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October 01, 2017

CMS Applies the Brakes to Mandatory Bundled Payment Models: Proposed Rule to Revise the Comprehensive Care for Joint Replacement Model and Cancel the Episode Payment Models and Cardiac Rehabilitation Payment Model

Briar Siljander and Jennifer Gross, Cooper & Riesterer, PLC, Brighton, MI

The Centers for Medicare & Medicaid Services (CMS) published a proposed rule on Thursday, August 17, 2017 (Proposed Rule)1 that, if adopted without significant change, will cancel three bundled payment models and a post-cardiac episode incentive model before their launch, and shrink the scope of another bundled payment model as it approaches its third year in effect. The Proposed Rule rescinds the Episode Payment (EP) models and Cardiac Rehabilitation (CR) Payment model, which were set to take effect January 1, 2018, and will alter the Comprehensive Care for Joint Replacement (CJR) model, most notably by cutting in half the number of mandatory participating regions. Heeding the call of stakeholders, the Proposed Rule signifies a shift from a mandatory, regulatory rule-making approach to healthcare delivery and payment to one emphasizing voluntary participation and partnership.


Section 3021 of the Patient Protection and Affordable Care Act (PPACA; codified at 42 U.S.C. 1315a) established the Center for Medicare and Medicaid Innovation (Innovation Center) within CMS and tasked it with testing new payment and service delivery models that would provide more efficient care through improved care quality and coordination.2 Five of these models are the subject of the Proposed Rule: the CJR Model, the three EP models (acute myocardial infarction, coronary artery bypass graft, and surgical hip and femur fracture treatment), and the CR model. All five models were developed as part of CMS’ stated goal to transition at least 50 percent of its payments from fee for service reimbursement to value-based reimbursement by 2018.3

Comprehensive Care for Joint Replacement Model

The CJR model was the pioneer for CMS in episode-based payment models. It was implemented to test bundled payments for episodes of care related to MS-DRG 469 and MS-DRG 470 (major joint replacement or reattachment of lower extremity with or without major complications or comorbidities).4 An episode of care runs from a beneficiary’s hospital admission for the procedure to 90 days after the hospital discharge date, and includes all Medicare Part A and Part B services (subject to certain exclusions5).6 CMS sets a target price for each episode for the MS-DRG code based on a blend of historical hospital and regional standardized spending for lower-extremity joint replacement (LEJR), discounted by three percent.7 During the model period, providers are paid as they normally are for all services provided in an episode. At the end of each model year, the total paid by CMS for services in an episode is compared to the target price. If episode quality and spending benchmarks are met, a hospital is eligible for a reconciliation payment from CMS up to the target price, subject to stop-gain limits.8 If episode spending exceeds the target price, the hospital will be responsible to pay back a portion of the difference to CMS.9

The CJR model was implemented by regulations published November 16, 2015 (CJR final rule) and officially started April 1, 2016.10 Presently, the CJR model will run until December 31, 2020.11 Subsequent amendments to the regulations were made in the same rulemaking that included the final rule for the EP models, discussed below.12

Episode Payment Models

In the same rule-making finalizing changes to the CJR model published on January 3, 2017 (the EP model final rule), CMS issued the final rule for the EP models for acute myocardial infarction, coronary artery bypass graft, and surgical hip and femur fracture treatment, as well as the incentive payment model for CR.13 The EP models follow the same basic framework established for the CJR model: CMS would require hospitals in certain metropolitan statistical areas (MSAs) to participate in payment models whereby traditional fee for service payments are initially paid and payments are then reconciled against target prices established by CMS for all services in an episode of care from the date of admission until 90 days following discharge.14 Each of the EP models would be implemented in certain MSAs. The surgical hip and femur fracture treatment model would be implemented in the same MSAs as the CJR model, and the acute myocardial infarction and coronary artery bypass graft models would be implemented in randomly selected MSAs meeting certain criteria, with the goal of providing diverse testing grounds for the models.15 Participation in the EP models would also provide pathways to qualify for incentive payments under the Quality Payment Program tracks established by the Medicare Access and CHIP Reauthorization Act (MACRA).16

