CMS Announces Final Rule for Joint Replacement Bundle Program

In a widely anticipated statement, the Centers for Medicare & Medicaid Services (CMS) announced on November 16, 2015, the publication of a final rule that will require certain hospitals to participate in a bundled payment program for lower extremity joint replacements. The Comprehensive Care for Joint Replacement (CJR) program is designed to incentivize hospitals and contracted collaborators to actively share in reducing cost variation for joint replacements while improving quality and outcomes. These common orthopedic procedures can range in cost from $16,500 to $33,000, as noted by the announcement, and offer a significant opportunity for savings through reduced variation in utilization and more consistent care management.

As noted in previous ECG blog posts regarding the proposed rule, the program will utilize a retrospective model based on standard Medicare fee-for-service payments compared to a target price. The target price will include all Medicare Part A and Part B services for a 90-day episode of care and be determined on a rolling 3-year average, blending the specific historical utilization levels and regional averages. Savings or losses will be reported quarterly, but reconciliation payments will be adjudicated annually.

CMS Finalizes Rule for Joint Replacement Bundle Program
Join Jennifer Skeels of Hall Render and John Fink of ECG to learn about the latest developments related to the CJR model.

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The proposed rule published in July 2015 garnered a significant number of responses from industry groups across the country, including the American Hospital Association and American Medical Association, many asking for changes to the program. The most frequently noted concerns were the mandatory nature of the program and the short time frame for implementation starting on January 1, 2016.

After reviewing an estimated 400 public comments, CMS made a number of alterations to the program, including reducing the number of affected metropolitan statistical areas (MSAs) from 75 to 67. Hospitals in the 67 MSAs will begin the program on April 1, 2016, three months later than the initially proposed January 1 start date. The agency also made some substantial structural modifications to lessen the burden on providers:

● The program will have risk-stratified MS-DRG target prices for patients with and without hip fractures. Utilization spending for patients with hip fractures can be nearly double those with-out fractures.
● The downside risk was reduced in Years 2 and 3 of the program. There is still no downside risk in the first year.
● To balance the reduced downside risk, the upside benefit will be reduced in Years 1, 2, and 3.
● The risk corridor for the 5-year program will now be as follows:


What happens now?

The timing and structural changes should not derail any current efforts to prepare for this program. Hospitals that have been working toward the proposed January start date are advised to continue in their efforts, while those that have not yet begun preparing get a little more time. Ultimately, with no downside in the first year, the April 1 start date represents a solid target but not a hard deadline for program preparations.

The final rule and details about the program structure can be found in the Federal Register. Check back in this space for future insights and strategies to address this and other upcoming bundled programs.

This entry was posted in Bundled Payments, Healthcare Reform, Legislative & Regulatory Issues, Managed Care Contracting, Orthopedics/Musculoskeletal and tagged , , , , , , , , by Jason Lee. Bookmark the permalink.

About Jason Lee

Jason has spent more than a decade partnering with healthcare providers, and his clients value his extensive expertise in the areas of strategic planning, hospital/physician alignment, and commercial contracting. Jason’s current practice focuses on managed care contract analysis and negotiation, development of hospital/physician financial relationships, and assessment of physician productivity. He has served as the interim System Director of Managed Care for a multi-billion-dollar health system, and he has led a range of hospital clients through contract assessments for commercial contract negotiations. In addition, he has worked with a number of clients to develop innovative care delivery and reimbursement models in the health reform era; most recently, his efforts in developing commercial bundles have helped many organizations achieve alignment with physicians and improve operational efficiency. Jason has assisted several hospitals with medical staff strategic planning and physician alignment agreements for recruitment and employment. His physician performance experience has encompassed physician practice productivity evaluations and compensation plan establishment. Clients have experienced physician productivity and clinical throughput improvement up to 25% in certain areas through these projects. Jason is a frequent speaker regionally and nationally and has written several published articles in areas such as value-based reimbursement and shared savings programs.

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