Regulatory Changes for 2017


Bundled Payment Program

By Alpha Lillstrom Cheng, JD, MA
June 6, 2017

As you know, the Centers for Medicare & Medicaid Services (CMS) is responsible for developing, proposing, and finalizing regulations in order to implement health care–related legislation that has been passed by Congress and signed into law. The regulatory process consists of publishing proposed rules for public viewing and requesting stakeholder input in the form of “comments.” On behalf of our over 4,200 members, the Private Practice Section (PPS) regularly analyzes and responds to regulatory activity that pertains to private practice physical therapy.

In recent years, payment for services provided to Medicare beneficiaries has been moving away from the standard fee-for-service model and toward payment on the basis of quality; therefore, regulatory proposals relevant to the practice of and payment for physical therapy care have been increasing in number and complexity. This year three such rules will go into effect. In the March issue of Impact, this column covered the changes in the 2017 Medicare Physician Fee Schedule (MPFS), which resulted in payment adjustments for care provided by physical therapists and other providers who are paid under the fee schedule. In this column, I will discuss the planned expansion of the Comprehensive Care for Joint Replacement (CJR) bundling program and the impact this policy could have on physical therapists in private practice.

Expansion of Comprehensive Care for Joint Replacement Bundling Program
On April 1, 2016, CMS began a bundled payment model for episodes of care that involved lower extremity joint replacement (LEJR). On January 3, 2017, CMS published final regulations to modify provisions of the existing CJR model and extend episode payment model (EPM) provisions beyond CJR’s hip and knee arthroplasty to a new group of patients—those who undergo surgical hip and femur fracture treatment (SHFFT). In the final rule, CMS stated that “these models will further [their] goals of improving the efficiency and quality of care for Medicare beneficiaries receiving care for these common clinical conditions and procedures.”1 The changes to the payment model are to begin this year and last five performance years—through December 31, 2021,2 and test whether using an EPM will reduce Medicare expenditures while simultaneously “preserving or enhancing the quality of care for Medicare beneficiaries.”3

The SHFFT bundled payment model will impact the same 67 geographic areas4 that were selected for the CJR model, as well as approximately 50 more hospitals that are excluded from CJR model participation because they are testing bundled payment for care improvement (BPCI) of LEJR episodes.5 While the SHFFT model test is separate and distinct from the current CJR model, it has the same goal of reducing costs through coordination of care and financial accountability, and will use a framework that is similar to CJR.6


Mechanics of the Episode Payment Models
When a Medicare beneficiary is admitted to a participating inpatient prospective payment systems (IPPS) anchor hospital for surgical hip/femur fracture treatment,7 that facility will be held accountable for the cost and quality of care provided. This responsibility extends from the Medicare fee-for-service (FFS) beneficiary’s inpatient stay as well as for all related care covered under Medicare Parts A and B that takes place within 90 days of discharge from the hospital.

In its comments to CMS, PPS reiterated last year’s concerns about the hospital-centric nature of the model. CMS remained steadfast in its decision that the hospital is to remain the central entity of the EPM and is thereby required to manage the episode of care, the bundled payment, and bear the financial risk.8 CMS expects that this responsibility will incentivize participating hospitals to implement and coordinate care redesign with other providers and suppliers in order to increase efficiency, reduce costs, and improve outcomes.9

Each year, CMS will set target prices for episodes of care based on historical data of total costs related to the care for Medicare FFS beneficiaries admitted for SHFFT. Target prices will be adjusted based on the complexity of treatment as well as a blend of hospital-specific and regional historical data. Throughout the year, participating hospitals will be paid according to the usual Medicare FFS payment systems. At the end of the year, the actual episode payment will be reconciled against an established EPM quality-adjusted target price.10 If there are savings and a quality category of “acceptable” or higher was achieved, a reconciliation bonus payment will be made to the participant hospital.11 On the flip side, if the amount of this calculation is negative, CMS will require a Medicare repayment from the participating hospitals.12 The hospitals are responsible for the distribution of relative portions of Medicare payments to, or the recoupment of payments from, providers who collaborated on the episode of care—in accordance with the specific agreement a hospital has with said participants.

