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Most PPS hospitals in designated metropolitan areas are required to participate in the CJR/LEJR bundled payment and quality measurement initiatives.

Navigating health reform

CMS’ Final Rule for Comprehensive Care for Joint Replacement Impacts Providers

  • 2/12/2016

The Centers for Medicare and Medicaid Services (CMS) has finalized the proposed rule to test bundled payment and quality measurement for hip and knee replacements. The final rule was published November 16, 2015, and the implementation date is set for April 1, 2016. The program is scheduled to run through December 31, 2020. 

This program is a major step in CMS’ initiative of establishing 30 percent of all Medicare fee-for-service payments via alternative payment models by 2016 and 50 percent by 2018.

Program tests bundled payments and quality measures 

The Comprehensive Care for Joint Replacement (CJR) (also known as Lower Extremity Joint Replacements (LEJR)) program explores episodes of illness associated with hip and knee replacements, which are two of the most common surgical procedures for Medicare beneficiaries. In 2014, over 400,000 procedures were performed and cost $7 billion for the hospital stays alone. 

All 800 prospective payment system hospitals in 67 designated metropolitan statistical areas are required to participate in the CJR/LEJR bundled payment and quality measurement initiatives, unless they are already part of the Bundled Payment for Care Improvement Initiative. The participating hospitals will be held financially accountable for the quality and all costs of the CJR/LEJR episode of illness and care, including the 90 days following the episode. This means that the hospital is both the acute episode care provider and the post-acute care coordinator. 

The post-acute responsibilities include: 

  • Physician’s services 
  • Inpatient hospitalization (including readmission) 
  • Inpatient psychiatric facility (IPF) 
  • Long-term care hospital (LTCH) 
  • Inpatient rehabilitation facility (IRF) 
  • Skilled nursing facility (SNF) 
  • Home health agency (HHA) 
  • Hospital outpatient services 
  • Independent outpatient therapy 
  • Clinical laboratory 
  • Durable medical equipment (DME) 
  • Part B drugs 
  • Hospice 

Episode time frame and payment 

The episode of care begins with the admission to the hospital for any fee-for-service beneficiary who is discharged with the MS-DRG 469 (major joint replacement or reattachment of lower extremity with major complications or comorbidities) and MS-DRG 470 (major joint replacement or reattachment of lower extremity without major complications or comorbidities). This episode of illness ends 90 days post-discharge from the participating hospital. 

All providers involved in the episode will continue to be paid under the Medicare fee for service (FFS) rates. In addition, CMS will hold participating hospitals accountable for an actual episode target price for MS-DRG 469 and 470 that reflects a discount off current episodic spending and is based on a blend of the hospital’s own historical costs and the regional historical episodic costs. The target price will be used as follows: 

  1. CMS will reconcile the actual target price to the actual episode spending. 
  2. If the target prices are lower than the actual episode spending, the hospital may have to repay Medicare. 
  3. If the actual target price is higher than the actual episode spending, the hospital may be eligible for additional reimbursement, called reconciliation payments. 

As currently outlined, there is no risk to the program in the first year (beginning April 1, 2016). During year one, all providers in the CJR Model will be paid as usual through the Medicare FFS payment models. Year two of the payment model will begin the initial phase-in of the repayment process for the hospital providers, but would include built-in protection for high-cost cases. 

To qualify for reconciliation payments, hospitals would be required to perform favorably on three of the National Quality Forum (NQF) measures: 

  • Meets standard level of risk for procedure (NQF #1550) 
  • Meets 30-day readmission rate for procedure (NQF #1551) 
  • Meets targets for consumer assessment of provider and systems (NQF #0166) 

Details for skilled nursing facilities 

The final CMS rule includes the potential to waive the three-day hospital stay requirement before SNF payment can be triggered in cases following the CJR hospitalization or anchor hospitalization. This waiver will take effect for years two through five under the CJR bundled payment. 

However, for a SNF to be eligible to receive an admission under this waiver and the CJR bundle, it must be identified on the quarter calendar list of qualified SNFs when the CJR/LEJR beneficiary was admitted and have an overall rating of at least three stars for at least seven of the twelve months measured. 

This criteria is based on the CMS Five Star Rating System, which is a critical point for both the participating hospitals and transferring SNF providers. All qualified SNFs will be posted in advance of the calendar quarter. 

Provider outcomes and expectations 

This program is a major step in CMS’ initiative of establishing 30 percent of all Medicare fee-for-service payments via alternative payment models by 2016 and 50 percent by 2018. CMS’ goal in this initiative is to hold providers accountable while coordinating care and working closely together for better outcomes. Hospitals involved in this bundled payment will need to be closely involved in the post-acute care services and monitor providers much more stringently than in the past. As organizations begin this new initiative leaders should keep the following in mind: 

  • Strong partnerships are critical. 
  • Hospitals will need to partner with the various providers of post-acute services. 
  • Understanding and developing best practice protocols and clinical pathways for these DRGs will be essential to ensure better outcomes, lower episodic cost, and the potential to capture additional reimbursement or reconciliation payments. 
  • Hospital readmission rates can be a key driver of costs. Working with partners to reduce readmissions through strong care transitions, clear care protocols, and communication will be important in managing the episodic cost, and enabling better outcomes, stronger results, and higher reimbursement. 
  • Discharge protocols will need to be developed and advertised to all post-acute care providers with expectations of customer service outcomes. 

How we can help 

CLA can analyze your costs associated with MS-DRG 469 and 470 from recent discharges. We can assist you in partnering with the best possible post-acute care providers in your geographic regions based on information available from CMS. This will permit you to be the best possible “gatekeeper” of your reimbursement and, with proper management oversight and involvement, the best care coordinator available.