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August 8, 2024 – The fiscal year 2025 Inpatient Prospective Payment System (IPPS) final regulation has been released! Embedded in this massive, 2,987-page final reg is a new episode-based payment model, called the Transforming Episode Accountability Model (TEAM). When the Center for Medicare and Medicaid Innovation (CMMI) proposed the model, it garnered significant attention from the provider community. We previously covered the top 10 comments submitted to CMMI. After considering the feedback, CMMI finalized the model mostly as proposed, but with a few changes.
To help me compare the proposed version of TEAM with the final model, I’m bringing in my colleagues Leigh Feldman and Kristen O’Brien. Key differences between the proposed and final policies are bolded. If you want an even deeper dive, please contact us.
The proposal that received the most comments related to mandatory participation. Although CMMI states in the final reg that many commenters opposed CMMI’s mandatory approach, CMMI finalized the proposal without additional exceptions. TEAM is the first mandatory CMMI model finalized by the Biden Administration and will apply to a broad range of hospitals under the IPPS.
While many commenters asked that the model be delayed, CMMI finalized the start date and length of the model as proposed. TEAM will be a five-year model with a performance period beginning January 1, 2026, and ending December 31, 2030.
CMMI finalized its proposal that TEAM’s participants be acute care hospitals that are paid under the IPPS and initiate episodes in selected geographic regions. Some hospitals are not paid under the IPPS and therefore will be excluded. For example, since hospitals in Maryland have their own special payment rules, all acute care hospitals in Maryland will be excluded. Exclusion of Maryland hospitals raised the question of participation by hospitals that operate under global budgets, such as those that participate in the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) model. Despite commenters’ feedback that they should be excluded, CMMI decided in the final reg not to exclude hospitals that participate in the AHEAD model from TEAM.
In general, CMMI included episodes even if beneficiaries are aligned to another model. This means that if hospitals participate in an accountable care organization or other model, they could still be required to participate in TEAM. CMMI did note, however, that it will consider more detailed model overlap policies in future notice and comment rulemaking to ensure that hospitals considering joining the AHEAD model do not view participation in TEAM as a deterrent.
CMMI also will allow participant hospitals to enter into sharing arrangements with other providers. In other words, to be successful in the model, hospitals can get buy-in from other providers and agree to share any reconciliation payments (described below) with the providers.
In the proposed reg, CMMI sought comment on allowing hospitals that have previously participated (or are currently participating) in a Medicare episode-based payment model and that are not in a selected geographic region to voluntarily opt in to TEAM. After considering the comments, CMMI finalized that hospitals participating in the Bunded Payments for Care Improvement (BPCI) Advanced and Comprehensive Care for Joint Replacement Model (CJR) models may voluntary opt in to TEAM up until the last day of the last performance period or year of their respective model.
CMMI finalized its proposal to select acute care hospitals for participation based on their inclusion in core-based statistical areas (CBSAs) and to use a stratified random sampling method to select the CBSAs.
To account for the voluntary opt-in option for BPCI Advanced and CJR, CMMI adjusted the CBSA stratification. CBSAs that contain at least one hospital participating in the BPCI Advanced or CJR model as of January 1, 2024, and CBSAs in states that participate in AHEAD (except Maryland) are in the new stratum 18, which has the lowest likelihood of selection for mandatory participation. Table X.A.-05 (page 1,867) of the final reg lists the eligible CBSAs, Table X.A.-06 (page 1,884) lists finalized selection strata and selection probabilities, and Table X.A.-07 (page 1885) lists mandatory CBSAs selected for TEAM.
CMMI finalized the five general surgical episode categories that it originally proposed: Coronary Artery Bypass Grafting (CABG), Lower Extremity Joint Replacement (LEJR), Surgical Hip and Femur Fracture Treatment (SHFFT), Spinal Fusion and Major Bowel Procedure. CMMI notes that any additional episodes added to TEAM would need to undergo notice and comment rulemaking. Although CMMI finalized inclusion of SHFFT, it noted stakeholder concerns about how to address emergent and trauma-related episodes to ensure that the model does not unduly disadvantage participant hospitals. CMMI also adjusted the Spinal Fusion episode to conform to the final spinal fusion MS-DRGs defined as any cervical, thoracic or lumbar spinal fusion procedure paid through the IPPS or the Outpatient Prospective Payment System.
CMS made no changes to episode length. An episode begins with an “anchor” acute care hospital stay or outpatient department procedure visit and continues 30 days after discharge from the anchor hospitalization or anchor procedure. All items and services paid under Medicare Part A and Part B (including most Part B drugs, with specific exclusions) are included in the episode.
CMMI proposed that the TEAM participant (the hospital) would be fully financially responsible for the episode (although as noted the hospital can enter into financial arrangements with other providers). CMMI proposed three participation tracks to provide a glide path to risk:
In the final reg, CMMI revised the risk tracks, allowing safety net hospitals to remain in the upside only track for PYs 1 – 3. For certain TEAM participants (safety net hospitals, rural hospitals, Medicare dependent hospitals, sole community hospitals and essential access community hospitals), CMMI also reduced the upside and downside risk options, moving from 10% to 5% stop-gain/stop-loss limits for PYs 2 through 4.