Cardiac Rehabilitation Payment Model

Implemented in conjunction with the acute myocardial infarction and coronary artery bypass graft EP models, the CR model is a different strategy to achieve similar goals.17 Designed specifically to increase utilization of cardiac rehabilitation services by beneficiaries following an acute myocardial infarction or coronary artery bypass graft in an effort to reduce repeat cardiac events, the CR model would make incentive payments to participating hospitals (in addition to regular payments to the service provider, which may or may not be the hospital) for CR services used by beneficiaries discharged from the hospitals following certain cardiac-related events.18 The model would apply to 90 MSAs, 45 of which are also participant MSAs in the acute myocardial infarction and coronary artery bypass graft models.19 Under the CR model, a participating hospital would receive incentive payments of $25 for the first 11 qualifying services provided and $175 for each qualifying service thereafter completed within 90 days of the beneficiary’s discharge from the hospital.20


The EP model final rule was set to take effect on February 18, 2017.21 Following the change in executive administration after the 2016 election, implementation of the EP and CR models and changes to the CJR model were delayed by the 60-day regulatory freeze issued across all federal agencies.22 During and following the freeze period, the effective date for the EP and CR models and changes to the CJR model were delayed repeatedly – first until March 21, 2017, then May 20, 2017, then October 1, 2017, and finally until January 1, 2018.23

CMS notes that, in response to its request for comment about the delayed start date of the EP and CR models, it received voluminous comments from stakeholders about concerns over the substance of the EP and CR models (and not, as sought and expected, just the start date), causing it to revisit the models altogether.24 The result is the Proposed Rule, which proposes to terminate the EP and CR models and dramatically reshape the CJR model.

Termination of Episode Payment Models and Cardiac Rehabilitation Incentive Model

Citing the extensive stakeholder feedback generated in prior rule-making for the EP and CR models, the Proposed Rule proposes to cancel outright the EP and CR incentive payment models that would otherwise become effective January 1, 2018.25 Viewing the models in light of this feedback, CMS concludes that “certain aspects of the design of the EPMs and the CR incentive payment model should be improved and more fully developed prior to the start of the models,” and that implementing the models in their present form (without sufficient time to address the problems raised by stakeholders) would be counterproductive.26 CMS also conveys a strong belief that new mandatory initiatives like the EP and CR models could sour the relationship between providers and CMS, jeopardizing future proposed initiatives.27 CMS does note, however, that it expects to introduce new voluntary bundled payment models in 2018 similar to the Bundled Payments for Care Improvement (BPCI)28 Initiative sufficient to allow providers to meet the criteria for incentive payments by participating in an Advanced Alternative Payment Model (Advanced APM).29 It also specifically references positive stakeholder feedback from the CR model and leaves open the possibility of revisiting the model in the future as a voluntary initiative.30

Changes to Comprehensive Care for Joint Replacement Model

Already well into its second year, the CJR model was spared, though not entirely, by the Proposed Rule. The most dramatic change in the Proposed Rule would make the program no longer mandatory for 33 of the 67 MSAs involved, and instead would, as discussed below, give these now-voluntary participants an opportunity to discontinue participation in the model or opt in to voluntarily continue.31 Additional changes and clarifications to the CJR model, each discussed in greater detail below, include:

  • Making the CJR model voluntary for low-volume and rural hospitals
  • Closing the CJR model to new hospitals
  • Providing for remedial action for participants that fail to participate in model-related evaluation activities
  • Clarifying the use of ICD-CM Code use for quality measures
  • Clarifying CJR reconciliation after a hospital reorganization
  • Adding practice expense relative value units (RVUs) for pricing of certain telehealth services
  • Establishing a new “Clinician Engagement List” to make providers who do not have a financial arrangement with an Advanced APM Entity eligible for MACRA’s Quality Payment Program for their participation in the CJR model
  • Clarifying the Composite Quality Score methodology used for Year One performance
  • Making technical changes to clarify calculation of target prices and actual episode spending using the Price (Payment) Standardization Detailed Methodology
  • Finally, while the Proposed Rule does not propose changes to gainsharing and distribution arrangement limitations in the CJR model, it seeks comments specific to the appropriateness of and alternatives to these caps.32

Reduced Geographic Scope of Comprehensive Care for Joint Replacement Model

Acknowledging that many providers in the mandatory CJR model have already invested significant resources to develop relationships, processes, and programs to meet the specific requirements of the CJR model since its rollout on April 1, 2016, and with year one reconciliation payments being paid to participating hospitals by the end of September 2017, CMS opted to continue the model, but drastically reduce its mandatory scope.33 The Proposed Rule cuts 33 of the 67 MSAs from its scope, automatically reducing the number of hospitals required to participate in the CJR model from 700 to 393.34 The 34 MSAs that remain as mandatory participants are MSAs with the highest average wage-adjusted historic LEJR episode payments.35

