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Cancellation of EPMs and CR Incentive Payment Model; Changes to CJR Model; and Extreme and Uncontrollable Circumstances Policy for CJR Model

Publications - Client Alert | December 1, 2017


On November 30, 2017 the Centers for Medicare and Medicaid Services (CMS) announced a final rule (Final Rule) which confirms the cancellation of the Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) Incentive Payment Model that were to begin on January 1, 2018, and implements changes to scale back the Comprehensive Care for Joint Replacement (CJR) model. In addition, CMS announced an interim final rule with comment period (Interim Final Rule) to aid providers located in areas impacted by extreme and uncontrollable circumstances (i.e., hurricane-impacted areas). The Final Rule and Interim Final Rule can be viewed here.

EPM and CR Models

The EPM and CR models were designed as mandatory payment models and were set to begin in 2018 to test the effects of bundling cardiac and orthopedic care and incentivizing higher value care. The EPM models encompassed three new models: (i) acute myocardial infarction, (ii) coronary artery bypass graft, and (iii) surgical hi/femur fracture treatment episodes of care, which are collectively referred to as the EPM models. Regulations setting forth the EPM and CR models are located at 42 CFR Part 512. In the Final Rule, CMS rescinds 42 CFR Part 512 in its entirety.

While acknowledging strong evidence-based and positive stakeholder feedback regarding the CR model, CMS concluded that certain aspects of the design of the EPM and CR models should be improved and more fully developed prior to their start. CMS found that implementation at this time would not be in the best interest of the beneficiaries, and given the planned start date of January 1, 2018, there was not sufficient time to revise the models. The intention to remove the mandatory models is seen as a way to enhance a provider’s ability to determine models and initiatives that suit the organizations while increasing quality and value-based payments. CMS found it was not feasible to continue the mandatory CR model without the EPM model because the models were too interconnected. However, CMS did not rule out the possibility of revisiting the CR model in the future and would consider stakeholder feedback in that regard.

CJR Model

The CJR model began on April 1, 2016 and is currently in its second performance year, which includes episodes ending on or after January 1, 2017 and on or before December 31, 2017. Initially, the CJR model was a mandatory program, with limited exceptions, for hospitals with a Medicare certification number (CCN) primary address in one of 67 selected geographic areas.

However, the Final Rule changes that. The Final Rule makes the CJR model mandatory for certain hospitals located in approximately half of the geographic areas, while making the CJR model voluntary for the remaining half. Specifically, the CJR model will remain mandatory in 34 of the 67 selected geographic areas, with an exception for low-volume and rural hospitals located in these areas. To see a table identifying the mandatory geographic areas for purposes of the CJR model, please click on the file below.

The remaining 33 geographic areas are voluntary, meaning that hospitals located in these areas may choose to participate in the CJR model for performance years 3, 4 and 5. To see a table identifying the voluntary geographic areas, please click on the file below.

Under the Final Rule, CMS has determined that hospitals in the 33 voluntary geographic areas will have a one-time opportunity to notify CMS to elect to continue their participation in the CJR model on a voluntary basis (i.e., opt-in) for performance years 3, 4 and 5. Further, CMS will exclude and automatically withdraw low-volume hospitals (having fewer than 20 lower-extremity joint replacement episodes in total across 3 historical years of data) and rural hospitals (as defined in 42 CFR 510.2) in the 34 mandatory participation geographic areas effective February 1, 2018, unless they otherwise elect to continue in accordance with the opt-in requirements.

The voluntary participation election (opt-in) period will begin January 1, 2018, and end January 31, 2018. Each participant hospital that desires to elect to continue participating in the CJR model will be required to submit a written participation election letter (Election Letter) which must be received during the opt-in period. The Election Letter will serve as a model participation agreement. The Election Letter must include all of the following:

  • Hospital name
  • Hospital address
  • Hospital CCN
  • Hospital contact name, telephone number, and email address
  • If selecting the Advanced APM track, attestation of CEHRT use as defined in 42 CFR § 414.1305

The Election Letter must also include a certification in a form and manner specified by CMS that:

  • The hospital will comply with all requirements of the CJR model (42 CFR part 510) and all other laws and regulations that are applicable to its participation in the CJR model
  • Any data or information submitted to CMS will be accurate, complete, and truthful, including, but not limited to, the participation election letter and any quality data or other information that CMS uses in reconciliation processes or payment calculations or both

Finally, the Election Letter must be signed by a hospital administrator, chief financial officer (CFO) or chief executive officer (CEO), and the completed letter must be submitted to by 11:59 p.m. EST on January 31, 2018. If the Election Letter meets these criteria, CMS will accept the hospital’s participation election. CMS has provided a template election participation letter that can easily be completed and submitted in order to limit the burden on hospitals seeking to opt-in. A template can be accessed through the CMS website here. By opting-in, the hospital will be subject to all model requirements and will not have a chance to opt-out later.

Hospitals in the voluntary geographic areas, rural hospitals, and low-volume hospitals that do not elect to participate in the CJR by January 31, 2018, will be withdrawn from the CJR model effective February 1, 2018, all of their performance year 3 episodes up to and including that date will be canceled, and the hospitals will not be subject to a reconciliation payment or repayment amount for performance year 3.

For hospitals that remain in the mandatory geographic areas for purposes of the CJR model or opt-in via the opt-in process, the Final Rule includes additional comments and clarifications with respect to other aspects of the CJR model. The full text of the rule can be found at the link noted above.

Future Innovation Center Models 

CMS expects the Innovation Center to develop new bundled payment models during 2018, but CMS also made clear that it would be setting a new direction for the Innovation Center. The Innovation Center will focus on models that promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers; provide price transparency; increase choices and competition to drive quality; reduce costs; and improve outcomes. New models will be designed to reduce burdensome requirements and unnecessary regulations to the extent possible to allow physicians and other providers to focus on providing high-quality healthcare to their patients. In the Final Rule, CMS reiterates its commitment to develop models that reward value-based care and allow opportunities for Advanced APM participation for 2018 and future years.

Interim Final Rule

CMS issued the Interim Final Rule to address the need to provide flexibility in determining episode spending for CJR participant hospitals located in areas impacted by extreme and uncontrollable circumstances (i.e., hurricane-impacted areas). Specifically, the Interim Final Rule will apply to CJR hospitals that are located in a county, parish, U.S. Territory or tribal government designated as a major disaster area under the Stafford Act. In addition, the area must be one in which a waiver under section 1135 of the Social Security Act has been invoked.1 CMS determined that capping the actual episode spending at the target amounts for certain episodes would be the best way to protect beneficiaries from potential care stinting and hospitals from escalating costs. This also ensures that hospitals are still able to earn reconciliation payments on those eligible episodes where the disaster did not have a noticeable impact on cost.

The Interim Final Rule discusses these protections in greater detail and providers further procedural guidelines for hospitals affected by these extreme and uncontrollable circumstances. For those hospitals that may qualify for protection under this Interim Final Rule, we recommend reviewing the Interim Final Rule and any subsequent guidance issued by CMS.

Additional Information

If you have questions regarding CMS’ final rule, or would like assistance evaluating other arrangements that may pose a risk for your business, please contact a member of our National Healthcare Practice Group.


1    Section 1135 allows the Secretary to temporarily waive or modify certain Medicare requirements to ensure that sufficient healthcare items and services are available to meet the needs of individuals enrolled in Social Security Act programs in the emergency area and time periods. The waiver also allows providers who provide such services in good faith to be reimbursed and exempted from sanctions.

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