On November 16, the Centers for Medicare & Medicaid Services (CMS) released its 1000-page final rule implementing its Comprehensive Care for Joint Replacement payment model, or CCJR. Beginning April 1, 2016 (three months later than the originally proposed start date of January 1), CMS will bundle payments for nearly all Part A and B services related to hip and knee replacement surgeries performed at hospitals located in 67 selected metropolitan statistical areas (MSAs).
Over much objection, CMS is moving forward with converting what is now a voluntary payment model—Bundled Payment for Care Improvement (BPCI)—into a regulatory mandate. CMS anticipates saving $343 million—or 2.8% of the $12.299 billion it expects to spend on hip and knee replacements over the five-year course of the program.
Back in July, when CMS introduced the proposed payment model, we summarized CCJR’s key provisions in a Q&A format. We now have updated those answers (and added a few more) based on the final rule and related CMS commentary.
What services are included and bundled for a CCJR episode of care?
A CCJR episode will start on the day a traditional Medicare beneficiary is admitted for hip or knee replacement surgery (limited to MS-DRGs 469 and 470), and will continue for 90 days following the beneficiary’s discharge from the hospital. The episode includes all Part A and Part B services furnished to the beneficiary during this period with the exception of a specific list of services CMS has deemed clinically unrelated to these episodes. CMS will update the list, found at 42 CFR 510.200(d), on an annual basis.
Which providers are subject to CCJR?
Any hospital located in one of the 67 selected MSAs that bills traditional Medicare for a hip or knee replacement surgery is subject to CCJR. (Maryland hospitals and other hospitals now participating in a risk-bearing phase of BPCI Model 2 or 4 for lower extremity joint replacements are excluded from CCJR.)
CMS had proposed including 75 MSAs, but eliminated 8 of them because they no longer met the eligibility criteria. Hospitals in the following MSAs can decide whether they dodged a bullet or missed out on an opportunity: Las Vegas, NV; Richmond, VA; Virginia Beach, VA; Fort Collins, CO; Colorado Springs, CO; Evansville, IN; Medford, OR; and Rockford, IL.
Hospitals in the 67 selected MSAs will bear the financial risk for the total cost of care furnished by all providers for the included episodes of care. The hospital and these individual providers (e.g., physicians, long-term care hospitals, skilled nursing facilities (SNFs), home health agencies, ambulance services) will continue to submit, and CMS will continue to pay, claims for services furnished during a covered episode of care.
On an annual basis, CMS will compare the actual total cost of care for all episodes provided at a hospital to that hospital’s predetermined episode target price. If the actual cost is less than the target price, the hospital will receive a reconciliation payment equal to the difference, provided the hospital has met certain performance standards.
If, however, the actual cost is more than the target price, the hospital will be required to pay the difference to CMS (with the exception of Year 1, as described further below), subject to a cap to protect hospitals from what CMS characterizes as “excessive risk.”
Because a hospital already receives a flat amount for its services within the episode of care – its DRG payment – its opportunity/risk is, for the most part, based on the performance of other providers furnishing care during the episode. CMS is incentivizing hospitals to assume the “captain-of-the-ship” role and aggressively manage the entire episode of care.
How will CMS calculate the target pricing?
CMS will calculate each hospital’s benchmark price annually based on 3 years of historical data updated every other year: performance Years 1 and 2 will use historical CCJR episodes that started between January 1, 2012, and December 31, 2014; performance Years 3 and 4 will use historical episodes that started between January 1, 2014, and December 31, 2016; and performance Year 5 will use episodes that started between January 1, 2016, and December 31, 2018.
In Years 1 and 2, the formula will be based two-thirds on hospital-specific data and one-third on regional data. (CMS will calculate cost data for 9 different geographic regions.) In Year 3, the formula flips: the benchmark price will be calculated weighting one-third of the price on hospital-specific data and two-thirds of the target price on regional data. In Years 4 and 5, the benchmark price will be based exclusively on regional data. The formula also makes certain adjustments for low-volume hospitals and high episode spending.
The most significant difference between the proposed and final rules is the discount rate used to adjust the benchmark price to arrive at the target price. Under the proposed rule, CMS would have set each hospital’s target price by applying a fixed, standard discount rate to the benchmark price to account for Medicare’s share of reduced expenditures.
CMS had proposed a discount rate of 1.7% for hospitals that successfully submitted patient-reported outcomes data for at least 80% of eligible patients for that performance year. Non-reporting hospitals would have been subject to a 2% discount rate. Remember, the lower the target price, the harder it is to earn a reconciliation payment (or avoid a repayment liability).
That would have been simple, but CMS opted for an alternative, composite quality score (CQS) methodology “to provide stronger incentives for more hospitals to improve quality.” A hospital’s annual CQS will determine its discount rate (higher CQS = lower discount rate), meaning top-performing hospitals will have higher target prices than poor-performing hospitals.