For hospitals in the 33 MSAs that are removed from mandatory participation, the Proposed Rule automatically withdraws them from the CJR model and allows them a one-time opportunity to opt back into the CJR model between January 1, 2018 and January 31, 2018.36 CMS will provide an opt-in participation election letter that providers can submit to continue without interruption in the CJR model.37 Those that opt in must remain in the program until its completion in 2020.38 Hospitals that to date are mandatorily participating in the CJR model, but that do not opt to continue after January 31, 2018, will be removed from the model effective February 1, 2018.39 All care episodes attributed to what would have been their third year in the CJR model (January 1, 2018 to December 31, 2018) will not be considered in reconciliation payments.40

Low Volume and Rural Exceptions

The Proposed Rule treats low-volume and rural hospitals in the remaining mandatory MSAs the same as the hospitals in the now-voluntary MSAs: low-volume and rural hospitals will be automatically withdrawn February 1, 2018 unless they have submitted a timely participation election letter to opt in to continued participation in the CJR model.41 The Proposed Rule includes a specific list of the 55 hospitals that it considers low-volume for purposes of exemption from mandatory CJR model participation.42 Rural hospitals are determined using the 2017 Inpatient Prospective Payment System § 412.103 rural reclassification list.43 Notably, a change in a hospital’s rural status after the end of the participation election period (January 1 – January 31, 2018) would not impact its required status (e.g. mandatory or voluntary participation, or exemption) under the CJR model.44

Model Closed for New Hospitals in Affected MSAs

New hospitals with new CMS Certification Numbers (CCNs) would not be required or eligible to join a CJR model if the Proposed Rule is confirmed, no matter whether the new hospital is in a mandatory MSA or voluntary MSA.45 However, if after a reorganization event (merger, purchase, etc.) the surviving entity is one with a CCN that previously participated in the CJR model, that hospital would continue participation consistent with the Proposed Rule even if predecessor hospitals were not participating.46

Remedial Action to Ensure Participation in Evaluation Activities

The Proposed Rule only briefly discusses the addition of a provision to permit remedial action (already defined at 42 C.F.R. 510.410(b)(2)) if a participating hospital or any of the hospital’s collaborators fail to participate in CJR model-related evaluation activities.47 The addition of this explicit provision, CMS says, is to ensure that participants understand their responsibilities relating to model and data evaluation.48

Clarification of ICD-CM Use for Quality Measures

CMS clarifies that it did not intend for comments in the preamble to its CJR model final rule49 to mean that quality measures would be tied, for the duration of the CJR model, to specific, static ICD-CM codes.50 Instead, CMS intended that the applicable quality measures were tied to those ICD-CM codes as they change year to year.51 CMS takes the position that such changes are not sufficiently substantive to require it to go through the rule-making process each time the changes take place.52

Clarification of CJR Reconciliation After a Hospital Reorganization

CMS proposes in the Proposed Rule to codify the reconciliation calculation process to reduce potential confusion in calculations when a hospital reorganization occurs.53 The Proposed Rule provides that separate reconciliation calculations will be made for each predecessor hospital in a performance year for all episodes that began prior to the reorganization date, as well as new reconciliation calculations for the new or surviving participant hospital for episodes that occurred on or after the effective date.54

Addition of practice expense RVUs for pricing of certain telehealth services

Prior CMS regulations created nine HCPCS codes specific to home telehealth evaluation and management under the CJR program.55 The regulations, however, did not provide a practice expense (PE) component. The Proposed Rule, recognizing the additional costs associated with delivering telehealth services under the CJR model (e.g. telecommunications equipment maintenance and security), proposes to include a PE component to the nine HCPCS codes for telehealth services under the CJR model at the same rate as the RVUs for comparable in-person services.56 While CMS states it does not believe the actual PE resource costs are as high as for other services, it prefers (as do its stakeholders) this calculation over the status quo of no reimbursement.57

Establishment of Clinical Engagement List for Quality Payment Program Eligibility

