In proposing a mandatory, episode-based payment model for certain hospitals, the Centers for Medicare & Medicaid Services (CMS) has provided a window into how value-based care might be addressed under a possible second Biden Administration.
At issue is the Transforming Episode Accountability Model (TEAM), which was included within the fiscal year (FY) 2025 Hospital Inpatient Prospective Payment Systems (IPPS) for Acute Care Hospitals and the Long-Term Care Hospital (LTCH) Prospective Payment System proposed rule released by CMS on April 10. Find Applied Policy’s summary of this model, which covers participation selection, episode definitions, quality reporting, payment, and more, here.
TEAM will have serious financial implications for hospitals that are selected for participation. It will also offer insights into what to expect as the Administration moves towards the CMS Innovation Center’s goal of having all Medicare fee-for-service beneficiaries in a care relationship with accountability for quality and total cost of care by 2030[1]. CMS will need more mandatory payment models to reach this goal and transition the heath care system to value.
TEAM is the first mandatory payment model proposed under the Administration, meaning that it is the first model on which stakeholders have been provided the opportunity to comment. CMS’s responses to these comments, as well as the finalized version of TEAM, will be telling. Among other things, Applied Policy is watching the following:
How will CMS reduce risk for safety net hospitals?
CMS proposes that safety net hospitals will be allowed to select a model track that is subject to less risk and provides more opportunities for participants to decrease repayments owed to CMS through performing well on quality measures. However, the agency considered going even further to support safety net hospitals, including allowing these hospitals to remain in a track that has no downside risk for the entirety of the model.
CMS also took safety-net hospitals into account when determining how to set target prices for TEAM episodes. Hospitals that serve more disadvantaged beneficiaries may be less efficient than their peers, and perform poorly if they have to compete against regional benchmarks, as opposed to their own past performance. Under the Comprehensive Care for Joint Replacement (CJR) Model, safety net hospitals struggled after the model moved to 100 percent regional pricing. While CMS ultimately proposed reginal target prices under TEAM, they did consider providing certain hospitals with 100 percent hospital specific targets, or a blend of reginal and hospital-based targets. The agency seeks comment on this decision, as well as solutions that “would decrease the likelihood of safety net hospitals being disproportionately penalized by regional target prices.[2]”
How will CMS account for social risk?
To support health equity, CMS has incentivized providers to serve beneficiaries with higher social risk. For example, in the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model, ACOs are rewarded for serving historically marginalized populations via the Health Equity Benchmark Adjustment (HEBA). HEBA has attracted criticism for its reliance on the Area Deprivation Index (ADI), which uses 17 variables that capture the wealth, health, education, and housing quality of an area to rank census blocks based on disadvantage. Critics believe the ADI struggles to identify underserved beneficiaries in high-cost areas though the heavy weight it granted to housing prices; the most disadvantaged census block in Washington D.C. for example, has a national ADI of 68, meaning that 42 percent of census blocks in the nation are considered less advantaged under the measure[3].
Accordingly, CMS made major changes to HEBA in performance year 2024 of ACO REACH, providing higher weight to individual, as opposed to neighborhood, levels of disadvantage. Additionally, the agency added the state ADI into HEBA, which ranks census blocks at the state, as opposed to national level, better identifying disadvantaged beneficiaries in states with higher costs of living.
In TEAM, CMS will identify social risk via a single binary variable (0 = No, 1 = Yes). Beneficiaries can display social risk by living in a census block with a state or national ADI above the 80th percentile of disadvantage, by being dually eligible, or though qualifying for the Medicare Part D Low Income Subsidy. This method of measuring social risk will be much more palatable for providers in high cost of living areas. When considered alongside the aforementioned changes to HEBA, it may signal a shift in how CMS accounts for social risk.
[2] 89 FR 36429