Like it or not, the Centers for Medicare & Medicaid Services (CMS) is expanding its strong commitment to focus on quality and care improvement as the basis for payment to providers throughout the continuum of care.

The Final Rule for the Comprehensive Care for Joint Replacement (CJR) Model published by CMS in November 2015 is now in effect, with the April 1, 2016, mandatory participation date for Skilled Nursing Facilities (SNFs) fast approaching. In addition, CMS’s proposed rule to revise the discharge planning conditions of participation (CoPs) for hospitals includes new requirements that SNFs should follow closely.

CJR Final Rule

Under the CJR model, mandatory participation will impact 67 geographic areas across the country, including four in North Carolina (Asheville, Charlotte-Concord-Gastonia, Durham-Chapel Hill, and Greenville). A listing of the participant hospitals in these four geographic areas can be found at https://innovation.cms.gov/initiatives. Participant hospitals will be held financially accountable for the quality and cost of items and services for care provided to Medicare fee-for-service beneficiaries for lower-extremity joint replacements and recovery, including all hip and knee replacements, for the 90-day period following hospital discharge (the episode). SNF services that occur within the episode are covered by this Final Rule, so SNFs that do, or could, receive patient referrals from CJR participant hospitals will be directly impacted.

Participant hospitals will be seeking to enter into financial arrangements in the form of CJR collaborator agreements and/or sharing arrangements with SNFs and other post-acute care providers (PAC) to help increase quality of care and achieve reductions in cost of care. These CJR collaborator agreements will be related to gainsharing payments for CJR in which a hospital may share savings with collaborators throughout the episode. In addition, these collaborator agreements may require the CJR collaborator to share financially in downside risk with the anchor hospital under the CJR model. All of these payments align with CMS’s shift in focus to incentivize hospitals and PAC providers, including SNFs, to work collaboratively, improving the quality of care provided in all settings through the continuum of care.

Specifically under 42 C.F.R. § 510.610, the CJR model includes a waiver of the SNF three-day rule during episodes being tested in model performance years two through five. This waiver for coverage of an SNF stay only applies to qualified SNFs at the time of a CJR beneficiary SNF admission following the anchor hospitalization. Qualified SNFs are those rated an overall three stars or better for at least seven of 12 months, using the Five-Star Quality Rating System for SNFs on the Nursing Home Compare website. CMS determines and posts qualified SNFs for each calendar quarter, on a rolling 12-month basis. All other Medicare rules for coverage and payment of Part A-covered SNF services will still apply.

Lower-extremity joint replacements are the most commonly performed Medicare inpatient surgery, with predictions showing continued growth in utilization. The quality and cost of care for an inpatient hospital stay that results in a Diagnostic-Related Group (DRG) of 469 or 470, along with all related care provided during the episode, will be measured and adjusted using a retroactive bundled payment. The payment model and phases of the CJR model will extend for five performance years, concluding on December 31, 2020.

As part of the CJR final rule, CMS also implemented certain target pricing on the DRGs affected, a weighted methodology for quality and patient satisfaction in determining incentive payments, and stop-loss and stop-gain limits to protect both hospitals and CMS. Also, in addition to the specific SNF three-day rule waiver, waivers for certain fraud and abuse authorities were issued jointly by CMS and the U.S. Department of Health and Human Services Office of Inspector General (OIG) concurrently with the CJR final rule. Those waivers, which include waivers for specified arrangements involving CJR model participants, can be found at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Fraud-and-Abuse-Waivers.html.

Discharge Planning Requirements

With the discharge planning CoPs proposed rule issued by CMS on November 3, 2015, CMS continued its focus on improving health outcomes and reducing health care costs by decreasing patient complications and avoidable hospital readmissions with more robust discharge planning requirements. Consistent with the CJR final rule summarized above, CMS intends for the new requirements to increase communication between providers, patients and families/caregivers in the discharge planning process by incorporating patient goals and utilizing quality and resource-use data to enable people to take charge of their own health care – here, their PAC/SNF provider. The proposed CoPs rule at 42 C.F.R. § 482.43(f) adds specific requirements for hospitals that mandate that certain information about SNFs (e.g., a list of all available SNFs in a given patient’s geographic area, quality data about those SNFs, etc.), as well as the patient’s freedom of choice among PAC/ SNF providers, be included in a patient’s discharge plan.

These particular rules, along with other ongoing CMS payment initiatives, should put SNFs on alert that CMS is determined to utilize quality and resource-use data to improve health outcomes and reduce health care costs, while expanding program rules and opportunities to all PAC settings. SNF leadership and experienced legal counsel should closely review all related policies, procedures and agency practices to ensure full, continued compliance, as well as address the contracting needs for all collaboration and sharing arrangements, whether mandatory or not.

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