CMS proposes extending mandatory bundled payment model for joint replacements

• About 350 hospitals would be included in a proposed three-year extension of a mandatory bundled payment model.
• Most of the proposed changes were praised by hospital supporters and advisers.
• The changes would require increased efficiency for participating hospitals to avoid losing the average $1 million that would be at risk each year.

A large bundled payment program slated to expire at the end of 2020 would last three more years, according to a Medicare proposed rule.

The Centers for Medicare & Medicaid Services (CMS) on Feb. 20 issued a proposed rule that would implement several changes to the Comprehensive Care for Joint Replacement (CJR) model, which provides bundled payments to acute care hospitals for hip and knee replacement surgery. The model uses quality and cost outcomes to give bonuses or penalties to hospitals where joint replacements occur.

The rule would implement various changes to the model, extending it for three years but only for the hospitals in 34 metropolitan statistical areas (MSAs) where participation has been mandatory. The five-year-old model would still end Dec. 31, 2020, for hospitals in the 33 MSAs that volunteered to participate, as well as for low-volume and rural hospitals.

Other proposed changes include:

• Adding outpatient knee and hip replacements as CJR episodes
• Changing the CJR target price calculation from three years of claims data to the most recent year
• Incorporating additional risk adjustment in the target pricing
• Changing the methodology for calculating the high-episode spending cap
• Changing the CJR reconciliation process, such as by moving from two reconciliation periods to one
• Changing the high-episode spending-cap calculation methodology used at reconciliation to add a retrospective trend adjustment factor

Industry groups see good and bad in the proposal

The American Hospital Association said in a written statement that it was “disappointed that CMS is not proposing to extend voluntary participation options in the CJR model.”

CMS said in the rule that the decision to not extend the voluntary arm was driven by the low uptake of voluntary participation and the availability of other bundled payment options.

Premier, a quality improvement alliance of hospitals, hailed the proposed changes, specifically the change in the definition of episode of care to include outpatient procedures.

“This change will help remove the current risk of lower performance in the program when conducting joint replacements in the most appropriate care setting, which might be outpatient,” Blair Childs, senior vice president of public affairs for Premier, said in a written statement.

Perceived good, bad and neutral changes

Michael Phillips, senior manager at Archway Health, which provides data analytics to 12 hospitals in CJR, said several changes in particular should be helpful to the estimated 350 hospitals that would continue under the mandatory arm of the model.

Changes for the better include:

• Simplifying administrative functions, such as moving from two reconciliation periods to one
• Continuing various quality metrics on which hospitals have become focused
• Adding a more sophisticated risk adjustment
• Increasing rewards for high quality
•  Aligning goals with the site-neutral payment shift in Medicare

Changes that could go either way include:

• Changing the outlier capping methodology, which could expose organizations to either higher payment cuts or higher bonuses
• Using lower-acuity inpatient costs to set the 2021 baseline for outpatient joint replacement, which may overstate costs
• Potentially negative issues include:
• Using an “aggressively priced” baseline and incorporating the downward trend in joint costs, which will require increased efficiency
• Discontinuing voluntary participation at a time when voluntary participants already have missed the deadline to join the Bundled Payments for Care Improvement Advanced model
• Lacking transparency in quality data, which Phillips said is common in CMS programs

Lessons learned by successful participants include the importance of accurately identifying the level of post-acute care that joint patients will require, Phillips said. Choosing the most cost-efficient option was a common source of savings.

A Lewin Group report on the first two years of the model found that larger hospitals with more volume performed better than smaller hospitals, which likely struggled to find the resources to improve, said Keely Macmillan, senior vice president of policy and solutions management at Archway.

However, she noted that the Lewin report’s lessons were of limited usefulness because the report covered only the first two years of the program, when there was little financial risk for participating hospitals. That risk level has steadily increased to 20% of the target price this year and for the three proposed additional years. That translates to about $1 million at risk for an average hospital performing about 200 joint procedures annually.