CMMI finalized all its proposed quality measures for TEAM. These will be reported through the Hospital Inpatient Quality Reporting Program.
CMMI also finalized its proposal to link TEAM participants’ quality performance to payment by translating the composite quality score (CQS) into a CQS adjustment percentage and applying the CQS adjustment percentage to any positive or negative reconciliation amount. The adjustments will be different for each of the three tracks in TEAM. There will be a step-wise process for determining the CQS, including collecting the TEAM quality measures from the CMS Hospital Inpatient Quality Reporting Program and the Hospital Acquired Condition Reduction Program, converting the raw quality measure scores into scaled quality measure scores, and volume weighting the quality measures based on the volume of episodes for a TEAM participant.
Some commenters opposed what they viewed as CMMI’s “all or nothing” approach to quality for hospitals that would receive a positive reconciliation payment (i.e., hospitals that successfully reduce costs). Under CMMI’s approach, hospitals that would otherwise receive a positive reconciliation amount must receive a quality score of 100 to retain the full amount. Any score below 100 will result in CMMI deducting a portion of the positive reconciliation amount. Conversely, if hospitals would receive a negative reconciliation payment, a higher quality score would reduce the amount that they owed back. Some commenters argued that the quality score should work the same regardless of whether hospitals receive a positive or negative reconciliation payment – in both cases, a higher quality score should be financially advantageous to hospitals. Thus, if hospitals would otherwise receive a positive payment adjustment, their adjustment should be increased by the amount of their quality score. In the view of commenters, this change would help incentivize better quality of care and quality improvement over time. Despite these comments, CMMI finalized the approach as proposed.
CMMI finalized its proposal to use three years of baseline data, trended forward to the PY, to calculate target prices at the level of MS-DRG/HCPCS episode type and region. CMMI will risk-adjust episode-level target prices. This approach is consistent with PYs 4 – 8 of CJR. CMMI proposed to apply a 3% discount factor to the benchmark price to serve as Medicare’s portion of reduced expenditures from the episode. In the final reg, CMMI finalized a 1.5% discount factor for CABG and Major Bowel Procedure, and 2% for LEJR, SHFFT and Spinal Fusion.
CMMI finalized its proposal to conduct an annual reconciliation in which CMMI will compare spending for a TEAM participant’s beneficiaries in episodes against the reconciliation target price to determine if CMMI owes the TEAM participant a reconciliation payment, or if the TEAM participant owes CMMI a repayment (for all Track 3 participants and beginning in PY 2 for Track 2 hospitals). CMMI will conduct the annual reconciliation of each TEAM participant’s actual episode payments against the target price(s) six months after the end of the PY.
Significantly, CMMI did not finalize its proposal related to the low-volume threshold. Similar to previous models, CMMI proposed that if a participating hospital did not meet a low-volume threshold of at least 31 total episodes in the baseline period for PY 1, CMMI would still reconcile the hospital’s episodes, but the hospital would be subject to the Track 1 stop-loss and stop-gain limits for PY 1. If a participating hospital did not meet the proposed low-volume threshold of at least 31 total episodes for PYs 2 – 5, the hospital would be subject to the Track 2 stop-loss and stop-gain limits for PYs 2 – 5. CMMI did not finalize this low volume threshold, citing stakeholder comments that the threshold could create difficulties for TEAM participants. CMMI says it will propose alternatives in future notice and comment rulemaking prior to the model start date.
CMMI finalized with modifications its policies regarding risk adjustment to include two hospital-level variables (hospital bed size and safety net hospital) for all episode categories. CMMI also finalized with modification its proposed risk adjustment methodology to include additional beneficiary-level variables that are episode category specific. In addition to the five risk adjustment variables applicable to all episode categories, CMMI finalized:
CMMI finalized its proposal that TEAM participants will be required to screen attributed TEAM beneficiaries for societal risk factors such as food insecurity, housing instability, transportation needs and utilities difficulty.
CMMI finalized specific waivers under its Innovation Center authority (Section 1115A of the Social Security Act) similar to the waivers granted to existing episode-based payment models. As proposed, CMMI will waive the geographic and originating site Medicare telehealth requirements (currently waived through the end of 2024) and the requirement that Medicare beneficiaries have a prior inpatient hospital stay of no fewer than three consecutive days to be eligible for coverage of inpatient skilled nursing facility care.
CMMI finalized other model features related to the following:
In all, CMMI left the core features of the proposed model mainly intact in the final reg. But, while CMMI finalized the January 1, 2026, start date as proposed, CMMI states that it intends to revisit or refine many of its policies through future notice and comment rulemaking. Therefore, we are not done with the TEAM rulemaking yet (nor are we quite finished with this particular meal of regs and eggs).
Until next week, this is Jeffrey (and Leigh and Kristen) saying, enjoy reading regs with your eggs.
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