or in the calculation of actual episode spending. Related items and services included in CCJR episodes would be the following items and services paid under Medicare Part A or Part B, after the exclusions are applied: • Physicians' services. • Inpatient hospital services (including readmissions), with certain exceptions proposed later in this section. • Inpatient psychiatric facility (IPF) services. • LTCH services. • IRF services. • SNF services. • HHA services. • Hospital outpatient services. • Independent outpatient therapy services. • Clinical laboratory services. • Durable medical equipment (DME). • Part B drugs. • Hospice. We note that under our proposed definition of related services included in the episode, the episode could include certain per-member-per-month model payments, as discussed in section III.C of this proposed rule. We propose to exclude from CCJR drugs that are paid outside of the MS-DRG, specifically hemophilia clotting factors (§ 412.115), identified through HCPCS code, diagnosis code, and revenue center on IPPS claims. Hemophilia clotting factors, in contrast to other drugs that are administered during an inpatient hospital stay and paid through the MS-DRG, are paid separately by Medicare in recognition that clotting factors are costly and essential to appropriate care for certain beneficiaries. Thus, we believe there are no efficiencies to be gained in the variable use of these high cost drugs when particular beneficiaries receive LEJR procedures who have significantly different medical needs for clotting factors under an episode payment model, so we propose to exclude these high cost drugs from the actual historical episode expenditure data used to set target prices and from the hospital's episode actual spending that is reconciled to the target price. Similarly, we propose to exclude IPPS new technology add-on payments for drugs, technologies, and services from CCJR episodes, excluding them from both the actual historical episode expenditure data used to set target prices and from the hospital's actual episode spending that is reconciled to the target price. This proposal would apply to both the anchor hospital stay and any related readmissions during the episode. New technology add-on payments are made separately and in addition to the MS-DRG payment under the IPPS for specific new drugs technologies, and services that substantially improve the diagnosis or treatment of Medicare beneficiaries and would be inadequately paid otherwise under the MS-DRG system. Medicare pays a marginal cost factor of 50 percent for the costs to hospitals of the new drugs, technologies, or services. We do not believe it would be appropriate for the CCJR model to potentially hamper beneficiaries' access to new technologies that are receiving new technology add-on payments or to burden hospitals who choose to use these new drugs, technologies, or services with concern about these payments counting toward episode actual expenditures. In addition, because new drugs, technologies, or services approved for the add-on payments vary unpredictably over time in their application to specific clinical conditions, we believe we should exclude IPPS new technology add-on payments from CCJR episodes. We followed a number of general principles in determining other proposed excluded services from the CCJR episodes in order to promote coordinated, high-quality, patient-centered care. Based on the broad nature of these episodes, we propose to identify excluded (unrelated) services rather than included (related) services based on the rationale that all Part A and Part B services furnished during the episode are related to the episode, unless they are unrelated based on clinical justification as described in more detail later in this section. In developing our proposals for exclusions for this model, we believe that no Part A services, other than certain excluded hospital readmissions during the episode as described in this section, furnished post-hospital discharge during the episode should be excluded, as post-hospital discharge Part A services are typically intended to be comprehensive in nature. We also believe that no claims for services with diagnosis codes that are directly related to the LEJR procedure itself (for example, loosening of the joint prosthesis) based on clinical judgment, and taking into consideration coding guidelines, should be excluded. Furthermore, we believe that no claims for diagnoses that are related to the quality and safety of care furnished during the episode, especially the anchor hospitalization under MS-DRG 469 or 470, should be excluded, such as direct complications of post-surgical care during the anchor hospitalization. Examples of diagnoses that would not be excluded on this basis include surgical site infection and venous thromboembolism. Finally, we believe that no claims for services for diagnoses that are related to preexisting chronic conditions such as diabetes, which may be affected by care furnished during the episode, should be excluded. However, severe exacerbations of chronic conditions (for example, some surgical readmissions) that are unlikely to be affected by care furnished during the episode should be excluded; thus, when a beneficiary is admitted to the hospital during the episode for these circumstances, we would not consider it