The Comprehensive Care for Joint Replacement program is a major development in hospital finance. It is the first mandatory program to come from the Affordable Care Act-created Center for Medicare and Medicaid Innovation and is a strong indicator of future Medicare payment methodology: mandatory value-based care programs placing greater risk/reward on providers and offering providers new flexibility needed for success.
Executives at hospitals outside of the 25 percent of the U.S. selected for the program should be monitoring and planning as much as the directly impacted hospitals, to understand what change in payment is imminent.
April 1 of 2016 marks the beginning of the first year of the program, a partial year ending in December of 2016, followed by four more full years of the program. CJR requires hospitals to be accountable for all the costs related to care by all providers during and after hospital care given for Diagnosis-Related Groups 469 and 470, hip and knee replacements. In this retrospective payment bundle, all providers will continue to file claims and be paid on a fee-for-service basis, but at the end of each year, CMS will compare each patient's costs against a hospital-specific budget. The hospital will be paid or will have to pay the difference, subject to various limits and adjustments, 2016 being the exception with no risk incurred by the hospital.
Payment bundles are no longer new and this is the fourth major payment bundle program for Medicare. But the CJR has many essential elements that distinguish it from other commercial and public programs. Among these are the focus on post-acute care, the firm decision to assign primary risk to the hospital, the waivers of longstanding policies designed to prevent abuse under fee-for-volume, and the fact that the gains and losses are shared at 100 percent (subject only by caps).
But the word "mandatory" is the biggest change. Only a handful of state Medicaid programs have made payment bundles mandatory (and no commercial payers for anything other than certain transplants). This action by CMS is manifestly different in degree and scope. Hip and knee replacements are often the most profitable procedure at a hospital and CMS is typically the payer for over half of a hospital's volume. As noted, no CMS demonstration project or CMMI initiative has ever been mandatory. Indeed, one might have to look back to the start of the DRG prospective payment approach for a similar change greater in scope. And just like that change, some hospital executives will win and some will lose. The executives who ignore this trend will be among the losers.
Consider also the forthcoming Medicare Access & CHIP Reauthorization Act of 2015 changes to physician payment and all of the CMMI innovations, the most recent of which are increasing in scope (Next Gen ACO) and breadth (CJR). It is clear that a hospital's biggest customer is changing the rules. Executives should note the other great power of CMMI – they have the authority to unilaterally change any part of the traditional Medicare payment system with a stroke of a pen and no action by Congress.
While the following points will apply generally to any payment reform initiative, the following strategies are suggested here in the context of CJR.
Lead from the top. The operational transformation, financial impact of change, and related changes to a health system's growth strategy must all be led by a top hospital executive. Active senior involvement will be necessary to overcome the significant opportunity cost impacts through the staff of an already busy hospital management team and medical staff. Hospitals are far more likely to be successful under the new program if there is a C-Suite executive whose job depends upon successful performance.
Understand that you are a payer. CJR shifts risk from CMS to the hospital. Within the boundaries of the stop-loss and the stop-gain, the net impact of CJR is the same as if a hospital had to write a check to every provider who touched their patient, both during and after the procedure. For every patient, a hospital will now either earn more money as profit or will have to reimburse CMS, as a new expense to the hospital.
Do the things that a payer does. Payers manage risk, which means that they understand the sources of risk and they try to prevent unnecessary or harmful care. How well does a hospital understand what care a patient receives for 90 days after discharge? Can a hospital's decision support system or data warehouse meaningfully understand what unwarranted variations of care exist during or after a hospital stay? Why do similar patients go to a SNIF vs home? What leads to short or long SNIF stays? More importantly, what can the hospital do to say "no?" Any effort spent managing something when "no" is not an option is the same as not managing the process at all.
Payers build networks. There is already a network in place for every hospital. It is the community of providers that have been treating their patients for years. Know that there is a difference between the network of providers that actually treats a hospital's patients and the network that a hospital might want to treat their patient. Since CJR ensures that patients retain complete free choice to see any Medicare providers, hospitals need to build relationships with the providers in their market that will deliver the best outcomes and then try to direct patients to the preferred providers.
Create new models of patient engagement. Payers try to direct patients to the "right" providers and payers try to stop unhelpful utilization. Payers have tools such as member responsibility, network design, and prior authorization to help them. Hospitals will need to create their own tools, leveraging the strong primary relationship they and their surgeons and hospitalists have with the patients, using some of the CJR-waived rules around the two midnight rule, telehealth, and especially patient incentives.
All of these need to drive a new model of patient engagement. All hospitals manage the well patient during an inpatient stay. Leading hospitals manage a patient well pre-admission, ensuring that diagnostics are done, barriers to discharge addressed, and that patients are stabilized before receiving elective care like hips and knees. But there is often very little management or even knowledge about what happens to the patient after discharge. There is no reason why a hospital cannot manage this phase of care and there is good reason now to do so.
