CMS finalizes bundled payment initiative for hip and knee replacements

November 20, 2015
Policy Snapshot

Model supports quality and care improvements for patients’ transition from surgery to recovery

In 2014, more than 400,000 Medicare beneficiaries received a hip or knee replacement, costing more than $7 billion for the hospitalizations alone. Despite the high volume of these surgeries, quality and costs of care for these hip and knee replacement surgeries still vary greatly among providers. For instance, the rate of complications, like infections or implant failures, after surgery can be more than three times higher for procedures performed at some hospitals than others. And the average total Medicare expenditure for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 across geographic areas.

Today, the Centers for Medicare & Medicaid Services (CMS) finalized the Comprehensive Care for Joint Replacement (CJR) model, set to begin on April 1, 2016, which will hold hospitals accountable for the quality of care they deliver to Medicare fee-for-service beneficiaries for hip and knee replacements and/or other major leg procedures from surgery through recovery. Through this payment model, hospitals in 67 geographic areas will receive additional payments if quality and spending performance are strong or, if not, potentially have to repay Medicare for a portion of the spending for care surrounding a lower extremity joint replacement (LEJR) procedure.

This model furthers the administration’s commitment to create a health care system that provides better care, spends health care dollars more wisely and makes people healthier. It builds on measurable goals and a timeline to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.

“Today, we are embarking on one of the most important steps we will take to improve the quality and value of care for hundreds of thousands of Americans who have hip and knee replacements through Medicare every year,” said Health and Human Services Secretary Sylvia M. Burwell. “By focusing on episodes of care, rather than a piecemeal system, we provide hospitals and physicians an incentive to work together to deliver the best care possible to patients.”

The model’s goal is to give hospitals a financial incentive to work with physicians, home health agencies, skilled nursing facilities, and other providers to make sure beneficiaries get the coordinated care they need. Today, beneficiaries receive care from many providers and suppliers, with each having their own coordination efforts. This can lead to confusion and in some cases, multiple care plans and instructions for beneficiaries that conflict and can lead to re-hospitalizations and complications. CMS will help hospitals improve care delivery and care coordination by providing spending and utilization data and facilitating the sharing of best practices.

The proposed framework for the model was displayed in the Federal Register on July 9, 2015. After reviewing nearly 400 comments from the public and considering commenters’ thoughtful perspectives, several major changes were made from the proposed rule, including:

  • Start Date: In order to allow participant hospitals more time to prepare, the first performance period for the model will begin on April 1, 2016 instead of the proposed January 1, 2016 performance period start date.
  • Site Selection: The CJR Model will be implemented in 67 metropolitan statistical areas (MSAs), instead of the proposed 75 MSAs, to respond to comments asking for us to incorporate the increased participation in the Bundled Payments for Care Improvement (BPCI) initiative since publication of the proposed rule and to incorporate BPCI physician group practice participation levels into our MSA selection methodology.
  • Quality Measures in Model Pay-for-Performance: CMS is finalizing an alternative, composite quality score methodology, rather than the threshold methodology that we proposed, in order to provide stronger incentives for more hospitals to improve quality.
  • Payment: In response to several commenters requesting a more gradual transition to downside risk and a lower stop-loss limit to allow hospitals more time to gain experience under the CJR model, CMS is finalizing a policy for no repayment responsibility in performance year 1, a stop-loss limit of 5 percent in performance year 2, a stop-loss limit of 10 percent in performance year 3, and a stop-loss limit of 20 percent in performance years 4 and 5 for participating hospitals other than rural hospitals, Medicare-dependent hospitals, rural referral centers, and sole community hospitals. A parallel approach has been finalized for the stop-gain limits to provide proportionately similar protections to CMS and hospital participants, as well as to protect the health of beneficiaries. We are also gradually phasing in repayment responsibility with a reduced discount percentage for repayment responsibility in years 2 and 3.
  • Waivers: No waivers of any fraud and abuse authorities are being issued in the final rule. Rather, CMS and OIG will jointly issue a notice regarding the waiver of certain fraud and abuse laws for purposes of testing this model. The notice will be published on the CMS and OIG websites.

The CJR model incorporates successful design elements from other initiatives. This model also reflects best practices from the private sector, where major employers and leading providers and care systems are moving towards bundled payments for orthopedic services.

“This model is about improving patient care. Patients want high quality, coordinated care -- not just for a day, but for an entire episode of care. Hospitals, physicians, and other providers who work together can be successful and improve care for patients in this model, and CMS will help providers succeed,” said Patrick Conway, M.D., CMS’ principal deputy administrator and chief medical officer.

The CJR model final rule can be viewed here, starting November 16, 2015.

The waiver notice jointly issued by CMS and OIG is available here.

For more information, click here.