to be a related readmission for purposes of CCJR. We also believe that services for clinical conditions that represent acute clinical conditions not arising from an existing chronic clinical condition or complication of LEJR surgery occurring during an episode of care, which would not be covered by the previous principles about included services, should be excluded. To operationalize these principles for CCJR, we propose to exclude unrelated inpatient hospital admissions during the episode by identifying MS-DRGs for exclusion. We propose to exclude unrelated Part B services based on the ICD-9-CM diagnosis code (or their ICD-10-CM equivalents when ICD-10-CM codes are implemented) that is the principal diagnosis code reported on claims for services furnished during the episode. More specifically, we propose to exclude specific inpatient hospital admissions and services consistent with the LEJR episode definition (also triggered by MS-DRGs 469 and 470) that is currently used in BPCI Model 2. We note that the list of exclusions was initially developed over 2 years ago for BPCI through a collaborative effort of CMS staff, including physicians from medical and surgical specialties, coding experts, claims processing experts, and health services researchers. The list has been shared with thousands of entities and individuals participating in one or more phases of BPCI, and has undergone refinement over that time in response to stakeholder input about specific diagnoses or MS-DRGs for exclusion, resulting in only minimal changes over the last 2 years. Thus, the BPCI list of exclusions for LEJR procedures has been vetted broadly in the health care community; refined based on input from a wide variety of providers, researchers and other stakeholders; and successfully operationalized in the BPCI models. We are proposing its use in CCJR based on our confidence related to our several of years of experience that this definition is reasonable and workable for LEJR episodes, for both providers and CMS. With respect to the proposed inpatient hospital admission exclusions for this model, we propose that all medical MS-DRGS for readmissions be included in CCJR episodes as related services, with the exception of oncology and trauma medical MS-DRGs. We propose that admissions for oncology and trauma medical MS-DRGs be excluded from CCJR episodes. Readmissions for medical MS-DRGs are generally linked to the hospitalization for the LEJR procedure as a complication of the illness that led to the surgery, a complication of treatment or interactions with the health care system, or a chronic illness that may have been affected by the course of care. We refer readers to section III.D. of this proposed rule for background and discussion of the complication rate measure proposed for CCJR that includes common medical complications resulting from the aforementioned circumstances following LEJR procedures and that may result in related hospital readmissions. For readmissions for medical MS-DRGs, the selection of the primary diagnosis code is not clear-cut, so we generally believe they all should be included, and we strongly believe that providers should focus on comprehensive care for beneficiaries during episodes. We propose to include all disease-related surgical MS-DRGs for readmissions, such as hip/knee revision, in CCJR episodes. We also propose to include readmissions for all body system-related surgical MS-DRGs as they are generally related to complications of the LEJR procedures. An example of a readmission of this type would be for an inferior vena cava filter placement for treatment of thromboembolic complications of the LEJR. We propose to exclude hospital admissions for chronic disease surgical MS-DRGs, such as prostatectomy (removal of the prostate gland), as they are unrelated to the clinical condition that led to the LEJR nor would they have been precipitated by the LEJR. Finally, we propose that hospital admissions for acute disease surgical MS-DRGs, such as appendectomy, be excluded because they are highly unlikely to be related to, or precipitated by, LEJR procedures and would not be affected by LEJR episode care redesign. With respect to the LEJR proposed diagnosis code exclusions for Part B services for this model, we propose that ICD-9-CM codes be excluded or included as a category and as identified by code ranges. We propose that disease-related diagnoses, such as osteoarthritis of the hip or knee, are included. We also propose that body system-related diagnoses are included because they relate to complications that may arise from interactions with the health care system. An example of this would be pressure pre-ulcer skin changes. Additionally, we propose that all common symptom diagnoses are included because providers have significant discretion to select these as principal diagnosis codes. We propose that acute disease diagnoses, such as severe head injury, are excluded. Finally, we propose that chronic disease diagnoses be included or excluded based on specific clinical and coding judgment as described previously with respect to the original development of the exclusions for LEJR episodes under BPCI, taking into consideration whether the condition was likely to have been affecte [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2015-17190. Public record. Not legal advice.