CMS Changes Policy on Mandatory Bundled Payments In Key Areas


On August 17, CMS posted a proposed rule on the Federal Register that will significantly scale back mandatory bundled payments models initiated by the Obama Administration. The rule, CMS-5524-P (available at proposes to:

  • Cancel the Episode Payment Models (covering acute myocardial infarctions, coronary artery bypass grafting, and surgical hip and femur fracture treatment (SHFFT) Medicare patients);
  • Cancel the Cardiac Rehabilitation incentive bundled payment model and
  • Reduce greatly the scope of the Comprehensive Care for Joint Replacement (CJR) model.

Comments on the proposed rule are due on or before October 16. This rule makes clear that the Trump Administration disfavors mandatory bundled payments and intends to fundamentally re-structure the move away from fee-for-service Medicare.

Dr. Tom Price, Secretary of HHS, has been particularly concerned about provider bundled payment initiatives. All three programs had been implemented in a flurry of activity during the final full month of the Obama Administration. The programs had been previously delayed, but were scheduled to begin on January 1, 2018.

While there have been many individual success stories regarding the success of prior voluntary incentive payment models, CMS had received criticism for implementing mandatory programs and forcing providers to incur the disruption and costs of implementation of such mandatory programs without hard data to back-up the projected cost savings.

Regarding the CJR model, CMS reduced the number of mandatory geographic areas participating in the program from 67 to 34 and excluded low-volume hospitals. Newly excluded providers may continue to participate, however, on a voluntary basis. Memphis, Austin and Tuscaloosa remain on the mandatory list, while Nashville was moved to the voluntary list. As proposed, the Episode Payment Models and the Cardiac Rehabilitation incentive payment models would be cancelled completely. Because many organizations have invested significant time and money preparing for the mandatory programs and expected to be able to continue on a voluntary basis, CMS will likely receive numerous comments on this issue.

CMS provided its rationale for the Proposed Rule and move away from mandatory bundled payment programs as follows: "We are concerned that engaging in large mandatory episode payment model efforts at this time may impede our ability to engage providers, such as hospitals, in future voluntary efforts. Similarly, we also believe that reducing the number of providers required to participate in the CJR model will allow us to continue to evaluate the effects of such a model while limiting the geographic reach of our current mandatory models."

In the proposed rule, CMS made clear that it is still seeking to implement payment models which improve overall quality of care and enhance participating provider infrastructure. CMS still supports its goal of encouraging better care management and reducing costs. CMS also anticipates that there will continue to be a broader focus on more cooperation and outcome improvement among hospitals and other providers within the Medicare program. CMS believes that its voluntary programs and increased consultation with provers will lead to better coordination of care and improved quality of care for beneficiaries.

Most providers are supportive of the move away from mandatory Medicare bundled payments. Many of the proposed programs involved implementation expenses and required new staff hiring which made the new programs costly to implement. Moreover, many of the details for the bundled payment initiatives were "to be determined" with great frustration to the providers. Although private payors have done a good job in many parts of the country structuring payment methodologies that reward performance, CMS has not been able to achieve similar successes. Although there is widespread agreement that fee-for-service Medicare payments are not likely to last over the long term, it remains unclear how quickly CMS will implement the alternatives.

Denise Burke and Colin Luke are partners with Waller where they specialize in health law.


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Colin Luke; Denise Burke; Waller; Waller Law; CMS; Mandatory Bundled Payments; C


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