The Centers for Medicare & Medicaid Services (CMS) announced on July 25 a five-year proposed bundled payments model for hospitals that treat Medicare patients following an MI or bypass surgery.

CMS also proposed a five-year cardiac rehabilitation incentive payment model to encourage hospitals to refer patients to cardiac rehabilitation.

Under the bundled payments proposal, hospitals would be held responsible for Medicare beneficiaries during their inpatient stay for an MI or bypass surgery as well as for the 90 days after they are discharged from the hospital. Hospitals would receive a fixed payment for each episode of care. If hospitals deliver higher quality of care, they will receive higher payments. If they deliver lower quality of care, they will be penalized.

CMS is seeking comments on the proposal, which would be implemented July 1, 2017. As of now, CMS only requires bundled payments for total hip and knee replacements.

For the cardiac care bundled payments model, CMS plans on randomly selecting hospitals in 98 metropolitan areas to participate, which represents approximately 25 percent of the U.S.’s metropolitan areas. There is no application to participate, and hospitals outside of the 98 metropolitan areas will not be able to participate.

“Preliminary results from other tests of bundled payments for cardiac and orthopedic care suggest that these models have strong potential to improve patient care while reducing costs,” CMS said in a news release. “Because they will include a wide range of hospitals around the country, the models announced today will allow CMS to test the impact of bundles on quality and cost when implemented at scale and across all types of providers and patients.”

With the bundled payments model, CMS plans on setting target prices for episodes of care starting with the hospitalization and continuing for 90 days post-discharge. The agency will adjust the prices based on the complexity of MI or bypass surgery.

CMS will evaluate hospitals’ quality of care on several metrics. For instance, it will examine the 30-day, all-cause, risk-standardized mortality rates following hospitalization for MI or bypass surgery. It will also examine the excess days in the hospital following an MI.

If the proposal passes, CMS will implement the program in phases. For instance, CMS will not require hospitals that do not meet quality standards from July 2017 to March 2018 to repay the government. However, the penalties will begin in April 2018 and will increase from a maximum of 5 percent for 2018 to a maximum of 20 percent in 2020 and 2021, the final two years of the program.

Under the cardiac rehabilitation incentive payment model, CMS plans on providing incentives to hospitals in 45 metropolitan areas that were not selected for the cardiac care bundled payment models and 45 areas that were selected for bundled payments.

CMS plans on paying $25 per cardiac rehabilitation service for each of the first 11 services that Medicare pays for following an MI or bypass surgery. After those 11 services, payments will increase to $175 per service.

Hospitals will be able to offer a maximum of two, one-hour cardiac rehabilitation sessions per day for up to 36 sessions during a 36-week period. They could offer an additional 36 sessions if CMS approves the extension.

In 2014, more than 200,000 Medicare beneficiaries were hospitalized for an MI or underwent bypass surgery at a cost of more than $6 billion, according to CMS. The agency said there was a 50 percent variation in the cost of treating these patients and a 50 percent variation in 30-day readmissions based on where the patients were treated.

“Patients want the peace of mind of knowing they will receive high-quality, coordinated care from the minute they’re admitted to the hospital through their recovery,” CMS principal deputy administrator and chief medical officer Patrick Conway, MD, said in a news release. “The variation in cost and quality for the same surgery at different hospitals shows there are major opportunities for hospitals included in today’s models to reduce costs, improve care and receive additional payments by improving patient outcomes.”