Mandatory bundled payment program for joint replacement makes changes to accommodate hospitals during COVID-19

• The mandatory bundled payment model for joint replacement has been changed to essentially upside-only risk during the pandemic.
• CMS has proposed a range of further changes as part of a three-year extension of the model.
• Hospital advocates have sought further changes, including to the method used to create target prices.

Medicare is tweaking its mandatory bundled payment program for joint replacements in response to the COVID-19 pandemic’s impact on hospitals.

CMS has scrambled to reposition the Comprehensive Care for Joint Replacement (CJR) model in recent weeks in response to the many effects of the pandemic. The agency extended an April 24 deadline for public comments on a proposed rule to extend the program for three years.

That extension came as part of an April 6 interim final rule with comment period that aimed to clarify components of the CJR model, which remains mandatory at more than 350 hospitals even during the public health emergency for COVID-19.

Although CMS expects few new CJR episodes amid a widespread suspension of elective surgeries due to the COVID-19 pandemic, many CJR episodes initiated prior to March 2020 remain ongoing. Additionally, hip fracture episodes also are included in CJR and are still occurring through accidents.

Changes to the program as described in the interim final rule included:

• Implementing a three-month extension of CJR performance year 5, from Dec. 31, 2020, to March 31, 2021
• Capping “actual episode payments” at the target price determined for that episode

The latter change is critical for CJR participants because it effectively “waives downside risk, entirely, in a way that is hugely beneficial to participants,” said Pamela Pelizzari, a principal and senior healthcare consultant at Milliman. “So for any patient for whom you happen to have spending below the target price, you get money for that. But for any patient on whom you spend more than the target, it will just be capped.”

That change effectively shifted the program to upside-only financial risk at the patient level.

“I was surprised that they went that far, and they applied it to the whole country,” Pelizzari said.

Pandemic causes turmoil for CJR, other models

Pelizzari said the pandemic has scrambled provider relationships and patient interactions in ways that are directly affecting the performance of hospitals in value-based programs such as CJR.

“The healthcare system is working in a different way than it used to. Patients who used to be admitted, won’t be. You used to have a nice relationship with this nursing home, now they are not taking patients from that hospital anymore,” Pelizzari said as examples of disruption from the pandemic.

Additionally, many of the services that would fall under the CJR model are being deferred as hospitals in a large number of states operate under mandatory bans on elective procedures.

Such effects have raised questions about not only program performance in the current year but also performance moving forward.

“Are we going to use 2020 as a baseline for 2021, 2022? Because it seems like it was an odd year for health systems, so maybe it doesn’t make sense to do that,” Pelizzari said.

Such questions are roiling not only CMS value-based payment models but also the many such programs operated by commercial health plans, she said.

Plans to implement CJR changes

Hospital advocates have called for additional changes since CMS tweaked CJR in early April. In an April 24 letter, the American Hospital Association (AHA) urged a range of changes, including making the program voluntary and holding hospitals “harmless” for penalties in 2020.

Of particular concern were CMS plans to move from the use of three years of historical data to just one year in calculating hospital target prices.

“We note that CMS’s use of three years of data not only helped [provide] generally stable target prices, but also helped ensure that a hospital did not have to compete against its own best performance,” AHA wrote.

Using only the most recent year of data to calculate target prices will reflect cost and quality gains to the maximum extent possible and essentially penalize regions for success by making future savings more difficult to achieve, according to AHA.

In addition to commenting on the target price calculation changes, a letter from HFMA described concerns about adding total knee arthroplasty (TKA) and total hip arthroplasty (THA) to the program. CMS would create a CJR episode category using blended outpatient and inpatient TKA and THA episodes — without hip fractures in all cases — to establish a single target price.

But that target price would not be created using actual outpatient episode spending but instead would use MS-DRG 470 as a proxy to identify beneficiaries undergoing inpatient TKAs who are most likely to be candidates for outpatient TKAs.

“Therefore, we do not believe that CMS can definitively state that spending for uncomplicated inpatient and simulated outpatient episodes is ‘highly similar,’” HFMA wrote.