For providers to qualify for additional incentives through the Quality Payment Program, they must be considered a “Qualifying APM Participant” (QP). One way to be a QP is to be on an “Affiliated Practitioner List” of an Advanced APM entity, which includes an entity participating in the CJR model.58 While those who have a financial relationship with a hospital operating under the CJR model are considered “CJR collaborators,” and are therefore QPs, the Proposed Rule would broaden the pool of providers eligible to be QPs under the QPP by including providers who do not have a financial arrangement under a CJR model, but who nevertheless are under contract with a participating hospital to perform clinical work that “supports the cost and quality goals of the CJR model.”59 The Proposed Rule would require CJR model hospitals to submit a clinician engagement list (no more than quarterly) including the names and pertinent information of providers that, while not having a financial relationship sufficient to be consider “CJR collaborators,” nevertheless have a contractual relationship with the hospital “based at least in part on supporting the participant hospital’s quality or cost goals under the CJR model” during the applicable period.60

Clarification of the Composite Quality Score Methodology for Year One Performance

Due to the delay in finalizing the EP model final rule, certain provisions of the CJR model that were intended to be in effect prior to the CJR model’s performance year one initial reconciliation were not, and are still not, in effect.61 In fact, these provisions – changes to the quality measures and composite quality score methodology – did not take effect until May 20, 2017, a month after the initial reconciliation had been performed (using the then-current, un-amended rules).62 CMS clarifies in the Proposed Rule that it will conduct the performance year one subsequent reconciliation using the new criteria sometime in early 2018, noting that using the new criteria may result in significant variation between the initial and subsequent reconciliations.63 CMS rationalizes that adjusting to the new quality measures sooner would be better for participants in the program overall.64 It also notes that reconciliation payments or repayments based on subsequent year one reconciliation would not be made until reconciliation results were combined with year two initial reconciliation results.65

Technical Changes to Target Prices and Actual Episode Spending

Based on participant questions, CMS makes clarifications in the Proposed Rule for calculation of CJR model target prices and actual episode spending, and specifically its use of Price (Payment) Standardized Detailed Methodology with modifications.66


While uncertainty abounds over whether Congress will pass substantial legislation in healthcare and what such legislation might look like, the Proposed Rule is an early indicator of what might be expected generally from the new CMS regime and how providers can prepare.

First, CMS appears to have an increased sensitivity to stakeholder feedback and a willingness to scrap agency initiatives based on 11th-hour feedback. In response to its request for comments to the proposed delayed effective date of the EP model final rule, CMS received substantive comments about perceived issues with the models themselves.67 Even though the EP and CR models had been finalized and only the effective date was at issue, CMS considered these out-of-scope comments and ultimately acted on the feedback in the Proposed Rule.

Second, providers can expect new pilot payment models and initiatives to be voluntary. In the one model that the Proposed Rule preserves – the CJR model – CMS eliminated its mandatory nature for half of the participants, giving them the option to continue in the model or drop out midstream. The model remains mandatory for only enough MSAs to permit statistically significant data to be gathered.68 In commentary to the proposed cancellation of the EP and CR models, CMS notes its concern that mandatory models “may impede our ability to engage providers, such as hospitals, in future voluntary efforts.”69 Throughout the Proposed Rule, it quietly highlights the voluntary nature of the Acute Care Episode demonstration and BPCI initiative, as well as the voluntary Pioneer ACO model, all of which it deems successful.70 Finally, it explicitly states that if these models are revived or similar ones are proposed in the future, they will be done on a voluntary basis.71

Third, the shift to quality purchasing and away from fee for service is not going to change. CMS expressly states that the Innovation Center “expects to develop new voluntary bundled payment model(s) during CY 2018 that would be designed to meet the criteria to be an Advanced APM.”72 Implicit, too, in this statement is a tacit endorsement of the Quality Payment Program, or at least an acknowledgment that the program is not going away. CMS also specifically recognizes the positive feedback for the CR model, stating that it “may revisit” it.73

Hospitals that have the opportunity to voluntarily participate should carefully review the revisions to the CJR model in the EP model final rule and the proposed revisions in the Proposed Rule, and make a determination as to whether the program is favorable to them and the providers they work with in LEJR care episodes. Given the narrow opt-in window (January 1 – January 31, 2018), providers should not wait for the final rule to be issued before assessing the financial and operational viability of CJR model participation.

Hospitals within the 34 MSAs that are still required to participate in the CJR model should review the Proposed Rule with care and determine whether to submit comments to CMS, which must be received no later than 5 p.m. on October 16, 2017.74 Notably, among the 47 comments received by CMS in response to its interim final rule published March 21, 2017 was substance sufficient to convince CMS to cancel the EP and CR models. Therefore, it may be advisable for stakeholders to highlight continuing challenges with the CJR model under the Proposed Rule and present palatable solutions.

