382 Hospitals Earn Initial Reconciliation Payments Under CJR Model

October 18, 2017 - Out of approximately 800 hospitals required to participate in Medicare’s Comprehensive Joint Replacement (CJR) model, 382 facilities will receive a reconciliation payment based on cost savings and care quality, according to preliminary data on the program’s first performance year.

CMS noted that initial reconciliation payments and the list of hospitals earning them may change since the federal agency determines final reconciliation amounts 14 months after each performance year to account for updated data, claims run out, other alternative payment model overlap, and other adjustments.

The CJR model launched in 2016 to promote higher quality, more efficient care for the most common inpatient surgeries Medicare beneficiaries undergo: hip and knee replacements. Over 400,000 hip and knee replacements occurred in 2014, costing more than $7 billion in hospitalization costs alone.

Despite the prevalence of lower extremity joint replacements, care quality and costs significantly varied by provider and region. Rates of complication were three times higher at some hospitals compared to others.

The average Medicare spending on the surgery, hospitalization, and recovery also varied between $16,500 to $33,000 across regions.

To reduce care variations and costs, the federal agency required hospitals in 67 metropolitan statistical areas to participate in the CJR bundled payment program. Participants receive an episode target price for the surgery, hospitalization, and 90-day recovery period.

While the hospitals are reimbursed under the traditional Medicare reimbursement structure, CMS reconciles the payments at the end of each performance year based on the hospital’s actual spending on the care episodes.

If participants achieve cost savings and high care quality, CMS pays the hospitals an additional reimbursement. Hospitals that exceed the episode target price will have to repay a portion of the financial losses to CMS after the first performance year.

The most recent CMS data revealed that approximately 47 percent of CJR participants generated cost savings for hip and knee replacement surgeries compared to their episode target prices.

The preliminary results showed that CMS will reimburse the cost-efficient facilities a total of over $37.5 million.

The bundled payment reconciliation payments ranged from $348.66 for just three care episodes performed to more than $1.2 million for 850 episodes performed.

The average number of lower extremity joint replacements performed at CJR hospitals was about 86 procedures.

The remaining facilities reported actual healthcare costs above their target price, but will not have to repay CMS for the first performance year.

Additionally, the preliminary data showed the level of care quality at participating facilities. In the bundled payment program, CMS uses four care quality categories: below acceptable, acceptable, good, and excellent.

Hospitals that earn acceptable, good, or excellent care quality scores qualify for reconciliation payments and hospitals with good or excellent scores may receive additional incentive payments.

Of the 382 CJR facilities earning a reconciliation payment, the majority (201 hospitals) fell into the good care quality category.

About 150 hospitals earned an excellent score and another 31 received an acceptable score.

Out of the ten hospitals earning the greatest preliminary reconciliation payments, six received excellent care quality scores and the other four received good scores.

As hospitals in the CJR bundled payment program prepare another performance year, they can expect some changes. CMS recently proposed to make the program voluntary in 33 of the 67 metropolitan statistical areas starting in February 2018.

The proposed rule would also cancel two other compulsory Medicare bundled payment models (the Episode Payment Models and Cardiac Rehabilitation incentive payment program).

Mandatory Medicare bundled payments and other alternative payment models have drawn criticism from healthcare stakeholders, including former HHS Secretary Tom Price. Price and several other House Representatives previously urged CMS to stop all compulsory programs, including the CJR, because the federal agency did not have the legislative authority to force hospitals to participate in demonstrations.

Other stakeholders have argued that requiring unprepared hospitals to participate in healthcare reform efforts would lead to financial and clinical setbacks for those organizations.

On the other side, supporters of mandatory reform demonstrations contended that making alternative payments voluntary would impede the value-based care transition.

Five healthcare policy experts from the Brookings Institution explained that “making these models optional would eliminate the ability to generate robust evidence on their effectiveness, dealing a severe blow to efforts to use bundled payments to improve care delivery in orthopedics and cardiac care, and to the chances for bringing bundled payments to scale nationally in the coming years.”

As the preliminary data shows that the mandatory CJR program brought moderate success, CMS is currently reading through industry comments on its proposal to change the program.