Collaboration with Other Providers
CMS is implementing bundled payment models in order to encourage coordination among all the providers involved in a patient’s care, including collaboration between hospitals, physicians, and community-based providers. As with the CJR model, the SHFFT model allows for therapists to provide care without being an official collaborating agent, but permits contracts between hospitals and community-based providers in order to include those practitioners in the gainsharing portion of the payment model.

The original CJR collaboration guidelines were vague and insufficient to ensure that nonphysician group practices—such as private practice physical therapy groups—could be collaborating agents with a participant hospital. PPS requested that the Agency clarify the regulations to explicitly permit nonphysician practice groups to enter into collaborator agreements with participating hospitals.13 In response, the Agency unequivocally stated that “groups of nonphysician practitioners should be permitted to be EPM collaborators.”14

The final rule also declared that groups of nonphysician practitioners should be treated the same way as physician group practices (PGPs) regarding their ability to engage in distribution arrangements with their members.15 Therefore CMS is adding nonphysician practitioner group practices (NPPGPs) to the list of entities eligible to be EPM collaborators. An NPPGP is defined as an “entity that is enrolled in Medicare as a group practice, includes at least one owner or employee who is a nonphysician practitioner, does not include a physician owner or employee, and has a valid and active tax identification number (TIN).”16 As a result of this regulatory change, NPPGP is assured the same collaborator privileges as a PGP.

To add further clarity, the Agency is going to individually list all of the types of Medicare-enrolled providers and suppliers that are able to bill Medicare outpatient therapy who are also eligible to be EPM collaborators.17 They are also establishing a new term of art, “therapist in private practice,”18 to identify rehabilitation therapists who provide outpatient therapy in a private practice setting. Therapists in private practice and therapy group practices (TGPs) will be included in the list of those eligible to be EPM collaborators. Echoing the definition of the NPPGP, a TGP is an “entity that is enrolled in Medicare as a therapy group in private practice, includes at least one owner or employee that is a therapist in private practice, does not include an owner or employee who is a physician or nonphysican practitioner, and has a valid and active TIN.”19 Only those listed as eligible EPM collaborators may enter into a sharing arrangement with a participating hospital.20 This rule change is a significant and positive achievement for PPS.


Beneficiary Choice
All patients receiving LEJR or SHFFT at a participating hospital will have his or her care included in an EPM episode.21 In comments filed with CMS, PPS argued that the mere statement that Medicare beneficiaries retain their right to obtain health services from any qualified provider has been insufficient to overcome a hospital’s inherent bias to resist referring to independent rehabilitation professionals who may be more cost-effective and achieve higher functional outcomes. Sharing those concerns made a significant impact; in the final rule, CMS required EPM-participating hospitals “to provide a complete list of post-acute care providers to EPM beneficiaries as part of discharge planning and referral.”22 Furthermore, CMS “will have a monitoring contractor actively reviewing claims and monitoring behavior of participant providers to ensure beneficiary choice and care are not compromised by the EPMs.”23 If an EPM participant or collaborator does not comply with the requirements, including respecting beneficiary choice, CMS may respond with remedial actions.24

Effective Date
Soon after President Trump was sworn in, he froze the effective date of regulations that had been issued at the end of the Obama administration. The declaration impacted this final rule to modify CJR and implement other bundled payment programs. On March 20, 2017, the new Health and Human Services (HHS) Secretary, Dr. Tom Price, issued an interim rule, shifting the effective date from March 21 to May 20, 2017.25 Likewise, the expansion of CJR to include SHFFT was originally planned to begin July 1, 2017, and end December 31, 2021. It is now slated to begin on October 1, 2017.

