Healthcare News & Insights

Details announced on CMS bundled payments for joint replacement

It’s official: The Centers for Medicare & Medicaid Services (CMS) has set a date for when bundled payments will begin for hip and knee replacements. The agency’s also released the new structure it’ll use for reimbursement – and there are quite a few changes from its initial proposal.  

487098007Hospitals can mark their calendars for April 1. That’s when bundled payments will start.

The CMS announcement, which will be available on the Federal Register on Nov. 24, was discussed in-depth in an article from U.S. News & World Report, as well as in a news release from the Department of Health & Human Services (HHS).

Under the new payment system, officially dubbed the Comprehensive Care for Joint Replacement (CJR) model, facilities will face more financial risk regarding patient outcomes for each procedure.

Originally, CMS planned to implement the CJR model in January. But, due to several comments from hospitals and other healthcare providers asking for an extension, the agency pushed back the start date to give them more time to get ready.

Purpose & objectives

According to CMS, the ultimate goal of the new CJR model is to test whether giving hospitals one lump-sum payment for hip and knee replacements will improve quality while reducing Medicare costs. The agency is also looking to:

  • improve the coordination and transition of care
  • encourage more provider investment in changing care processes to boost quality
  • improve the coordination of items and services that are reimbursed through Medicare, and
  • incentivize hospitals to provide higher value care to patients from admission to post-discharge.

As of now, CMS plans the CJR model as a pilot program. It’ll evaluate the model’s effectiveness over a four-year period (or five CMS “performance periods”), ending Dec. 31, 2020.

But unlike other CMS bundled payment pilot programs, which asked hospitals to volunteer, the agency is requiring all hospitals in the targeted geographic areas that provide hip and knee replacements to participate. It’s hoping to gather data about improving quality of care in all kinds of facilities, so it wants a wider range of participants.

CMS did, however, scale back the scope of the program slightly. Instead of requiring participation of all hospitals in 75 metropolitan statistical areas, facilities in 67 of these areas will be paid via the CJR model.

Another big change: CMS won’t be using a “target price” methodology for determining how much hospitals will be paid for joint replacement.

Instead, it’ll base payments on whether hospitals measure up with meeting a yet-to-be-determined quality score methodology. This way, reimbursement will be tied more closely to quality, further emphasizing the shift to value-based payments.

Gradual repayments

Under the CJR model, CMS will also implement a more gradual transition for hospitals to assume higher financial risk than it proposed in its initial announcement. This is designed to make the adjustment even easier. Per CMS, the limits will be as follows:

  • No repayment responsibility for hospitals in performance year one
  • A stop-loss limit of 5% in performance year two
  • A stop-loss limit of 10% in performance year three, and
  • A stop-loss limit of 20% in performance years four and five.

And in years two and three, CMS will allow hospitals to be eligible for a reduced discount percentage for repayment responsibility. So they may not be on the hook for the full repayment penalty.

Rural hospitals, Medicare-dependent hospitals, rural referral centers and sole community hospitals will be exempt from these stop-loss limits.

Hospitals’ next move

Although the CJR model is technically a pilot project, hospitals across the country should be prepared for similar initiatives from Medicare and other payors as time goes on.

Value-based care is quickly becoming the norm. And bundled payments won’t be far behind. So it’s critical to start working on improving your hospital’s quality of care for joint replacements and other procedures, even if your facility isn’t located in one of the targeted geographic areas for the CJR model.

Laying the framework for high-quality, low-cost care right now will make your facility better poised to survive in the future healthcare climate.

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