CMS Proposes Extension of and Updates to Joint Replacement Model: WHG’s Top Takeaways

By: | February 25, 2020

Given rising health care costs, conversations have understandably gravitated toward large-scale reform measures such as Medicare for All or public option plans. But more localized and targeted reforms can impact costs as well. Take, for example, the Centers for Medicare & Medicaid Services (CMS)’s recently proposed changes to its ongoing Comprehensive Care for Joint Replacement (CJR) model (details).

The CJR program, which began on April 1, 2016, explores whether bundling payments for hip and knee replacements (known as “lower extremity joint replacements” or LEJRs) can incentivize providers to deliver more cost-effective and higher quality care. Spanning 67 metropolitan statistical areas (MSAs) in total, the demonstration requires provider participation in 34 of the MSAs and makes participation in the remaining 33 voluntary.

The latest evaluation of the CJR model (overview) highlights “promising” Medicare program savings – upwards of $17.4 million after two performance years – while maintaining quality of care. CMS largely attributes the average CJR episodic payment reductions to changes in post-acute care use, shifting to less intensive sites of care. CMS recognizes the potential of the model to improve costs without diminishing quality – an impetus of the proposed changes and model extension.

On February 20, 2020, CMS proposed a series of changes to the demonstration (which we summarize here for Policy Hub subscribers) to further improve the model and better account for recent changes to the health care delivery system.

Our three major takeaways on these proposed changes follow.

  1. CMS furthers its investment in bundled payments. Several developments from the Innovation Center in 2019 showed CMS advancing its foray into the comprehensive, coordinated care space (in primary care and kidney care, for example), financed by capitated payments and shared savings arrangements. The execution and testing of these models will provide evidence on whether these specific coordinated care schemes can meaningfully impact quality and costs. However, CMS’s proposed decision to extend the duration of the CJR model by three years (through Dec. 31, 2023) for the 34 mandatory MSAs signals that CMS is still committed to teasing out the precise effects of bundling physician payments. In addition, CMS’s request for input (RFI) from stakeholders on how to develop yet another bundled payment model for LEJR services in new settings of care even more so suggests that CMS eyes bundled payments as a meaningful path forward to bending the health care cost curve.

 

  1. Provider flexibility continues to be a CMS priority. As CMS noted, providers were once able to receive payment for certain LEJR-related services when furnished in the inpatient setting only. However, recent regulatory changes made it possible for CMS to pay providers for certain LEJR-related services on both an inpatient and outpatient basis. In compliance with the older regulations, the CJR model currently only allows participating providers to furnish services under the model on an inpatient basis. Many providers expressed concern that more of these services shifting to the outpatient setting (which would likely occur if a particular patient’s acuity was low) would limit their ability to see lower-cost patients under the model. In response to these concerns, CMS proposed to allow providers under the CJR model to furnish such services to patients in the outpatient setting as well. This importantly increases provider flexibility, allowing them to retain a balanced cost-mix as health care delivery trends continue to change.

 

  1. While flexibility remains a priority, so does provider accountability to cost. To protect providers from catastrophically high costs, CMS calculates a “high episode spending cap amount” that limits episodic costs incurred by providers at a certain amount. CMS currently sets this cap amount at two standard deviations above the regional mean price. However, CMS found that a larger share of episodes exceeds this cap than expected, meaning that providers are not responsible for the costs of more services than CMS initially intended. Therefore, CMS proposed a new methodology – setting the cap at the 99th percentile of historical costs – to hold providers accountable to a more appropriate share of episodic costs. The same can be said in regard to CMS’s proposed changes to calculating the CJR target price. Under the current model, CMS calculates a “target price” based on a blend of hospital-specific and regional historical spending data. CMS then holds providers accountable to these target prices at the end of the model performance year, where provider episodic spending is compared to the CMS-calculated target price. In its proposed rule, CMS outlined changes to how it calculates the target price to better account for the overall year-over-year decrease in per episode costs. CMS also proposed to base target price calculations on only the most recent year of claims data rather than the past three years. Such changes may yield lower target prices for some participating providers, increasing the need to manage episodic costs.

Again, what’s evident from these changes is that CMS is continuing to explore how bundled payments can further impact quality and costs across the health care system. Under these proposed changes, the CJR model would continue for an additional three years. Moreover, and as alluded to above, CMS is reportedly considering the development of additional LEJR bundled payment models that would incorporate additional settings of care (i.e., ambulatory surgical centers (ASCs)). And, lest we forget, a new cohort under another Innovation Center bundled payment program – the Bundled Payments for Care Improvement Advanced (BPCI Advanced) model – commenced model participation this past January.

As CMS works to finalize its latest CJR proposal and moves forward on the BPCI Advanced model, we will continue to assess how the agency plans to transform health care through this critical approach to payment reform.

Oh, and one last thing: Comments on the CJR proposed rule are due April 24.

 

Josh LaRosa is a Policy Director at Wynne Health Group, focusing primarily on regulatory affairs with an emphasis on the FDA and CMS. His interests lie in delivery reform and innovations in payment and care delivery models. You can reach Josh via email at josh@wynnehealth.com, and can find him on LinkedIn and Twitter as well.

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Josh LaRosa