Bundled Payment for Joint Replacement Coming Soon to You (or a Hospital Near You)

It’s been a few weeks since CMS released the highly anticipated final Comprehensive Care for Joint Replacement (CJR) rule. But wait…What is that you say? You still haven’t made it through the 1,018-page document? Sg2’s recent discussions with hospitals and health systems reveal that you’re not alone. What else have we learned from our Sg2 members? Namely, that you’ve made great headway in several areas since July’s initial announcement of the proposed rule: 1) evaluating gaps in your System of CARE for joint replacement; 2) understanding cost across the episode of care; 3) evaluating the quality of your post-acute care providers; and 4) revisiting your gainsharing options with your orthopedic surgeons.

The approximately 400 comments CMS received in regards to the proposed rule did have some impact on the final CJR model, but, for the time being, hospitals and health systems will continue to solely bear the provider risk for the episode lasting from admission to 90-day postdischarge. Thankfully, however, there’s a bit more time to prepare. CMS postponed the start date from January 1 until April 1, 2016. Also, just as proposed in the initial version, downside risk will not be in effect until the second year of the program. However, the stakes get higher in subsequent years. Stop-loss limits will increase from 5% in 2017 to 10% in 2018, culminating at 20% in the fourth and fifth years of the program. While a significant portion of the proposed initiative remained intact, there were a few other notable changes. What do they mean for you?

Your discussions will roll off the tongue a bit easier. The acronym for the model has been shortened from CCJR to CJR.

You may be off the hook…for now. Down from the initially proposed 75 proposed metropolitan statistical areas (MSAs), the CJR model applies to approximately 800 hospitals in 67 MSAs. Of note, the expected reduction in CMS payments and demonstrable increases in quality will likely lead to expansion of similar programs over the next 3 to 5 years.

The stakes are higher. The maximum target discount rate has been raised to 3%. A hospital participating in CJR will have a unique spending target to achieve to avoid repaying CMS. This is called the target price, which is based on a discount rate applied to regional and historic spending. The increase in the discount rate from 2% (proposed) to 3% (final) will intensify pressure on hospitals and affiliated providers to achieve greater savings.

However, CMS has also provided opportunities to halve this discount rate through achievement of designated quality thresholds. The composite quality scoring methodology takes into account surgical complications (50%), HCAHPS survey measures (40%) and voluntary submission of patient-reported outcomes (10%)—hospitals that perform well in these areas can slash their target discount rate to 1.5%.

Resource-intensive hip fracture cases will be recognized separately. During the CJR comment period, CMS received substantial feedback that hip fractures and other nonelective procedures should be risk-adjusted, if not completely excluded from the program. As stated in the final rule, CMS’s own analysis demonstrated that episodes including hip fracture have “approximately 70% greater historical average episode expenditures than episodes without hip fractures.” The final model will incorporate a separate target price for fractures, but they won’t be eliminated from consideration. Success under CJR will require renewed focus on these highly variable episodes, especially in rural settings where hospitals tend to experience a higher incidence of hip fracture among their joint replacement cases.

Next Steps
To maximize opportunity under CJR, begin by familiarizing yourself with the details of the CJR program, appraising its financial impact, and leveraging this unique opportunity to educate and strengthen your relationships with affiliated providers. Organizations that succeed under CJR will reap the benefits from an overall healthier orthopedics service line.

Sg2 suggests the following strategies for success:

  • Collect and examine your Medicare claims data, analyzing both historical and prospective costs across the 90-day total joint episode. Use the information to identify the high-quality, low-cost physicians and post-acute care facilities in your area.
  • Redesign care pathways to reduce variation and decrease cost across the entire episode. Focus on presurgical patient optimization, patient education and engagement, reduced inpatient costs, and efficient use of post-acute care settings and treatments. Closely manage care transitions through the development of a formal network of providers and the use of nurse navigators. Collect clinical and financial results and review them with your team on a monthly basis.
  • Reduce variation in in-hospital treatment of hip fractures. In many hospitals, current processes diverge due to differences in physician specialties, availability and experience, leading to inconsistent outcomes and erratic experiences for patients. Engage your providers to develop standardized care paths and create the structural improvements needed to enable predictable financial and clinical outcomes.
  • Create formal agreements with preferred providers to drive provider alignment, improve care and reduce costs. Engage with a third party to facilitate these conversations, if necessary.
  • With improvements in place, take advantage of the opportunity to grow your business. Aggressively market your low-cost, high-quality care to commercial payers and local employers.

Sources: Better, smarter, healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value [press release]. January 26, 2015; Comprehensive Care for Joint Replacement (CJR) Model. November 16, 2015; Sg2 Analysis, 2015.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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