CHART Model Community Transformation Track: Value Proposition for Rural Healthcare Reform

Manatt on Health

The Centers for Medicare & Medicaid Services (CMS) has long acknowledged the disparities in care and outcomes affecting the one in five Americans who live in rural areas, as well as the financial challenges faced by rural providers. Rural populations are older, with more chronic illness burden and more adverse social determinants of health than their urban counterparts; yet there are widespread physician and staffing shortages in primary care and behavioral health. The existing rural healthcare infrastructure is aging and often does not match current needs—rural hospitals were set up for inpatient demand that has decreased over the decades as medicine has changed, many populations have declined and patients are more likely to travel to urban centers for elective procedures. Many rural hospitals are under immediate threat of closure.

To address these long-standing challenges, the Center for Medicare & Medicaid Innovation (CMMI) at CMS announced the Community Health Access and Rural Transformation (CHART) model in August. The CHART model is a voluntary opportunity for rural communities to test care transformation supported by payment reform. In September, CMS released the full Notice of Funding Opportunity (NOFO) for one of the two options under the CHART model. The NOFO provides additional details on the so-called Community Transformation Track modeled after the hospital global budget payment systems in Maryland and rural Pennsylvania. 

The CHART model offers states and their rural hospitals and communities an intriguing opportunity to restructure their payments to enable broader facility transformation to best meet the needs of the community. The CHART model, and particularly the Community Transformation Track, will not be the right fit for every rural hospital, but for some, it could provide the springboard needed to longer-term financial sustainability.

CHART Model Overview

The CHART model is voluntary and will feature two participation tracks. The Community Transformation Track (CTT) will combine communitywide transformation planning with payment changes to rural hospitals over seven years. Under this track, a “Lead Organization”—which can be a provider organization, a payer or a state government entity—will coordinate efforts across a target community to design and implement a healthcare transformation plan for the community. The transformation plan will be financed through a combination of seed dollars and prospective payments to participating hospitals that will replace fee-for-service (FFS) reimbursement for Medicare fee-for-service beneficiaries for the duration of the model. CMMI will also add an Accountable Care Organization (ACO) Transformation Track, with details expected in 2021.

On September 15, 2020, CMS released the NOFO for the Community Transformation Track. Letters of intent for the NOFO are due on January 18, 2021, and the final application is due February 16, 2021. Up to 15 regions will be selected, with up to $5 million in grant funding available for each region. This newsletter focuses on the key features of the Community Transformation Track and raises some considerations for regions interested in the model.

CHART Community Transformation Track Design

The Community Transformation Track is a seven-year model with supporting grant funding to promote transformation in each rural community. A “community” is defined as one or more counties or census tracts (may be contiguous or noncontiguous), all of which must be classified as rural as defined by the Federal Office of Rural Health Policy. At the time of application submission, the region must have at least 10,000 Medicare FFS beneficiaries whose primary residence is within the region.

The model includes three components:

1. Funding to Establish Partnerships and Technical Support. The planning/administrative funding associated with the model (up to $5 million for each region, with up to $2 million available up front) will support the work of the Lead Organization. The Lead Organization will be expected to lead transformation planning activities as well as procure the necessary technical supports to help the hospitals successfully transition to the model. Each community’s transformation plan must address behavioral health treatment, substance use disorder treatment, chronic disease management and prevention, maternal and infant health, or a combination. CMS is specifically allowing transformation plans to include conversion to freestanding emergency facilities where appropriate for the community.

2. Regulatory Flexibility to Support Delivery System Redesign. CMS will provide participating hospitals with various regulatory flexibilities, many of which have been rolled out in other CMMI models, but others of which are new. Regulatory flexibilities will include waivers of the skilled nursing facility three-day rule, telehealth requirements (after the end of the current public health emergency [PHE] flexibilities) and care management home visits. Engagement of Medicare beneficiaries through transportation reimbursement, cost-sharing waivers and gift card rewards will be permitted. Finally and most significantly, CMS will allow Lead Organizations flexibility in how they implement the CHART CTT Medicare payment model itself in the region, including in their negotiation of how payment discounts will apply to different facilities in the region, provided the overall discount at the regional level meets requirements. 

