CMS Proposes Payment Models for Surgical Procedures

The Centers for Medicare & Medicaid Services (CMS) has proposed an episodic payment model, the Transforming Episode Accountability Model (TEAM). This is one of CMS’s “innovation” models. If it makes it through the rulemaking process, the proposed model would launch on Jan. 1, 2026 and run for five years, ending on Dec. 31, 2030.

The model would be mandatory for five types of surgical procedures:

• Lower extremity joint replacement;
• Surgical hip femur fracture treatment;
• Spinal fusion;
• Coronary artery bypass graft; and
• Major bowel procedures.

These procedures would “initiate” the episode.

For my readers, episodic payment models have been in the making since 1988. However, it has only been the last two decades that CMS has introduced and expanded their presence, typically on a voluntary basis. The model usually pays a flat rate for the defined period of the episode of care, which with TEAM would start at the surgery and include all treatment associated with the patient’s recovery for the 30 days following discharge.

TEAM, as proposed, would require selected acute-care hospitals to coordinate care for the affected traditional Medicare beneficiaries who undergo one of these surgical procedures, and to assume responsibility for the cost and quality of care from surgery through the 30-day period. The expectation is that the hospital would connect patients to primary care services through established accountable care relationships and support optimal, long-term health outcomes. “Optimal, long-term health outcomes” can have multiple meanings, but likely, this expectation will include seamless patient care transitions, reducing avoidable readmissions, and decreasing duplication of services and excess utilization.

According to CMS, the agency “would provide participating hospitals with a target price that would represent most Medicare spending during an episode of care, which would include the surgery (including the hospital inpatient stay or outpatient procedure) and items and services following hospital discharge, such as skilled nursing facility stays or provider follow-up visits.”

CMS also is including its voluntary Decarbonization and Resilience Initiative. If you’re like me, I asked, what the heck is this?! The initiative is designed to “address threats posed by climate change to the nation’s health and healthcare system by collecting, monitoring, assessing, and addressing hospital carbon emissions and their effects on health outcomes, costs, and quality.” So, what does surgery have to do with climate change?  Well, apparently, our healthcare industry is a contributor to greenhouse gases. Our industry allegedly accounts for between 4.4-4.6 percent of worldwide emissions.

Improvements in operating costs, energy efficiency, and more efficient use of anesthetic gases are examples of how our industry can support savings for the Medicare Trust Funds and hospitals. Two healthcare organizations have demonstrated such initiative and benefited from substantial savings.  Organizations that participate in the initiative would report metrics for a) organizational, building energy, b) anesthetic gas, and c) transportation. These metrics are like those collected by the Joint Commission for its Sustainable Healthcare Certification.

According to Moss Adams, a national healthcare accounting firm, the CMS proposed payment incorporates a comparison of the participant’s Medicare fee-for-service spending for each episode of care, which may be adjusted by the participant’s performance on three quality measures:

1. Hybrid Hospital-wide Readmission Measure;
2. CMS Patient Safety and Adverse Events Composite Measure for all episodes; and
3. Risk-Standardized Patient-Reported Outcomes Following Elective Primary Total Hip and/or Total Knee Arthroplasty.

Hospitals may earn a payment from CMS, subject to a qualified performance adjustment, if the total Medicare costs for the episode are below the target price. Conversely, hospitals may owe CMS a repayment, depending the quality performance adjustment, if the total Medicare costs for the episode are above the target price, according to MossAdams.

The proposed target payment from CMS is much more complex than I’ve described. However, if your organization is considering participating in this initiative, your finance executives should connect with a knowledgeable healthcare accounting firm to understand the pricing inclusions/exclusions and adjustments to the target price, including but not limited to which non-excluded Medicare Parts A and B items and services will be included, the beneficiary-level factors, social risk adjustments, discounts, quality measures, health equity documentation requirements, and the climate change option.

In summary, the episodic payment would be based on the CMS targeted overall cost for each of these surgeries and apply to the fees for all provider participants (structured in an accountable care organization, or ACO, fashion) that are caring for the patient during the 30-day period. Creating workflows and process changes could benefit the ACO and its participants, Medicare, the patient, and the environment.