Manage post-acute care. Under DRGs, hospitals have always had an incentive to manage their internal cost structure for such a procedure, such as length of stay and implantable costs. While the cost of the surgeon, anesthesiologist, and hospitalist are now included in the episode, there is little unwarranted variance in these. The major new goal must be management of post-acute care. One major aim CMS has for CJR is to see hospitals manage the out of control spending on post-acute care. The cost of post-acute care for procedures like hips and knees is growing by more than 15% each year and is now greater than the cost of the inpatient care. With a 300 percent variation in SNIF utilization, it is clear that post-acute care is rife with unwarranted variation.
Like it or not, hospitals are now the buyers or purchasers of post-acute care. This new reality should drive many changes in a hospital.
Think outside the box. What new acquisitions should be made to increase the vertical integration of hospital systems into post-acute care? What new and non-reimbursed expenses can the hospital make on behalf of the patient to reduce the overall cost? If a hospital spends $500 to install a ramp at a house, it cannot be reimbursed by Medicare, but it might lead to a much larger savings from the avoided SNIF stay.
Create new workflows. The new forms of patient engagement should be driven by new technology around new business cases. While CMS will not allow a hospital to pay a patient to go to one provider over another, it appears that the new waivers allow financial incentives for patients to stay in communication with hospitals. New hospital engagement with patients must be created and driven through such incentives, or through new patient-centric technology (ranging from home telemetry to iPhone aps), or through new concierge or care management type services or a combination of all of these. These engagement models will measure the quality outcomes that are encouraged by CJR, they will track utilization so the hospital can know how they are doing against budget, and the best will attempt to anticipate the patient and prevent unnecessary utilizations where possible. This patient management is not unlike what happens preadmission or during an admission, but managing post-acute care is a major lift for hospitals without the relationships, the technology, they management savvy, or the qualified staffing to do it.
Contract with others. Hospitals may outsource such management. It is expected that existing and new actors will quickly offer their services to hospitals to help manage the post-acute spend. From community-based surgeons (who can also help manage the hospitals cost structure in these procedures) to hospitalists to management service organizations, there will be no shortage of new "vendors" who may be equipped and experienced to accomplish this management. This calls into view something else that payers are now doing.
Look for ways to share the risk. If CMS can pass risk to the hospital, then the hospital should consider gainsharing with community based surgeons, changing the variable compensation plan of employed surgeons, and/or contracting with third parties to manage these post-acute costs and "win" under the new rules. What about a shared risk arrangement with the SNIFs, trading soft-steerage done through the new patient engagement for the efforts of a SNIF to reduce overall cost and improve quality?
Finally, expect more change. This author firmly expects a Coordinated Care for Prostate Cancer (or something similar with ever greater degrees of change) to be announced this year. Commercial payers are looking to develop their own versions of CJR. Innovation in payment programs will accelerate and successful hospital executives will address the change directly.
Jay Sultan, Principal Strategy Advisor, Edifecs
Jay Sultan is a preeminent thought leader in healthcare payment reform. He has extensive experience across healthcare enterprises and payment systems and a long track record using technology to catalyze breakthrough innovation.
As a Strategy Consultant for Edifecs, Jay provides thought leadership and experience-based direction to foster innovation and disruption in the healthcare industry. He works closely with payer and provider leadership on healthcare policy and enabling technology. Jay helps shape Edifecs' overarching business, technology, product architecture and new product go-to-market strategies. With more than 18 years of consulting and development experience in the payer and hospital settings, Jay helps define business requirements and is responsible for ensuring Edifecs technology is driving true healthcare reform.
A nationally recognized expert in payment reform, Sultan began work on implementing episodes for payment over 15 years ago and has authored two patents in payment bundling. He has participated in both commercial and the Centers for Medicare and Medicaid Services (CMS) payment bundling programs – for both retrospective and prospective episodes, and is currently working on one of the largest episode of care programs in the industry. Jay has served and/or still serves as subject matter expert in payment bundles to the CMS, several states, various non-profits (such as IHA), and over 100 payer and provider organizations. He is regularly invited to speak at national industry conferences on payment reform, healthcare reform, and technology.
Prior to joining Edifecs, Jay served as Associate Vice President, Chief Product Portfolio Architect and Expert in Value Based Reimbursement at TriZetto where he was responsible for enterprise product architecture, interaction of all products and the adoption of clinical analytics. While at Trizetto, he authored the industry's first major piece of software to administer prospective payment bundles.
Previously, as a principal of a consulting firm, Jay was the architect and principal author of two payment-bundling programs that were chosen by the CMS as Acute Care Episode demonstration project sites. As the chief operating officer of MedAlign, he developed a number of innovative payment reform programs, including episodic provider payment. Sultan received a master's degree in international economics/policy from the University of Chicago and a bachelor's degree in mathematics and political science from the University of Georgia.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.L