3. Capitated Payment Amount Payment Model. CMS will pay fixed, prospective payments to participating hospitals that will replace Medicare FFS. The stable revenue stream (called the “Capitated Payment Amount” [CPA], although it is not strictly speaking capitated) is intended to incentivize participant hospitals to lower fixed costs and engage in activities that improve quality of care and best serve the needs of the community. The value proposition for facilities is payment stability and predictability, as well as the freedom to invest in new service lines. The COVID-19 PHE, under which there have been sharp swings in utilization and therefore revenue, has added to interest in such payment models.

The CHART CTT Medicare1 CPA will be calculated by: 

  • Determining baseline Medicare FFS revenue based on historical expenditures for eligible services (i.e., averaging two years of historical FFS data).
  • Applying prospective adjustments to the baseline revenue (e.g., medical inflation trend, wage index changes, population changes, quality adjustment).
  • Applying a discount to the adjusted baseline revenue to yield the introductory capitated amount. The discount factor will start at 0.5% in the first performance year, increasing each year based on total Medicare FFS revenue in the community under the CPA.
  • Applying midyear and end-of-year adjustments to yield the final capitated amount (e.g., to account for changes in population size, demographics or shifts between hospitals).

Roles and Responsibilities Under CHART CTT

Each Lead Organization will be the regional federal grantee and will recruit the local hospitals and payers, lead the development of the transformation plan, and manage technical assistance. Lead Organizations must be experienced grantees with a history in the rural community; examples of eligible organizations include the State Medicaid Agency, State Office of Rural Health and Local Public Health Department and an academic medical center. 

The Lead Organization will be required to convene an Advisory Council of community stakeholders including payers, state officials, consumers, rural hospitals and rural providers. The council will assist the Lead Organization with transformation planning and engagement of the broader community.

Participating facilities may be acute care hospitals or critical access hospitals. The facilities must primarily serve local residents and/or provide a nontrivial volume of the total healthcare provided to the community.

State and local payer participation alongside Medicare FFS is important to ensure that participating facilities have aligned incentives across their patient populations. The state Medicaid program must participate for CMS to make the award, and may need to secure a Medicaid State Plan Amendment/waiver to effectuate the model, depending on current payment arrangements. Other state or local payers’ participation is voluntary and nonbinding, but viewed as critical for a successful application.

Next Steps for Prospective CHART Community Transformation Track Applicants

Rural health stakeholders considering the CHART Community Transformation Track may want to take the following steps:

1. Consider whether it is the right fit for the region. Shifting to a global budget-like model is a significant undertaking, with potentially long-lasting implications for the participating hospitals and their communities. Stakeholders will want to consider whether the conditions are right for taking such a leap. Key considerations include:

a. Does our region have rural hospital leaders with an appetite for change and enough population health infrastructure to build from?

b. Does our community have a clear sense of the transformation priorities and what it would take to act on those priorities?

c. Do we want to be early adopters of rural health reform?

2. Identify the Lead Organization. In addition to managing the relationship with CMS, the Lead Organization will build vision around the change concepts locally, keep the facilities and payers at the table, and help build political will for the model. While the Lead Organization is unlikely to be wholly neutral, it should be a trusted and known entity in the community with a strong ability to hold hospitals, payers and nonhospital providers together in a coalition.

3. Identify interested payers. Medicaid must agree to participate in the model, but strong applications will include indications of interest from other participating payers.

4. Define the community. Once stakeholders determine that there is an appropriate level of interest in the Community Transformation Track, they must define the communities that will participate. The definition of “community” will affect which hospitals participate and who can serve on the advisory committee.

5. Prepare and submit application materials. This includes the optional letter of intent due by January 18, 2021, and the full application due by February 16, 2021.

The Community Transformation Track presents an opportunity for rural hospitals to reshape themselves to meet the needs of their communities, but its transformative potential also presents challenges. Identifying the communities and hospitals best poised to capitalize on this opportunity is essential to ensuring the long-term success of the model.

1 Excluding Medicare Advantage. Medicare Advantage plans may participate as independent payers aligned with CMS.

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