On July 9, 2015, CMS shocked hospitals and other providers with their announcement concerning the Comprehensive Care for Joint Replacement Model (CCJR).
Seventy-five geographic regions (representing approximately 800 hospitals) in urban areas will be required to accept a risk payment for hip and knee replacement surgery (MS-DRG 469 and MS-DRG 470). These hospitals must save 2% of current costs and also accept responsibility if costs increase in the 90 day period following the initial surgery hospitalization. CMS chose these regions based on their volume of patients and lack of current participation in the current bundled payment test project known as the Bundled Payment for Care Improvement (BPCI).
CCJR is structured very similar to Model 2 in the BPCI initiative. The key difference in this new model is the mandate for participation if a hospital is located in one of the seventy-five designated geographic regions. The hospital is at risk for any cost increases from the current baseline Medicare costs over a 90 day period of time. In addition, hospitals must decrease Medicare costs by 2% starting in year 2 of the project or pay CMS a check.
This is a simplified example of how this works. CMS pays a hospital a MS-DRG payment of $13,500 for a hip replacement. An additional $12,000 is paid to physicians and post-acute providers for a total of $25,500. This becomes the baseline number for that hospital to decrease going forward. In this scenario the hospital must decrease the total amount by 2% which is $500. If the costs for these cases increases by $300 (to $25,800), then the hospital will be responsible for paying CMS a total of $800.
For those who have followed CMS's payment reform plans over the years, bundled payment has been a consistent goal for implementation. CMS began testing bundled payments in the early 90's. The first project which looked at coronary artery bypass surgery showed positive results for the patients, the providers, and CMS. This was followed by other bundled payment demonstrations which also have shown improved quality while saving money for CMS. In general, hospitals participating in these project also so a decrease in their costs based on the implementation of gainsharing relationships with their physicians.
Until the recent BPCI Bundled Payment project, CMS had not tested the post-acute phase with the hospitalization. With BPCI being new, there are no formal results on the success of controlling post-acute costs. The only experience hospitals have gained in the management of patient care on discharge has been related to the readmission penalty. Decreasing readmission rates has not come easy to most hospitals and a 90 day period of risk is new for everyone.
The former bundled payment projects had one major challenge which was the actual payment process. Although a lump sum payment could occur without difficulty, providers were unable to stop the automatic processing of billing from all the providers. This led to duplicate payments and a very large challenge for supplemental insurance. It was the hurdle that stopped the implementation of bundled payments to providers.
For CMS, the payment process obstacle was conquered with the implementation of retrospective reconciliation. In this method, all providers continue to bill as normal and then CMS looks at what has been paid for the care delivered to beneficiaries and reconciles the numbers to the set agreement. If costs have increased for the 90 day episode, providers owe CMS money. Also, if costs decrease lower than the 2% target, CMS shares some of the dollars with providers. Retrospective reconciliation has allowed CMS to move quickly on a model that saves them money.
CMS has set a goal of having 30% of the traditional fee- for- service Medicare payments tied to quality or value by the end of the 2016. The bundled payment model becomes the obvious method to meet the goals of value based payments. It also makes sense that widespread implementation of a bundled payments through a reconciliation methodology will occur quickly for all hospitals. In addition, other clinical conditions will be added to this list.
For providers, the implications of this type of change is automatic financial integration of hospitals, physicians, and post-acute providers. Hospitals will be accepting the risk. Based on current volumes, there are approximately 263,000 hip and knee replacement cases that were completed in the regions targeted for this project. With an average 90 day payment of $27,000, hospitals must generate 2% savings to Medicare which is approximately $540. This savings must be generated in the post hospitalization in order save CMS money. Any costs decreased during the hospitalization is positive for the hospital but does not save dollars for CMS.
Hospitals will need to find strategies to align physicians and other post- acute providers to change the current utilization of services. If costs increase, the hospital will be responsible for reimbursing CMS the increased costs plus the 2%.
This mandatory project has significant implications to hospitals, physicians and post- acute providers.
Joane Goodroe's groundbreaking work includes twenty-five years in bundled payments and creating the first gainsharing model approved by the Office of Inspector General. Her testimony at a Congressional hearing on gainsharing resulted in continuing efforts to reform current laws to promote hospital and physician alignment.
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