CMS calls for hospitals to be subject to a new bundled payment model and data-reporting requirements

Notable policies in Medicare’s FY25 proposed rule for inpatient hospital care and long-term care hospitals include the formation of a mandatory bundled payment model and requirements for hospital data reporting.

Although the proposed payment rate was the headlining aspect of the rule for hospitals, the policy developments could have a longer-term impact on segments of the industry.

The latest iteration of bundled payments

The Transforming Episode Accountability Model (TEAM) would be obligatory for hospitals in yet-to-be-determined markets beginning in 2026. Participants would coordinate care for Medicare beneficiaries during and for 30 days following:

• Lower-extremity joint replacement
• Surgical hip or femur fracture treatment
• Spinal fusion
• Coronary artery bypass graft
• Major bowel procedure

The five procedures were selected in part because they have a sufficient volume to warrant standard care pathways during the acute and post-acute portions of the episode, CMS wrote in the proposed rule.

As in earlier bundled payment models, including the ongoing Comprehensive Care for Joint Replacement (CJR) and Bundled Payments for Care Improvement (BPCI) Advanced models, hospitals would receive a risk-adjusted target price prior to the performance year to cover all costs associated with episodes of care. (CJR, a mandatory model, is set to end Dec. 31, while the voluntary BPCI Advanced model will wrap up at the end of 2025.)

Hospitals would receive a reconciliation payment or owe money to CMS according to their ability to keep episode costs under the target price. There also would be a quality adjustment based on measures of readmissions, patient safety and patient-reported outcomes.

There would be three tracks, including a one-year Track 1 option in which participants can decline to take on downside risk.

Track 2 would be available to safety-net hospitals, allowing for lower levels of risk and reward during the model’s duration. Track 3 would entail higher levels of risk and reward.

The model also represents an effort to better coordinate episode-based payment with accountable care organizations (ACOs). Namely, patients aligned with an ACO could still be part of a TEAM episode of care. Hospitals also would be required to make post-episode referrals to primary care.

Hospitals see potential issues

Although hospital advocates support the transition to value-based payment, they are concerned about the mandatory nature of the proposed model.

The American Hospital Association (AHA) noted the BPCI Advanced and CJR models have not generated net savings after factoring in incentive payments to providers.

“Many organizations are not of an adequate size or in a financial position to support the investments necessary to transition to mandatory bundled payment models,” the AHA said in a written statement by Ashley Thompson, senior vice president for public policy analysis and development. “Requiring them to take on risk for large, diverse bundles may require more financial risk than they can bear.”

CMS said the mandatory nature of the model is important to ensure a representative sample of hospitals for performance evaluation within and across markets. In addition, Medicare beneficiaries in rural and underserved areas may be underrepresented in voluntary models. The agency said it understands the need to offer “safeguards” for participating safety-net providers, including by making available the Track 2 option.

The model “is the next logical step for applying lessons learned from BPCI Advanced in a mandatory model,” CMS wrote. “TEAM would enable CMS to capture a more diverse population of providers, and potentially beneficiaries.”

Features designed to bolster operational feasibility include a target-pricing methodology that incorporates “provider spending trends by region and MS-DRG as well as accounting for beneficiary acuity,” the proposed rule states.

Data-reporting obligations

As a condition of participating in Medicare, hospitals and critical access hospitals (CAHs) would have to continue with a subset of patient-data reporting in relation to respiratory diseases, per the proposed rule. Pandemic-era reporting requirements are set to end this month.

Beginning Oct. 1, hospitals would need to report data pertaining to COVID-19, influenza and respiratory syncytial virus (RSV). Reporting would be required weekly, with data elements set to include:

• Confirmed infections among hospitalized patients
• Hospital bed census and capacity
• Limited patient demographic information, including age

“The moderate COVID-19 burden coinciding with resurgent influenza and RSV has led to an overall hospitalization burden larger than observed during severe influenza and RSV seasons prior to the COVID-19 pandemic, placing patient health and safety at risk,” CMS wrote. “The result of this ‘new normal’ will be more burdensome respiratory virus seasons for the foreseeable future, which promises to place continued strain on the nation’s hospitals.”

The rule also states, “Sustained data collection and reporting outside of emergencies would help ensure that hospitals and CAHs maintain a functional reporting capacity that can be mobilized quickly when a new threat emerges to inform and direct response efforts (for example, resource allocations or patient load balancing within and across facilities) that protect patients and their communities. It will also provide the baseline data necessary to forecast, detect, quantify and, ultimately, direct responses to signals of strain.”

During a public health emergency, reporting could be required more frequently and would involve additional categories. The proposed rule also includes a request for information on ways to leverage the CDC’s National Syndromic Surveillance Program to further enhance data reporting.