Blog Post

CJR Is Here to Stay: Three Strategies for Keeping Your Service Line Relevant

Cjr Is Here To Stay Web

On February 20, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to extend the Comprehensive Care for Joint Replacement (CJR) model by three years to December 2023. CJR is a bundled payment program that started in April 2016 and is currently scheduled to end in December 2020. The program is aimed at encouraging collaboration among healthcare providers to lower the overall cost and improve the quality of the services across the 90-day episode for hip and knee replacements.

In a sign that CMS recognizes that the program has successfully lowered the cost curve while maintaining high quality, the proposal includes the following highlights:

  • Adds performance year six (2021) through performance year eight (2023)
  • Includes outpatient knee and hip replacements
  • Changes the CJR target price calculation
    • Uses previous year instead of previous three years
    • Removes national update and twice-yearly fee schedule update
    • Removes anchor factors and weights
    • Incorporates additional risk adjustment
    • Changes high spend cap calculation
  • Adds an episode-level risk adjustment beyond fracture status; target prices will be further adjusted at the episode level based on the beneficiary’s age and Hierarchical Condition Category
  • Changes the quality discount factors applicable at reconciliation to participants with excellent and good quality scores “to better recognize high-quality care”
  • Eliminates the 50% cap on gainsharing payments

For those hospitals and health systems affected by this proposal, below are three key strategies to incorporate into your joint replacement program.

1. Develop an outpatient joint replacement program

For years, the threat of losing profitable inpatient joint replacement cases to the outpatient setting has been looming. With the recent decision to remove total knee and hip replacement from the inpatient-only list and allow Medicare total joint patients to be treated in an ASC setting, this has finally become a reality. Thus far, CJR has excluded outpatient total joints, despite the elimination of the two-midnight requirement. Hospitals have struggled with the process for determining whether a patient is appropriate for a second midnight and have developed a mixed bag of processes for identifying who is and is not appropriate to admit versus treat as an outpatient. With the proposed change to include outpatient hip and knee replacements in the CJR program, CMS is providing clarity to hospitals by eliminating the challenge of having to determine whether a patient is included. Organizations without an effective outpatient joint replacement program will struggle in the more contemporary payment models and, in the long term, may run the risk of becoming irrelevant in orthopedics.

2. Identify internal cost savings (ICS) opportunities

Over the past four years, successful organizations have primarily focused on lowering post-acute costs by increasingly discharging patients to their homes and reducing inpatient and subacute rehab utilization. Monitoring post-acute utilization and identifying further opportunities to reduce the episode spend remain important; however, efforts should also include collaborating with surgeons to identify ICS opportunities. The CJR program allows hospitals to gainshare with physician partners, and the savings calculation has the option to include ICS. However, because of the potential for payment penalties tied to overall episodic cost, most hospitals have focused exclusively on reducing post-acute utilization. While there may be few opportunities left to gain from net payment reconciliation payment savings, there are likely significant opportunities to reduce direct costs and improve the profitability of these cases to the hospital by including ICS in your gainsharing agreements. And with the proposed elimination of the gainsharing cap, hospitals will have more flexibility when designing these arrangements.

These efforts will not only help your joint program but may also lead to broader savings opportunities across all orthopedic procedures, a more collaborative and collegial relationship with surgeons, and deeper alignment among the entire care team.

3. Continue to concentrate on post-acute cost savings

According to CMS, “changes in post-acute care use, suggesting shifts to less intensive sites of care, contributed the most to the decrease in episode payments.” Successful organizations have set up preferred partner networks with post-acute providers, transitioned from expensive post-acute rehab utilization, discharged more patients to home, and developed systems of care navigation to ensure that the patients have a successful recovery. Because of the lower cost, regional target prices have been driven down, making it more difficult for hospitals to avoid repayment penalties to CMS. In addition, the proposed target price change to the prior year will further lower the target price, assuming that the more recent time periods represent lower episodic costs. Finally, although not part of the proposed rule, CMS considered changes to the target price calculation by setting prices at the national, rather than the regional, level.[

For those organizations that have yet to focus on reducing post-acute costs, time is running out. The traditional care pathways of 20 years ago will not be successful in today’s payer environment. To be successful and avoid repayment penalties for another three years, hospitals must organize around multidisciplinary care teams and identify progressive physician leadership to develop tactics to avoid unnecessary post-acute costs.

Looking Ahead

Executing a successful orthopedic service line strategy is crucial given the rapid pace of change in the industry. As CMS and other payers change their payment methodologies and accelerate the shift of cases to the outpatient setting, it will be important to proactively manage this change and evolve your service line. Hospitals that delay will be left behind. Now is the time to act.