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Comprehensive Care for Joint Replacement: CMS adopts mandatory approach to payment reform

August 27, 2015

On July 9, 2015, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that seeks to implement a mandatory episode-based payment model for lower extremity joint replacement (and reattachment) care in selected geographic areas. According to this Comprehensive Care for Joint Replacement (CCJR) model, CMS will test (for five years – through December 2020) an episodic-based payment to hospitals beginning on Jan. 1, 2016. This proposal signals, although still subject to comments and CMS’ rulemaking process, a notable change in payment policy, from voluntary episodic payment programs to a mandatory participation model affecting inpatient hospitals in select geographies.

In previous comments to CMS, many health care providers had encouraged CMS to continue voluntary participation programs, such as the Bundled Payment for Care Improvement (BPCI) initiative, which allows providers (i) to choose whether to accept financial risk, and (ii) to select the episodes they believe they can effectively manage from a cost and quality perspective. The CCJR model ignores those requests for episodic payment to remain voluntary and imposes a number of requirements with little time for planning or developing organizational infrastructure. The proposed rule includes hospitals in 75 metropolitan statistical areas, and would impact approximately 900 inpatient hospitals, representing about 25 percent of the lower extremity joint replacement procedures for Medicare beneficiaries nationally.

Some quick details regarding the rule may be useful in considering the impact on health care organizations looking to either comment on or prepare for the implementation of this rule:

  • The scope of the bundle includes MS-DRGs 469 and 470 (major joint replacements or reattachments with and without, respectively, major complications and comorbidities)
  • The episode will begin on admission and continue for 90 days following discharge
  • Downside risk will begin after the first year of the program and be effective for all discharges beginning Jan. 1, 2017
  • CMS has proposed some waivers of Medicare program rules for the CCJR model, including the Skilled Nursing Facility three-day rule (beginning in year two) and the geographic site requirements for telehealth
  • CMS has not proposed waivers for the fraud and abuse laws (civil monetary penalties, Stark self-referral law, or the anti-kickback statute), although waivers for these concerns have been developed for the Medicare Shared Savings Program and the BPCI program
  • Unlike the BPCI program, the mandatory imposition of risk impact hospitals in the selected geographies (other collaborators – as described by CMS – should participate in care redesign but cannot accept front-line risk under the CCJR program)
  • The episodic payment will be based on a retrospective financial analysis comparing the cost of care to the target price less the CMS discount

In addition, there are a number of administrative, documentary, and quality requirements to be imposed based on the CCJR model proposal. CMS has set transformative goals for shifting to value-based payment, and this proposal may be the beginning of required changes in payment policy.

Hospitals affected by the CCJR model proposal will need to address a number of opportunities and challenges rather quickly. For example, if hospitals are to benefit from the CCJR episodic payment model, they will need to develop care pathways and meaningful alignment with other providers. Coordinating care pathways with orthopedic surgeons and establishing a post-acute network operating with effective care coordination communication and strategies are two foundational components to achieve “better care” and reduce unnecessary health care spending. In addition, home care, outpatient therapy, patient communication, and other processes need to be adopted both to comply with and thrive under the proposed CCJR model. Making some of these efforts more challenging, CMS continues to require unfettered beneficiary choice. Consequently, hospitals remain at risk even for those providers not working collaboratively with them on care redesign, quality, and efficient cost management.

CMS is accepting comments on the CCJR proposed rule through September 8, 2015. For more information, please visit http://innovation.cms.gov/initiatives/ccjr/ or contact one of our health care attorneys.