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CMS Accounts for Extreme Situations in CJR Bundled Payments

For performance years 2 through 5, CMS will cap episode spending at the target price for CJR bundled payments model episodes occurring during an emergency.

Comprehensive Joint Replacement model and bundled payments

Source: Thinkstock

By Jacqueline LaPointe

- CMS updated rules for the Comprehensive Care for Joint Replacement (CJR) bundled payments model to protect participating hospitals from uncontrollable episodes costs incurred during an emergency period, like the recent Hurricanes or California wildfires.

The CJR program is a partially mandatory bundled payments model run by Medicare. Under the model, Medicare provides a bundled payment for hospitals treating patients for a hip or knee replacement episode.

Participating hospitals can earn savings by keeping episode costs below a target price. Otherwise, hospitals incur a financial loss if episode costs exceed the target, and participating facilities in the second performance year will have to repay CMS five percent of the loss.

But recent extreme circumstances prompted CMS to include an extreme and uncontrollable circumstance policy to prevent hospitals in disaster areas from incurring financial losses and owing CMS under the CJR bundled payment models.

“While the intent of this loss repayment policy is to incentivize providers to manage costs while improving the quality of CJR patient care, we noted in the interim final rule with comment period that in extreme and uncontrollable circumstances, prudent patient care management might involve potentially expensive air ambulance transport or prolonged inpatient stays when other alternatives are not practical due, for example, to state and local mandatory evacuation orders or compromised infrastructure,” CMS wrote.

READ MORE: Key Strategies for Succeeding with Healthcare Bundled Payments

“In addition to the news reports of disaster conditions that impacted several CJR participant hospitals, a number of research studies on natural disasters and rushed evacuations for hospitals supported our assumption that costs can rise during disaster situations.”

The federal agency reported that at least 101 participating hospitals were located in areas impacted by Hurricane Irma and Hurricane Harvey, and at least 22 hospitals were affected by the California wildfires.

These Hurricanes, wildfires, and other natural disasters significantly impacted patient care at participating hospitals. For example, at least two CJR hospitals in Miami had to close because of Hurricane Irma.

The hurricane also prompted a participating hospital in Texas to suspend all services but those delivered in its emergency and trauma center to ensure it had enough water for patients still in the hospital.

CMS determined that CJR hospitals located in areas impacted by these extreme circumstances might have experienced episode cost escalation, which could result in the hospitals having to repay CMS for financial losses under the bundled payments model.

READ MORE: Patient Engagement Critical to Bundled Payment Model Success

But the bundled payments model did not allow for episode cancellations or episode spending adjustments because of extreme and uncontrollable situations prior to Jan. 1, 2018.

Therefore, the federal agency finalized a rule that, for performance years 2 through 5, hospitals in the CJR program that are located in an emergency area during an emergency period, will have their actual episode payments capped at the target price determined for impacted episodes.

CMS defined the emergency period and area using Section 1135 of the Social Security Act. And to narrow the area to just regions significantly impacted by extreme situations, CMS will also require the area to be declared a major disaster area under the Stafford Act.

CJR episodes eligible for payment adjustments include fracture episodes with a date of admission to the anchor hospitalization that is on or within 30 days before or after the date that the emergency period.

Non-fracture episodes also qualify, but only if they a date of admission to the anchor hospitalization that is on or within 30 days before the date that the emergency period. CMS finalized different requirements for non-fracture episodes because these total hip and knee replacements tend to be elective surgeries.

READ MORE: Understanding the Basics of Bundled Payments in Healthcare

“[W]e do not expect a high volume of CJR non-fracture episodes to be initiated once extreme and uncontrollable circumstances arise, given that it is not prudent to conduct non-fracture major joint replacement surgeries, which generally are elective and non-emergent, until conditions stabilize and infrastructure is reasonably restored,” the final rule stated.

“We believe this policy empowers hospitals to decide whether they can safely and appropriately perform non-fracture THA and TKA procedures after the commencement of the emergency period and whether or not performing these procedures will subject their organization to undue financial risk resulting from increased costs that are beyond the organization’s control.”

The federal agency also explained that it chose to cap episode spending rather than allowing hospitals to cancel episodes to prevent care quality issues.

“[W]e determined that capping the actual episode spending at the target amounts for those episodes would be the best way to protect beneficiaries from potential care stinting and hospitals from escalating costs,” CMS wrote. “As we stated in the interim final rule with comment period, this will also ensure that those hospitals are still able to earn reconciliation payments on those eligible episodes where the disaster did not have a noticeable impact on cost.”

CMS released a similar rule for accountable care organizations affected by the same natural disasters at the end of 2017. The federal agency modified quality reporting and shared losses policies under the Medicare Shared Savings Program.


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