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Published 1/1/2016
Elizabeth Fassbender; Shreyasi Deb, PhD, MBA

CMS Finalizes Mandatory Bundled Payment Model

On Nov. 16, 2015, the Centers for Medicare & Medicaid Services (CMS) finalized a plan to bundle payment and quality measures for several lower extremity joint replacement procedures. The Comprehensive Care for Joint Replacement (CJR) model was originally announced in July and would have required participation by nearly all hospitals in 75 geographic areas, beginning Jan. 1, 2016.

Under the final rule, however, CMS reduced the number randomly selected geographic areas from 75 to 67 and delayed the start date to April 1, 2016. Hospitals within the selected geographic areas—even small or rural hospitals—are required to participate. The only excluded hospitals are critical access hospitals and those already participating in the Bundled Payment for Care Improvement Initiative (BPCI).

According to CMS, the CJR model aims to support "better and more efficient care for beneficiaries undergoing the most common inpatient surgeries." The bundle will cover elective hip and knee arthroplasty procedures (total or partial) performed for degenerative conditions. Ankle arthroplasty is also included, as is total and hemi- hip arthroplasty performed in the setting of hip fracture (diagnosis-related groups [DRG] 469 and 470).

Under the CJR model, hospitals are the only episode initiators and awardees. The hospital in which the hip or knee replacement takes place would be accountable for costs associated with the entire episode of care—from the time of the surgery through 90 days after discharge.

CMS has stated that this alternative payment model (APM) will contribute to the goals set for Medicare. By the end of this year, 30 percent of all Medicare fee-for-service payments are to be made via APMs; this number is scheduled to increase to 50 percent by 2018.

In comments to CMS on the proposed rule, the American Association of Orthopaedic Surgeons (AAOS) expressed concern about unintended consequences for Medicare beneficiaries and physicians and stressed the need for CMS to consider significant changes to the program.

"Many AAOS members have been leaders in developing, implementing, and evaluating episode of care payments," wrote David D. Teuscher, MD, AAOS president. "However, these past and current efforts share some features that differ from the current proposal. Namely, these programs were/are voluntary pilot projects and [had both] physician buy-in and leadership … The AAOS has multiple concerns about the proposed rule and we urge CMS to strongly consider significant changes to the program."

Feedback made a difference
Some of the suggestions made by AAOS were adopted by CMS. For example, the final rule revised the methodology used to calculate the composite quality score. Originally, CMS had proposed a specific threshold on three quality measures (THA/ total knee arthroplasty [TKA] complications, patient satisfaction [HCAHPS], and THA/TKA readmissions). The final rule dropped the readmission measure and based the composite score on an alternative approach focused on quality improvement.

The final rule also incorporates a more gradual transition to downside risk. Originally, CMS proposed to apply stop-loss limits of 10 percent in performance year 2 and 20 percent in performance years 3 through 5. The final rule applies stop-loss limits of 5 percent in performance year 2, 10 percent in performance year 3, and 20 percent for performance years 4 and 5.

However, other issues raised by the AAOS in previous comments still need to be addressed. For example, the program still lacks a risk-adjustment feature and does not recognize the need for designated physician leadership for episodes-of-care.

Although the delayed implementation date adds some flexibility to the payment program, an additional 3 months does not fully address many physician concerns. For example, physicians in continue to require better analytics and support, tools for best practices and ease of reporting, validated patient risk assessment measures, and the ability to share data with physicians through required transparency by hospitals and payers.

The AAOS recognizes that CMS has made progress in some of these areas. However, AAOS also believes that CMS needs to further strengthen the support and infrastructure for physicians and facilities before adding programs that require significant investment and development. AAOS recommended CMS postpone the mandatory implementation feature of the program until at least 85 percent of providers have attained meaningful use or another metric of infrastructure readiness.

In September 2015, several legislators—led by Reps. Tom Price, MD (R-Ga.), and Phil Roe, MD (R-Tenn,)—wrote to CMS and requested a 1-year delay of the CJR model. They argued that because the new model represents a "significant change to our healthcare delivery system" and physicians, hospitals, and post-acute providers will have "little or no time to prepare for this abrupt shift in payment," implementation should be delayed by a minimum of 1 year. In response to provider concerns, the Republican Doctor's Caucus renewed this request and delivered a letter to Speaker Paul Ryan (R-Wisc.) in late November 2015 asking that a delay be included in the upcoming appropriations package.

