Medicare Issues Final Rule for CJR Bundled Payment

Medicare issued the final rule for its first mandatory bundled payment program, Comprehensive Care for Joint Replacement (CJR). Participation in this model will be mandatory for 791 hospitals in 67 geographic regions. It will begin April 1, 2016.


These hospitals will be accountable for the quality and cost of care provided to Medicare fee-for-service beneficiaries for lower extremity joint replacement procedures and recovery, including all hip and knee replacement surgeries.


The retrospective bundled payment will apply to inpatient stays and all related care provided during the 90-day period following discharge (Episode). Hospitals will receive an incentive payment from CMS if the total aggregate cost for all Episodes is below the aggregate target price, or may owe CMS if the total aggregate cost for all Episodes is above the aggregate price. The downside risk will be phased into the payment model after the first year; however, “the availability of incentive payments will be immediate.” (“CRJ: CMS Issues Final Rule, AHLA email alert, November 23, 2015)


CMS encouraged hospitals to partner with other providers in an Episode to both incentivize reductions in cost and increases in quality, and to potentially share in the downside risk of CJR.


CJR will be in place for five performance years.


Hospital advocates have concerns about some of the provisions in the final rule. For example, CJR has regional pricing targets for hospitals. In large regions, the effect of average pricing could mean hospitals in costly urban areas will compete against benchmarks derived in part from hospitals in lower-cost suburban centers.


“The structure could create significant financial challenges for hospitals. For instance, among lower-volume teaching hospitals, average payments ranged from approximately 205 percent greater than the regional average to 39 percent less than the average, according to an analysis of the proposed rule.” (“CMS Delays Start of Joint Replacement Bundle,” HFMA Weekly, November 20, 2015)


Overall, hospital advocates are watching for signs of whether any facilities in regions with mandatory participation in the payment bundle will reduce or eliminate their joint replacement services in response to the new requirements. (“CMS Delays Start of Joint Replacement Bundle,” HFMA Weekly, November 20, 2015)


The CJR bundled payment model will impact only a small portion of the $7 billion Medicare spends on hip and knee replacements annually. However, CMS expects it to have a significant impact on participating hospitals—an estimated $343 million in net savings to Medicare over the five-year period



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