Providers that are involved in the episodes of care under the CJR model (whether voluntary or involuntary) should review the Proposed Rule and the CJR model generally to understand its implications to their practice, with specific attention devoted to the limitations of financial arrangements set forth in the CJR model. While the CJR model originates with the hospital, it relies on the coordination among, and services and data provided by, other providers. A thorough understanding of the CJR model will assist all providers in favorably negotiating the associated relationships.


While providers are reminded that the Proposed Rule is just that – a proposed rule, subject to significant change – it offers important insight into CMS’ plan for not only the CJR model, but also other similar value-based models that can be expected from CMS in the near future. Cancellation of the EP and CR models and the reduction in scope of the CJR model’s mandatory nature are not, as they first might appear to be, complete reversals in course from the previous administration. Instead, the Proposed Rule indicates, although sometimes subtly, a similar goal (quality-based purchasing) with a different roadmap (voluntary model testing).

  1. Medicare Program; Cancellation of Advancing Care Coordination Through Episode Payment and Cardiac Rehabilitation Incentive Payment Models; Changes to Comprehensive Care for Joint Replacement Payment Model, 82 Fed. Reg. 39,310-39,333.
  2.  Pub. L. No. 111-148, available at
  3.  Centers for Medicare & Medicaid Services, Health Care Payment Learning and Action Network,, (last visited September 6, 2017).
  4.  Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services, 80 Fed. Reg. 73,280; see generally 80 Fed. Reg. 73,274-73,554 (codified at 42 C.F.R. § 510 et. seq. (2016)). An MS-DRG (Medicare Severity-Diagnosis Related Group) code refers to the system used by CMS to classify hospital stays of Medicare patients for purposes of payment by CMS. See Centers for Medicare & Medicaid Services, Design and Development of the Medicare Severity Diagnosis Related Groups (MS-DRGs), October 1, 2016, available at (last accessed September 18, 2017).
  5.  Certain excluded services are identified at 42 C.F.R. § 510.200(e). CMS must also update the list of excluded services on an annual basis. Currently excluded services can be found at the CMS website, and through the main CMS page for Comprehensive Care for Joint Replacement Model,
  6.  42 C.F.R. § 510.210(a).
  7.  42 C.F.R. § 510.300(c)(2). For years one and two of the model, the blend will be 2/3 of the hospital’s spending and 1/3 of regional spending, and 1/3 hospital spending and 2/3 regional spending for year three. By the fourth and fifth year, the model will base target pricing solely from regional standardized spending, and will not consider a specific hospital’s historical spending. 42 C.F.R. § 510.300(b)(2).
  8.  42 C.F.R. § 510.305(e), (f). As the name suggests, a stop-gain limit caps the amount of incentive payment a CJR model hospital can receive in a reconciliation period. The stop-gain limits are phased in, and are calculated as a percentage of the target price set by CMS for an episode. In years one and two, participants may earn up to five percent of their target price; 10 percent for year three, and 20 percent for years four and five. Id.
  9.  Id. Similar to the stop-gain, the stop-loss risk is a cap on the potential repayment that a participating hospital may have to make to CMS if its actual episode costs are above the target price set by CMS. The stop-loss cap is also phased in as follows: no risk of loss in the first year, five percent of the target price for year two of the CJR model, 10 percent for year three, and 20 percent in years four and five. Id.
  10.  80 Fed. Reg. 73,274-73,554; 73,542. See also Centers for Medicare & Medicaid Services, Comprehensive Care for Joint Replacement Model, available at (last accessed September 18, 2017).
  11.  80 Fed. Reg. 73,542.
  12.  The amendments made to the CJR model in the EP model final rule included: (1) the addition of CJR and BPCI LEJR reconciliation payment amounts for calculating target prices in the CJR model, (2) establishing the method of post-episode spending penalty calculations and removal of stop-loss limits related to them, (3) implementing an accountable care organization (ACO) overlap calculation separate from subsequent CJR reconciliation to avoid including ACO overlap amounts in stop-loss limits, (4) applying stop-loss and stop-gain amounts to the net payment reconciliation amounts (NPRA),  (5) modifications to the pricing and reconciliation process, (6) methodologies for quality measure scoring, (7) excluding certain beneficiaries from the CJR model when their care is also associated with an ACO, (8) clarifications to the appeals process for reconciliation payments, (9) changes to notices to beneficiaries about provider participation in the CJR model, (10) restructuring provisions relating to financial relationships involving the CJR model and their enforcement,  (11) restrictions on and requirements for incentives to beneficiaries in the CJR model, (12) reorganization of records access and retention requirements, (13) changes to the skilled nursing facility (SNF) waiver, (14) finalizing two tracks for attaining Advanced APM status for purposes of the Quality Payment Program,  and (15) definitional changes and technical corrections. 82 Fed. Reg. 184-651.
  13.  Id.
  14.  Id. at 565-566.
  15.  Id. at 226-227.
  16.  Id. at 193.
  17.  See supra, note 13.
  18.  82 Fed. Reg. 185-186; 647-651.
  19.  Id. at 567.