"The CJR model represents the first mandatory episode payment program under CMS' Center for Medicare and Medicaid Innovation authority," the legislators wrote. "It is extremely broad in nature, lacks evidence-based support for much of its criteria, and will be implemented by CMS in just a few months. While development of patient-centered payment models that drive quality and efficiency should be encouraged, we have grave concerns about conducting mandatory demonstrations on a national scale."

In contrast, the BPCI models were voluntary in nature and gave provider-participants more time to prepare. Also, the CJR final rule did not accept stakeholder comments apart from the hip fracture codes, discussed below.

Including hip fractures
In addition to the comments submitted to CMS on the proposed rule, AAOS recently submitted additional comments on the International Classification of Diseases (ICD) code list for hip fractures, stressing that inclusion of all lower extremity joint arthroplasty procedures within DRGs 469 (major joint replacement or reattachment of lower extremity with major complications or comorbidities) and 470 (major joint replacement or reattachment of lower extremity without major complications or comorbidities) remains a serious problem.

"We believe the program should be limited to truly elective hip and knee arthroplasty procedures. To include other conditions only increases the burden on systems and exacerbates the likelihood of adverse selection," wrote AAOS Medical Director William Shaffer, MD. "The inclusion of higher costs and more variable conditions such as femoral and complex hip fractures also increases the possibility of significant variation both longitudinally and geographically."

Risk adjustment
The issue of risk adjustment remains problematic. CMS disagrees with commenters who pointed to an already existing, widely accepted risk adjustment methodology for CJR episodes. The agency currently has no plans for risk-adjusting the CJR model measures for sociodemographic variables at this time.

However, CMS has indicated that it is working with the National Quality Forum and waiting for a report to Congress from the Department of Health and Human Services Office of the Assistant Secretary of Planning and Evaluation before considering the future inclusion of sociodemographic and other risk adjustment variables. AAOS had strongly recommended to CMS that episode payment amounts be risk-adjusted or risk-stratified based on patient characteristics that might require significantly different types or amounts of services during the complete episode.

"Analyses of spending during joint replacement episodes have shown tremendous variation in postacute care costs for patients receiving what is ostensibly the same basic procedure," wrote Dr. Teuscher. "It is clear that some of this variation reflects legitimate differences in patient needs and not 'unnecessary' care. The program should be designed to enable teams of providers to redesign care in ways that reduce or eliminate avoidable spending while ensuring that patients with greater needs have access to increased levels of care."

On Dec. 8, 2015, the AAOS Health Care Systems Committee hosted a webinar to explain the impact this payment model will have on physicians and their practices. Presenters Craig R. Mahoney, MD; Alexandra E. Page, MD; and Brian McCardel, MD, also covered AAOS advocacy efforts to continue to define this payment model.

"Physicians need to consider hospital alignment strategies and recognize both the value and potential risks of being collaborators," stated Dr. Page. "The turnaround time is fast—implementation is moving forward in April—leaving little time to develop collaboration agreements with hospitals.

"The CJR model is also coming on top of many competing mandates, like ICD-10 and meaningful use," she continued. "Surgeons should contact their members of Congress to explain the challenges of implementing CJR at this time. However, surgeons should also recognize that payers other than Medicare are introducing bundled payments, and they may be the future for orthopaedic reimbursement."

Elizabeth Fassbender is the communications manager and Shreyasi Deb, PhD, MBA, is the senior manager, health policy, in the AAOS office of government relations.

Bottom Line

  • The Comprehensive Care for Joint Replacement (CJR) model requires participation by all hospitals (except critical access hospitals and those already participating in the Bundled Payment for Care Improvement initiative) in 67 specified areas, beginning April 1.
  • The hospital would be accountable for costs associated with the entire episode of care—from the time of the surgery through 90 days after discharge—for elective hip and knee arthroplasty procedures (total or partial) to treat osteoarthritis or similar conditions, as well as ankle arthroplasty, hip hemiarthroplasty for fracture repair, and THA for hip fracture.
  • CMS has no plans for risk-adjusting the CJR model measures for sociodemographic variables at this time, but may consider them in the future.
  • Physicians need to consider hospital alignment strategies and recognize both the value and potential risks of being collaborators.

Additional Information:
Advocacy Now article on the final rule
CMS final rule
AAOS comments on the proposed rule
Congressional letter to CMS asking for a one-year delay
Advocacy Now article on the AAOS proposed rule comments
CJR Model webpage