November 23, 2015

CMS has now finalized its proposal to cover total joint replacement (TJR) procedures through a bundled payment methodology.  Under the Final Rule issued on November 16, 2015, some 800 hospitals across the country will be financially responsible for all of the inpatient and postoperative care of patients undergoing total knee or hip replacements from admission until 90 days after discharge.  CMS estimates that the new bundled-payment test will cover about 23 percent of TJR surgeries for which Medicare pays and save Medicare $343 million over the five performance years of the model.

Through the Comprehensive Care for Joint Replacement (CJR) payment model, hospitals in 67 Metropolitan Statistical Areas (MSAs) will receive additional payments if quality and spending performance are strong or, if not, potentially have to repay Medicare for a portion of the spending for care surrounding a lower extremity joint replacement procedure.  The goal of the CJR model, according to CMS’s press release, is “to give hospitals a financial incentive to work with physicians, home health agencies, skilled nursing facilities, and other providers to make sure beneficiaries get the coordinated care they need.”  This creates an important opportunity for anesthesiologists to collaborate with their hospitals in improving outcomes for TJR patients and earning a CMS incentive payment.  The CJR model may even, perhaps, be the impetus for launching a Perioperative Surgical Home.

The episode of care begins with an admission to a CJR hospital of a Medicare patient who is ultimately discharged under MS-DRG 469 (Major joint replacement or reattachment of lower extremity with major complications or comorbidities) or 470 (Major joint replacement or reattachment of lower extremity without major complications or comorbidities) and it ends 90 days post-discharge.  The episode includes all related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries, with the exception of certain exclusions.

Every year during the five performance years of this model, CJR hospitals will receive separate episode target prices for MS-DRGs 469 and 470.  All patients in those two MS-DRGs will be included in the CJR program.  CMS will also use a simple risk stratification methodology to set different target prices for patients with hip fractures within each MS-DRG.

All physicians and providers and suppliers involved in the care of the CJR patients will be paid under the usual rules and procedures of the Medicare program for episode services throughout the year.  At the end of each model performance year, actual spending for the episode is compared to the Medicare target episode price for the particular hospital.  Depending on the participant hospital’s quality and episode spending performance, the hospital may receive an additional payment from Medicare or be required to reimburse Medicare for a portion of the episode spending (after the first year, during which there will be no repayment imposed).  CMS will limit how much a hospital can gain or lose based on its actual episode payments relative to target prices.

TJR surgeries are an obvious target for CMS as it moves toward its goal of having 30 percent of all Medicare fee-for-service payments made via alternative payment models by 2016 and 50 percent by 2018.  As we noted in our August 24, 2015 Announcement discussing the proposed CJR rule, A Role for Anesthesiologists in CMS’s New Comprehensive Care for Joint Replacement Payment Program, Medicare spent more than $7 billion on more than 400,000 TJR procedures in 2013 and again in 2014.  There is considerable variation in the costs of episodes of care, both between patients and on a geographic basis.  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 varies from $16,500 to $33,000 across geographic areas.

The Final Rule, issued after CMS considered 400 comment letters filed in response to the Proposed Rule, contained a number of important changes.  Among these are the following:

• Reduction in the number of MSAs in which the CJR program is mandatory from 75 to 67.  (To determine whether a given hospital is in one of the 67 MSAs, go to Melanie Evans’s article How hospitals are prepping for Medicare's mandatory bundled-pay test at Modern Healthcare online, or download a spreadsheet listing all of the CJR hospitals.)
• Delay of the implementation date, to April 1, 2016.  Numerous commenters asked CMS to delay the start of the model for a full year, to January 1, 2017, but CMS only granted a three-month reprieve.
• Application of composite quality scoring calculations, including consideration of patient-reported measures and hospital improvements in quality, that will be used to assign hospitals into acceptable, good and excellent quality categories for purposes of determining eligibility for gainsharing payments with CMS.  In the Proposed Rule CMS had instead put forward a threshold methodology under which hospitals would need to meet or exceed the 30th percentile performance threshold in order to qualify for savings.  Hospital performance will be evaluated on three measures:
  • Total hip arthroplasty/total knee arthroplasty complications
  • Hospital Consumer Assessment of Healthcare Provider Systems (HCAHPS) survey
  • Patient-reported outcomes
• Risk stratification of the target price for each episode of care based on the patient’s hip fracture status.

The Final Rule does not address a topic of considerable concern to providers, the requested waiver of fraud and abuse rules that proscribe payments for referrals, i.e., the anti-kickback statute and the Stark law.  It refers, however, to a special notice jointly issued by CMS and the OIG  on November 16th describing the conditions under which waivers would be available for alignment payments under sharing agreements between participating CJR hospitals and “collaborators” such as physicians, distributions from physician practices to “practice collaboration agents” and patient incentives.

While hospitals and their national association did not welcome the CJR payment model, questioning CMS’s authority to make a bundled-payment program compulsory, there are several potential benefits for anesthesiologists and pain physicians. 

First, physicians participating in CJR might be able to meet the requirements that would otherwise apply under the Merit-based Incentive Payment System (MIPS) that will replace current quality reporting programs in 2019 pursuant to the Medicare Access and Chip Reauthorization Act of 2015 (MACRA).  Alternatively, they may qualify as “alternative payment model” participants as defined in MACRA and therefore be excluded from MIPS, through their participation in CJR.  In the Final Rule, CMS suggested that it will address the question when it releases guidance on the implementation of MACRA next year.

Second, the CJR payment model presents an opportunity for anesthesiologists to step up and solve their participant hospital’s problem—the promise of a negative payment adjustment if the hospital does not meet the target for its TJR episodes—in return for a share of any bonus that they help the hospital earn.  The CJR hospitals now have a clear incentive to listen to proposals on reducing the rate of complications and total spending through better coordination of perioperative care.  Anesthesiologists should consider preparing and negotiating to lead their hospitals’ CJR work.

With best wishes,

Tony Mira
President and CEO