  20.  Id. at 580. For purposes of the CR model, claims with four specific HCPCS (Healthcare Common Procedure Coding System – the coding system used by CMS to classify medical procedures and services) codes relating to cardiac rehabilitation would be eligible for the incentive. Id. at 571; MB&CC, 2.11: HCPCS Codes, available at (last accessed September 19, 2017). These codes are used for cardiac rehabilitation and intensive cardiac rehabilitation activities that include at least the following: physician-prescribed exercise, education and intervention efforts tailored to modify cardiac risk factors, a psychosocial assessment, an outcomes assessment, and an individualized treatment plan. See Centers for Medicare & Medicaid Services, MLN Matters Number MM6850 (Revised), October 4, 2010, updated November 23, 2012, available at (last accessed September 18, 2017).
  21.  82 Fed. Reg. 180.
  22.  Id. at 39,312.
  23.  Id. at 39,311-39,312.
  24.  Id. at 39,312.
  25.  82 Fed. Reg. 39,312-39,313.
  26.  Id. at 39,313. CMS identifies some of the problems with the EP and CR models shared by stakeholders, including “participation requirements, data, pricing, quality measures, episode length, CR and skilled nursing facility (SNF) waivers, beneficiary exclusions and notification requirements, repayment, coding, and model overlap
  27. Issues.” Id. at 39,312.
  28.  See, e.g., Id. at 39,311, 39,313 (emphasizing future voluntary initiatives).
  29.  The Bundled Payments for Care Improvement (BPCI) Initiative was the voluntary bundled payment model precursor to the CJR and EP models. See generally Jennifer L. Gross & Briar Siljander, The Bundled Payments for Care Improvement Initiative Program: The Uncertain Impact of CMS Initial Models of Integrated Care Delivery, 12 ABA Health eSource 4, (2015), available at (last visited September 6, 2017) (Discussion of the structure and early results of the BPCI). Note that participation in BPCI Models 1, 2, or 4 for LEJR episodes exempts a hospital paid under the Inpatient Prospective Payment System from participation in the CJR model.
  30.  One of the two tracks under the Quality Payment Program is the Advanced Alternative Payment Model (Advanced APM) track. Eligible providers that receive a certain percentage of payment through Advanced APMs may receive up to a five percent bonus payment. See Centers for Medicare & Medicaid Services, APMs Overview, available at
  31.  82 Fed. Reg. 39,313.
  32.  Id. at 39,313-39,315.
  33.  Id. at 39,320.
  34.  Id. at 39,313-39,315; 39,326.
  35.  Id. at 39,327.
  36.  Id. at 39,315, Table 1 (CJR Mandatory Participation MSAs).
  37.  82 Fed. Reg. 39,317-39,318.
  38.  Id.
  39.  Id. at 39,317.
  40.  Id. at 39,318.
  41.  CMS notes that this policy is consistent with its treatment of care episodes that are not completed by the end of the CJR’s five-year term, which are excluded from reconciliation payments. Id. at 39318.
  42.  Id. at 39,314.
  43.  82 Fed. Reg. 39,316-39,317.
  44.  Id. at 39,328. The Inpatient Prospective Payment System is the method of reimbursement used by CMS to reimburse hospitals a fixed amount for a particular service. See Centers for Medicare & Medicaid Services, Medicare Learning Network, Acute Care Hospital Inpatient Prospective Payment System, ICN 006815, December 2016, available at (last accessed September 18, 2017). 42 C.F.R. 412.103 provides a process by which a hospital may seek to be reclassified from an urban to a rural hospital, usually for purposes of improved Inpatient Prospective Payment System reimbursement. See generally Lawrence + Mem'l Hosp. v. Burwell, 812 F.3d 257, 259 (2d Cir. 2016) (explaining rural and urban classification and the potential differences in reimbursement).
  45.  82 Fed. Reg. 39,315.
  46.  Id. at 39,314.
  47.  Id.
  48.  Id. at 39,320.
  49.  82 Fed. Reg. 39,320. Remedial actions follow a spectrum that includes a warning letter, corrective action plan, reduction or elimination of reconciliation payments, termination of CJR collaborators, and termination from participation in the CJR model altogether. 42 C.F.R. 510.410(b)(2). If a corrective plan is issued and not complied with, CMS may add as a penalty a 25 percent surcharge to the repayment amount. 42 C.F.R. 510.410(b)(3).
  50.  80 Fed. Reg. 73,474.
  51.  82 Fed. Reg. 39,320.
  52.  Id.
  53.  Id.
  54.  Id. at 39,320-39,321. While this policy has been used by CMS since the start of the CJR model, CMS believes it will provide greater transparency to participants to understand the reconciliation process for the CJR model amidst hospital mergers. Id. at 39321.
  55.  Id. at 39,320-39,321; 39,332.
  56.  80 Fed. Reg. 73,450.
  57.  82 Fed. Reg. 39,321-39,324.
  58.  Id. at 39,321.
  59.  Id. at 39,324.
  60.  Id. at 39,325.
  61.  Id.
  62.  Id. at 39,326.
  63.  82 Fed. Reg. 39,326.
  64.  Id.
  65.  Id.
  66.  Id.
  67.  Id. at 39,326-39,327.
  68.  Id. at 39,312.
  69.  82 Fed. Reg. 39,313-39,314. See also Id. at 39,327 (“[W]e also believe that reducing the number of providers required to participate in the CJR model would allow us to continue to evaluate the effects of such a model while limiting the geographic reach of our current mandatory models”). A further comment suggests that there may be a limit to the voluntary nature of the programs. Acknowledging that the forecasted revenues from reconciliation payments it receives from providers would drop because it anticipated that providers who expected to lose money in reconciliation would not voluntarily participate, CMS stated that a second reason for not making the entire CJR model voluntary was because the program would be a net negative line item on the budget. Id. at 39,330.
  70.  Id. at 39,311.
  71.  82 Fed. Reg. 39,320. The Acute Care Episode (ACE) Demonstration was a three-year CMS demonstration project that tested global payments for episodes of care as an alternative to fee for service reimbursement at five facilities. See generally IMPAQ International, Evaluation of the Medicare Acute Care Episode (ACE) Demonstration, available at (last visited September 6, 2017). The Pioneer ACO Model, which began with 32 ACOs participating in 2012 and concluded with eight ACOs remaining on December 31, 2016, tested shared savings and shared risk models. See generally Centers for Medicare & Medicaid Services, Pioneer ACO Model, available at (last accessed September 6, 2017).
  72.  82 Fed. Reg. 39,311; 39,313.
  73.  Id. at 39,313.
  74.  Id.
  75.  Id. at 39,310.

