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Fall 2016

Ten Things Anesthesiologists Should Understand About the Medicare Comprehensive Care for Joint Replacement Model

Kathryn Hickner, Esq
Ulmer & Berne LLP, Cleveland, OH

For years, anesthesiologists have been acutely aware that this country’s healthcare reimbursement regime is in a state of significant transition. Government healthcare programs (such as Medicare and Medicaid) and commercial payers are gradually moving away from a fee-for-service model to value-based payment programs that focus on the quality and efficiency of services provided. For example, the federal government aims to have 50 percent of all Medicare fee-for-service payments made via alternative payment models by 2018.

Anesthesiologists have also heard for several years that they need to command a seat at the table when such reimbursement changes are proposed and implemented. We know that anesthesia services provided during the perioperative period can have a significant impact on financial and clinical outcomes. By providing anesthesiologists with a seat at the table, hospitals gain from the unique perspective and insight that the anesthesiologists have to offer.

Active and collaborative participation by anesthesiologists also benefits the anesthesiologists themselves. Such involvement may provide anesthesiologists with an additional opportunity to improve the healthcare system and patient satisfaction, experience greater fulfillment in their own practices, provide additional value to their hospitals and, under some circumstances, financially benefit from such contributions. Although the practical opportunities for doing so vary tremendously depending on the circumstances, the importance of such anesthesiologist engagement—to the specialty, the patients, the hospitals and the industry more generally—is relatively well understood and accepted.

This article provides a broad overview of certain key considerations regarding one relatively new and significant alternative payment program, the Comprehensive Care for Joint Replacement Model (the CJR Model).1 Understanding the impact of the CJR Model on the healthcare industry is important not only for anesthesiologists who are directly impacted by the CJR Model, but also for those anesthesiologists who are preparing themselves for success under similar value-based payment models in the future. Here are 10 facts about the CJR Model that anesthesiologists should understand.

  1. The CJR Model aims to lower Medicare expenditures and improve outcomes related to hip and knee replacements. The CJR Model was designed by the Center for Medicare and Medicaid Innovation (Innovation Center) to improve surgical outcomes and reduce Medicare expenditures related to hip and knee replacements (sometimes also referred to as “lower extremity joint replacements” or “LEJR”), which are common and expensive procedures.

    According to the federal government, in 2014, there were more than 400,000 hip and knee replacements for Medicare beneficiaries, and the associated hospitalizations alone cost more than $7 billion. Further, it is anticipated that such surgeries will become increasingly utilized. The Innovation Center has identified substantial variability across the country in terms of cost and patient outcomes associated with these services. That means there may be significant room for improvement.

  2. Many hospitals are required to participate in the CJR Model. Unlike many other Innovation Center programs, hospitals do not opt into or out of the CJR Model. There is no application form or process. Rather, most acute care hospitals within the 67 designated CJR Model geographic areas (which are defined by and referred to as metropolitan statistical areas (MSAs)) are required to participate. Such geographic areas and the participating hospitals within such areas (along with an abundance of other materials related to the CJR Model) are set forth on the Innovation Center website.2 As of August 1, 2016, there were approximately 790 hospitals participating in the CJR Model.

  3. The CJR Model only applies to items and services provided to Medicare beneficiaries. Only those Medicare beneficiaries who satisfy the following criteria will be included in the CJR model: (a) the beneficiary is enrolled in Medicare Part A and Part B; (b) the beneficiary’s eligibility for Medicare is not on the basis of the End-Stage renal disease benefit; (c) the beneficiary is not enrolled in any managed care plan; (d) the beneficiary is not covered under a United Mine Workers of America health plan; and (e) Medicare is the primary payer.

  4. The CJR Model retrospectively bundles payments for certain hip and knee replacement episodes of care. The CJR Model is designed to hold hospitals accountable for the quality and cost of a CJR episode of care. Under the CJR Model, an episode of care has wide breadth in terms of duration and the scope of services included. For purposes of the CJR Model, an episode of care commences upon the patient’s admission to a hospital and ends 90 days after the patient is 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).

    Subject to certain exclusions that are described more specifically on the Innovation Center website, the episode covers all related items and services paid under Medicare Part A and Part B. In general, the episode of care includes, for example, the following services when they are related to the hip and knee replacement surgery: (a) physicians’ services, (b) inpatient hospital services (including hospital readmissions), (c) inpatient psychiatric facility services, (d) long-term care hospital services, (e) inpatient rehabilitation facility services, (f) skilled nursing facility services, (g) home health agency services, (h) hospital outpatient services, (i) outpatient therapy services, (j) clinical laboratory services, (k) durable medical equipment, (l) Part B drugs and (m) hospice.

