CMS final rule for bundled joint replacements - DoctorsManagement CMS final rule for bundled joint replacements - DoctorsManagement

Bundle up: CMS releases final rule for bundled joint replacements

CMS has finally released the final rule for its Comprehensive Care for Joint Replacement (CJR) program, a complex pay-for-performance experiment that will bundle lower extremity (hip and knee) joint replacements for five years in 67 areas nationwide starting April 1, 2016.

The final rule (click here to view PDF online) makes a few concessions to provider complaints, which centered around the fact that the program is mandatory, yet is being rushed into action, with fewer than six months between the release of the proposed rule and the proposed implementation date of Jan. 1, 2016. In its final rule, CMS pushed that date back to April 1 and also reduced the number of affected geographic areas from 75 to 67 (metropolitan service areas or MSAs).

The program is limited to five years, during which affected hospitals will continue to receive fee-for-service Medicare payments, CMS will calculate actual episode payments and compare them against CJR payment targets. If the actual costs were greater for a hospital, CMS will demand repayment from those hospitals. If the actual costs were less, CMS will make a “reconciliation payment” to the cost-saving hospitals based on the difference. Overall, CMS is projecting a cost savings of $343 million over the five years.

While the CJR program will end after the five years are up, if CMS achieves anything close to its projected savings without negatively impacting patient outcomes, the agency is likely to make the CJR model permanent and expand it.

When and how bundling is applied

The bundling will affect inpatients admitted to the hospitals located in the 67 selected areas. A lower extremity joint replacement (LEJR) episode of care would begin when a Medicare patient is admitted to a hospital being paid under the Inpatient Prospective Payment System (IPPS) and is discharged under the relevant diagnostic related group or DRG.

The LEJR episode would last for 90 days following discharge, and all Part A and Part B services related to the LEJR would be covered by the episode. In fact, hospitalizations and practically all services within the 90-day period would be covered by the bundled payment. The hospital that bills the relevant DRG assumes the financial risk and rewards. At the end of each year, CMS will compare the hospital’s actual spending against target spending to determine whether the hospital gets a bonus payment or a recoupment demand.

Hedging against losses

The cost sharing won’t take effect till the second year, thus participating hospitals will be protected from any negative costs in the first year, giving them time to make changes that reduce costs. As a further hedge against excessive negative financial impact, a stop-loss limit will be in effect from year 2 and beyond to protect hospitals. A matching stop-gain limit will also be in effect from year 2 forward to protect CMS. Patients can’t choose to opt out of the CJR program unless they switch their care to another, non-participating hospital. You can view the 67 geographic areas being targeted in the proposed rule by visiting CMS’ website here. Any hospital being paid under IPPS in the 67 MSAs will be subject to the CJR program.

— Grant Huang, CPC, CPMA. The author is Director of Content at DoctorsManagement.