Briar Siljander

Cooper & Riesterer, PLC

Briar Siljander is a partner at Cooper & Riesterer, PLC, where he represents a wide range of healthcare professionals, organizations, and suppliers. He focuses his practice on healthcare business transactions and arrangements (including healthcare franchising), reimbursement audits and appeals, and nonprofit/tax-exemption matters. Mr. Siljander is also co-founder of Appeals Wizard, LLC, a healthcare software company dedicated to handling healthcare payment audit responses and appeals. Mr. Siljander holds a Juris Doctor degree, Magna Cum Laude, with a Health Law Certificate from Loyola University Chicago School of Law. He can be reached at [email protected].

Jennifer Gross

Cooper & Riesterer, PLC

Jennifer Gross is an attorney at Cooper & Riesterer, PLC, where she represents a wide range of healthcare professionals, organizations, and suppliers. Her practice focuses on compliance and reimbursement issues, including Medicare, Medicaid, and other third-party payor audit defense and appeals, compliance programs and compliance audits, and other healthcare regulatory matters. Ms. Gross is also co-founder of Appeals Wizard, LLC, a healthcare software company dedicated to handling healthcare payment audit responses and appeals. Ms. Gross holds a Juris Doctor degree from Wayne State University School of Law. She can be reached at [email protected].