Crystal Ball
The March 20 interim rule stated, “This additional 3-month delay is necessary to allow time for additional review, to ensure that the agency has adequate time to undertake notice and comment rulemaking to modify the policy if modifications are warranted, and to ensure that in such a case participants have a clear understanding of the governing rules and are not required to take needless compliance steps.”26 The interim rule also added that the delay would give participants more time to prepare for these models and that it would be preferable for payment periods to align with the calendar year. While in Congress, Secretary Price was a vocal opponent of bundled payment initiatives and introduced legislation to delay their implementation. It is therefore not surprising that the agency under his direction is now considering pushing back the implementation of all bundled payment initiatives even further, until 2018. The Obama administration had set a goal of redirecting half of traditional Medicare dollars to alternative payment models by 2018. It is yet unclear whether or not the Trump administration will continue to support this goal, or instead develop different initiatives that may or may not continue to lead health care from fee-for-service operations into payment based on value and quality.

The final rule added clarity to the existing CJR model and expanded on that framework to implement a model for treatment for hip and femur fractures. While the bundled payment models remain hospital-centric, CMS did strengthen patient choice protections. By requiring that EPM participants provide EPM beneficiaries a complete list of post-acute care providers as part of discharge planning and referral, CMS has improved the chances that patients will seek therapy from a private practice physical therapist. Another big win is that CMS clarified that nonphysician practitioner group practices are to be treated the same way as physician group practices for purposes of becoming collaboration agents with hospitals participating in the bundled payment models. However, the onus is on the collaborating therapists to “ensure that financial exchanges with the participating hospital [are] attributed to the physical therapists who directly furnished services to [CJR] beneficiaries.”27

While these rules are to go into effect this fall, it is unknown how extensively President Trump and Secretary Price will modify the bundled payment programs, or the offices within CMS who manage them. We will keep you posted on developments that impact your practice.

In next month’s column, I will describe the rule to implement the Quality Payment Program (QPP), which seeks to reward value and outcomes through one of two paths: the Merit-Based Incentive Payment System (MIPS) or participation in Advanced Alternative Payment Models (APMs).


1. CMS-5519-F Medicare Program; Advancing Care Coordination Through Episode Payment Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; and Changes to the Comprehensive Care for Joint Replacement Model (CJR),, p.180.

2., p. 184.

3. Ibid., p. 184.

4. Ibid., pp. 226. Approximately 800 acute care hospitals (approximately 23 percent of all IPPS hospitals) now participate in the CJR model (p. 193). Rural counties are excluded from the models.

5., p. 193, 391.

6. Ibid., p. 187.

7. SHFFT model episodes will be initiated by claims for hip and femur procedures, except major joint, MS-DRGs 480-482, representing IPPS admissions for hip fixation procedures in the setting of hip fractures. Ibid., p. 196.

8. Ibid., p. 191.

9. Ibid., p. 185.

10. Ibid., p. 191.

11. Ibid., p. 191.

12. Ibid., p. 191.

13. Ibid., p. 437.

14. Ibid., p. 437.

15. Ibid., p. 437.

16. Ibid., p. 437.

17. Ibid., p. 437.

18. A therapist in private practice is “a therapist that either: complies with the special provisions for services furnished by physical therapists in private practices in §410.60(c) of this chapter; or complies with the special provisions for services furnished by occupational therapists in private practice in §410.59(c) of this chapter.” Speech-language pathologists are included in this definition as well. Ibid., p. 437.

19. Ibid., p. 438.

20. Ibid., p. 438.

21. Ibid., p. 410.

22. Ibid., p. 413.

23. Ibid., p. 189.

24. The remedial actions are detailed in §512.460(b)(2). Ibid., p. 406.



27., p. 437.


Alpha Lillstrom Cheng, JD, MA, is a registered federal lobbyist working with Connolly Strategies & Initiatives, which has been retained by PPS. An attorney by training, she provides guidance to companies, nonprofit organizations, and political campaigns. For six years, she served as Senior Policy Advisor and Counsel for Health, Judiciary, and Education issues for Senator Jon Tester (Montana), advising and contributing to the development of the Affordable Care Act, as well as working on issues of election law, privacy, government transparency, and accountability. Alpha has also directed Voter Protection efforts for Senators Bob Casey, Al Franken, Russ Feingold, and Mark Begich. She was Senator Franken’s Policy Director during his first campaign and was hand-picked to be the Recount Director for his eventual 312-vote win in 2009.

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