  5. Under the CJR Model, participating hospitals are paid in the usual manner subject to annual reconciliations that take into consideration quality and efficiency. Hospitals that participate in the CJR Model will operate under the usual Medicare payment system, subject to an annual reconciliation at the end of each CJR Model performance year. Such reconciliation will review certain quality indicators and also a comparison of the actual spending for the episode and the Medicare target episode price.

    Depending on the participating hospital’s performance in terms of efficiency and quality, the hospital may receive an additional payment from Medicare or may be required to repay Medicare for a portion of the episode spending. Note, however, that there is no downside risk during performance year one, which is a partial year commencing on April 1, 2016 and ending on December 31, 2016. For subsequent CJR Model performance years (each of which is a full 12-month calendar year), stop-loss limits apply during performance years two through five, increasing from five percent to 20 percent over the course of such timeframe.

  6. The CJR Model should create additional opportunities for collaboration. In order to succeed under the CJR Model, hospitals will need to foster alignment and coordination with anesthesiologists and other physicians, home health agencies, skilled nursing facilities and others. Participating hospitals will rely upon teams of professionals, including anesthesiologists, to monitor and improve performance (for example, by reducing unnecessary complications and hospitalizations) through communication, collaboration and standardization across the continuum of care. Anesthesiologists can uniquely contribute and benefit from such teamwork.

  7. The CJR Model includes safeguards designed to protect Medicare beneficiaries. Under the CJR Model, the patients (i.e., the Medicare beneficiaries) themselves continue to have the freedom to choose their own services and providers. Accordingly, participating hospitals may ultimately be responsible for items or services within the episode of care provided by a third party over whom the hospital has little influence or control.

    This dynamic creates a strong incentive for hospitals to align in new ways with physicians, home health agencies, skilled nursing facilities and others within the continuum of care to strengthen care coordination. The Innovation Center website (referenced above) includes a description of certain beneficiary notifications and forms for use by CJR Model hospitals and their collaborators. Also note that Medicare has several tools, including additional monitoring of claims data, to ensure that participating hospitals do not impermissibly stint care to achieve cost-savings.

  8. Providers impacted by the CJR Model must be cognizant of applicable regulatory constraints. Participation in a new Innovation Center payment model that encourages collaboration does not necessarily bless all potential relationships entered by participating hospitals and their collaborators, even if such relationships are designed for the lofty goals of achieving quality, efficiency and success under the payment model. Historically, the state and federal healthcare, tax exempt, anti-trust and other regulations have intentionally created certain barriers to alignment among providers. Such constraints are designed, in part, to protect the federal healthcare programs from overutilization and associated costs. It is important for providers to understand that, in general, the relationships that they forge while positioning themselves for success under the CJR Model continue to be subject to applicable regulations.

  9. CJR Model and related federal guidance affords hospitals and their collaborators with certain increased flexibility. To encourage the collaboration required for the CJR Model to achieve its objectives while simultaneously safeguarding the federal healthcare programs, the CJR Model itself includes certain increased flexibility for participants to structure relationships with other providers across the continuum of care.

    For example, subject to certain parameters, the CJR model allows its participating hospitals to share payments received from Medicare for the provision of efficient high-quality services (and also, on the flip-side, to share financial accountability and risk) with collaborating providers and suppliers, which could include anesthesiologists and their groups. Further, on November 16, 2015, the federal government issued limited fraud and abuse waivers for certain arrangements involving CJR Model participants. Note that such fraud and abuse waivers apply only with respect to the specific laws cited and only protect those arrangements that meet each and every applicable condition.

  10. Anesthesiologists should keep their eyes and ears open for additional developments regarding the CJR Model and other alternative payment models. During August, 2016, the federal government issued helpful Frequently Asked Questions regarding the CJR Model that are available along with several other pieces of useful guidance on the Innovation Center website.3 Further, note that although the CJR Program is relatively new, the federal government proposed further changes to the model during July 2016.4 Such changes focus, in part, on aligning financial incentive policies of the CJR Model with proposed episode payment models, allowing participating hospitals to further collaborate with accountable care organizations and critical access hospitals, and modifying the pricing and reconciliation process.

1 See 80 FR 73273 (November 24, 2015) and
2 See

3 See
4 See 81 FR 50793 (August 2, 2016). See also,

Kathryn (Kate) Hickner, Esq is an attorney at Ulmer & Berne LLP, Cleveland, where she co-chairs the firm’s Health Care Practice Group. Additional information regarding Kate’s background, experience, publications and presentations can be found at She can be reached at (216) 583-7062 and