United States: Delivery System Reform 2.0: Scaling Alternative Payment Models Is The New Normal

Last Updated: July 14 2015
Article by Andrew J. Shin and Steve Weiner

For some health care providers, a pair of recent announcements made by the Obama Administration to implement mandatory alternative payment models (APMs) for home health value-based purchasing and bundled payments for hip and knee episodes of care will come as a shock.  For others who have participated as APM early adopters, the news may have a far lesser impact.

The Centers for Medicare and Medicaid Innovation (CMMI) will run both the home health and orthopedic bundled payment models under the Affordable Care Act Section 3021 authority.

Home Health Value-Based Purchasing

Akin to the Hospital Value-Based Purchasing Program and other VBP models, the Home Health Value-Based Purchasing (HH-VBP) model, which is scheduled to begin on January 1, 2016, will apply an annual payment reduction (or increase) to home health agencies (HHAs) of 5% initially, and up to 8% in later years, based on performance against a set of quality measures predominantly drawn from the current Outcome and Assessment Information Set (OASIS).

CMMI will score HHAs for the quality of care delivered based on their performance compared to both the performance of other HHAs and also their own historical experience.  HHAs will be provided quarterly quality performance feedback reports that document their own performance and compare them to the larger HHA cohort.  Payment adjustment amounts will be calculated on an annual basis.

The HH-VBP model will apply to all Medicare-certified home health agencies in Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington. Any new market entries in the selected states would also be subject to participation in the HH-VBP program.  According to the proposed regulations, CMS is not proposing to waive any Medicare or Medicaid fraud and abuse laws.

The model is proposed to last five performance years, starting in 2016.  Comments on the proposed mandatory model are due September 4, 2015.

Lower Extremity Joint Replacement (LEJR) Bundled Payment

The Comprehensive Care for Joint Replacement (CCJR) Model will test bundled payment and quality measurement for an episode of care associated with hip and knee replacements.  The intent is to encourage hospitals, physicians, and post-acute care providers to better coordinate care from the initial hospital admission through recovery.  A LEJR episode will be defined as an admission of a fee-for-service Medicare beneficiary that eventually results in a discharge paid under MS-DRG 469 and 470 (Major joint replacement or reattachment of lower extremity with/out major complications or comorbidities).

The bundled payment will cover all Part A and B services (e.g., physician services, inpatient hospital services, inpatient rehabilitation facility, skilled nursing facility, outpatient services, clinical laboratory services, durable medical equipment, and Part B drugs, et. al.) provided beginning with hospital admission through 90 days following discharge.

Similar to the Bundled Payments for Care Improvement (BPCI) initiative, a target cost will be set based on expected spending and historical spending with a 2% discount.  While providers will be paid through the normal fee-for-service system during the year, they will be paid, or have to pay back Medicare, after a reconciliation process that occurs annually where each provider's actual spending will be compared to the target cost.  Further, the proposed model will allow for certain Medicare waivers such as the three-day inpatient hospital stay for skilled nursing facility admissions, physician visits to beneficiary homes via telehealth technology, and payment for certain types of physician-directed home visits for non-homebound beneficiaries.

Hospitals that are required to participate include all IPPS hospitals in 75 randomly selected geographic areas, with the exception of those who are currently implementing similar orthopedic bundles under CMMI's existing bundled payment pilot, BPCI Models 1, 2 and 4 who were given an exception from participating in the CCJR.

The CCJR model is proposed to last five years, starting in 2016, with a target cost rebasing adjustment made annually.  Comments on the proposed mandatory model are due September 8, 2015.

What's Next and Take Aways

Until now, with a few exceptions, such as the Prior Authorization of Power Mobility Devices (PMD) Demonstration (which was not implemented using Section 3021 of the Affordable Care Act), none of the major delivery reform pilots have been mandatory.  The reason for this shift is rooted in the statutory mandate under Section 3021, which established CMMI and the authority of the Secretary of Health and Human Services to scale successful delivery reforms.  In the law, the Secretary is given the authority to scale certain delivery reform models once: 1) they are certified by the CMS Office of the Actuary to lower costs; and 2) they generate enough evidence to show that quality has been maintained, if not improved, for Medicare beneficiaries.

To meet these two criteria, it will be necessary to scale APMs such that there are enough participating providers and beneficiaries to pass muster with the CMS Actuary and HHS Assistant Secretary for Planning and Evaluation.  Thus, the natural evolution for the Obama Administration is to scale various APMs that have shown some promise and would benefit from larger participation to increase the statistical strength of a potential nationwide and permanent change to the Medicare payment system.

For some providers who have already participated in at least one of the approximately two dozen models administered by CMMI, this news will validate, to a certain extent, their early investment and engagement with the federal government's efforts to reign in health care spending.  For example, some providers chose to become early adopters and engage in CMMI models with the hope of being exempt from mandatory models such as the CCJR model. Additionally, early adopters have already invested in much of the infrastructure that is necessary for care redesign and have been able to fine-tune their processes over the past few years.

While future APM scaling announcements are a certainty, not all of them are likely to be mandatory.  For example, the Pioneer ACO model (the first scaling announcement) was recently opened up for additional applicants for the first time since its inception in 2011.  The key for stakeholders moving forward will be to actively engage policymakers and their own internal decision-makers to be as prepared as possible for the new reality, that is, a much more aggressive version of delivery system reform.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions