August 24, 2015

Most of the hospitals located in any of 75 Metropolitan Statistical Areas (MSAs) would be required to participate in a new program that bundles the payment for joint replacement surgeries under a proposal issued by CMS on July 9, 2015.  As necessary members of the team that performs joint replacement surgeries, anesthesiologists in those MSAs should consider approaching their hospitals early in order to be sure of a seat at the table.  And they should be prepared to share both the opportunity and the risks.

The proposed rule for the Comprehensive Care for Joint Replacement (CCJR) is a significant departure from the voluntary Bundled Payment for Care Improvement (BPCI) program in that it requires virtually all affected hospitals to be financially responsible for all of the care of these patients for 90 days after discharge.  (Hospitals already participating in the BPCI program will be excluded.)

Physicians are not subject to the mandate but obviously the success of the CCJR program will depend on their participation.  Participating hospitals may share CCJR savings or penalties—the latter to a maximum of 25 percent of the amount at risk—with physicians by agreement.  Because the hospitals would be accountable for all Part A and Part B costs related to the episode of care, including professional charges and post-operative visits, they would have a strong incentive to seek to engage their orthopedic surgeons, anesthesiologists and other physicians involved in ensuring the quality and cost-effectiveness of the care furnished to the joint replacement patients. 

Why hip and knee joint replacement procedures? In 2013, the respective Diagnosis Related Groups (DRGs) 469 and 470 were reported for some 400,000 inpatient procedures for a total Part A (hospital) cost of more than $7 billion.  According to the CMS Innovation Center’s summary of the CCJR,

While some incentives exist for hospitals to avoid post-surgery complications that can result in pain, readmissions to the hospital, or protracted rehabilitative care, the quality and cost of care for these hip and knee replacement surgeries still vary greatly among providers.

For instance, the rate of complications like infections or implant failures after surgery can be more than three times higher at some facilities than others, increasing the chances that the patient may be readmitted to the hospital.  And, the average Medicare expenditure for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 across geographic areas.

Participating hospitals would be eligible for bonus payments in 2017 based on 2016 performance and for decreased payments only beginning in the following cycle.  Each hospital would have a price target based on three years of historical cost and utilization data.  The target price generally would include a two percent discount over expected episode spending.

For the first two years, the target would be a blend of hospital-specific and regional costs, transitioning to fully regional targets over the full five-year demonstration period.  If the patient’s combined total Part A and Part B costs during the 90-day period following discharge were below the target price for the procedure, and the hospital achieved quality performance requirements on three specific measures, the hospital would receive a reconciliation payment from Medicare for the difference between the target price and actual episode spending, up to a cap of 20 percent.  If actual costs exceeded the target, however, the hospital would be subject to a negative adjustment of up to 20 percent.

The three quality measures are:

1. Hospital-Level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty;
2. Hospital-Level 30-day, All-Cause Risk-Standardized Readmission Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty, and
3. Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey.

Quality performance requirements for reconciliation payment eligibility would increase over the lifetime of the model in order to incentivize continuous improvement on these measures.

CMS will consider public comments received on the proposed rule through September 8, 2015.  The final rule is expected to appear in the Federal Register around November 1st.  Suzanne Delbanco and François de Brantes suggested some of the changes to the CCJR program that CMS may well consider in their criticism of the initiative published on the Health Affairs blog on August 6th (The Payment Reform Landscape: Why Medicare’s Hip And Knee Replacement Payment Model May Not Be The Answer For Other Payers And Purchasers).  They noted that:

• Limiting the possibilities to acute care facilities would prevent lower-cost facilities from competing in the marketplace, while “in fact, many private and public sector purchasers experimenting with episode-based or bundled payment have designated the physician as the ‘quarterback’ of the episode, not the facility."  (More and more hip and knee replacement procedures are being performed in ambulatory surgery centers – Ed.)
• The model should “adjust for patient severity to avoid a market-average price.  Not every patient is the same; if employers and other purchasers are working hard to help enrollees stay healthy and get back to work faster, the price for their bundles should reflect that and they should not have to pay an inflated price due to the sickness or complications of other populations.”
• The DRGs “targeted by the program are too broad and include procedures unrelated to replacing a hip or knee.  This could contribute to higher total costs of care and result in hospitals being penalized unjustly for those unrelated procedures …. Keep the providers’ focus on what they can control by limiting the services in the bundle to those that are directly relevant to the targeted procedure.”

This recent move by CMS to require bundling of payment for hip and knee replacements is just the beginning of its efforts to link provider profits with costs and quality metrics.  Observers also expect commercial insurers and providers to follow CMS's lead.  Anesthesiologists should be on this train.  In fact, many of those already participating in Perioperative Surgical Home activities are working toward improving costs and quality during the post-operative phase as well as during the acute period of care.  We will all be studying their experience carefully.

With best wishes,

Tony Mira
President and CEO