CMS published 22 pages of supplemental information describing the manner in which the CQS will be calculated for each hospital for each year of the program. (Trust us: this publication is much easier to navigate than the 80+ pages devoted to the subject in the final rule.)
The CQS will be based on two measures: (1) hospital-level risk-standardized complication rate following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550); and (2) Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure (NQF #0166). The relevant performance periods are as follows:
Highly simplified, a hospital’s CQS will be based on its performance percentile relative to the national distribution of all hospitals’ performance on the two measures, as well as the hospital’s year-to-year improvement on its scores. Also, a hospital will have the opportunity to improve its CQS (i.e., earn extra credit) by voluntarily submitting to CMS patient-reported outcomes and risk-variable data associated with primary elective THA/TKA procedures.
Once the CQS has been calculated, CMS will use the following tables to determine the discount rate for purposes of calculating the reconciliation payment or repayment amount. CMS then will communicate these target prices to each hospital prior to the beginning of the performance year.
Recognizing that many CCJR hospitals will need time to analyze data and establish relationships with episode providers, there will be no downside risk in Year 1 (April 1 to December 31, 2016). Hospitals still will be eligible for reconciliation payments in Year 1 (and each year thereafter) if (1) the hospital has a positive net payment reconciliation amount (NPRA) (i.e., the actual adjusted episode payments are less than the episode target price; and (2) the hospital’s CQS is at least “acceptable.”
Under the proposed rule, CMS only considered a hospital’s performance on quality measures to determine whether it was eligible for a reconciliation payment. With the final rule, CMS now considers such performance in determining the dollar amount of a hospital’s reconciliation payment or repayment obligation. A hospital that achieves a high quality score will owe less in repayment than if it was a poor performer.
Also new in the final rule is a provision authorizing CMS to withhold or recover any reconciliation payment if the agency should determine the savings were realized through “inappropriate and systematic underdelivery of care.”
PERFORMANCE YEAR 1:
PERFORMANCE YEARS 2 AND 3:
PERFORMANCE YEARS 4 AND 5:
To what degree of financial risk is a hospital exposed?
Repayments are capped at 5% of the applicable target episode price in Year 2, 10% in Year 3, and 20% in Years 4 and 5. (In the proposed rules, these percentages had been 10% in Year 2 and 20% thereafter). For example, if a hospital’s target episode price was $10,000 and there were 100 episodes per year, the hospital’s potential liability would be limited to $50,000 in Year 2, $100,000 in Year 3, and $200,000 in Years 4 and 5. A lower stop-loss limit applies to rural hospitals, sole community hospitals, Medicare- dependent hospitals, and rural referral centers.
On the other end of the spectrum, CMS has imposed the following limits on reconciliation payments: 5% of the applicable target episode price in Years 1 and 2, 10% in Year 3, and 20% in Years 4 and 5.
What options are available to a CCJR hospital to manage this risk?
CMS intends to make reconciliation payments to, and require repayments from, hospitals only; the agency does not propose to hold other providers financially responsible. Instead, CMS expects hospitals to engage other providers to manage these episodes of care efficiently.
Prior to the April 1 start date, CMS will provide CCJR hospitals, upon request, up to 3 years of retrospective claims data, including both summary and raw claims-level data and quarterly updates thereafter. Hospitals will be required to sign an appropriate data use agreement to receive this data. This data will help the hospital identify specific opportunities to partner with other providers to drive down the total cost of care.
CMS encourages hospitals to enter into what it refers to as CCJR sharing arrangements with CCJR collaborators (including physicians and non-physician practitioners, skilled nursing facilities, long-term care hospitals, inpatient rehabilitation facilities, home health agencies, and outpatient therapy providers). Under such a written contract, the CCJR collaborator would agree to participate in specific quality and efficiency initiatives relating to the episodes in exchange for “gainsharing payments,” i.e., the hospital’s agreement to share a portion of any reconciliation payment and/or a portion of the hospital’s internal cost savings generated through such initiatives. A CCJR collaborator also may agree to pay the hospital an “alignment payment,” i.e., a portion of any repayment the hospital owes to CMS.
Under the final rule, a hospital is required to develop and maintain written policies regarding its selection of CCJR collaborators, including quality-related criteria to evaluate potential candidates. The hospital must maintain on its website a complete list of current and historical CCJR collaborators.
The regulations include several specifications for CCJR gainsharing arrangements, including quality performance requirements, caps on gainsharing and alignment payments, the timing of such payments, and detailed recordkeeping requirements. Also, CMS uses a narrow definition of internal cost savings for purposes of gainsharing payments. Any such payments are limited to the hospital’s measurable, actual, and verifiable cost savings resulting from care redesign undertaken by the hospital in connection with the CCJR episodes.
What opportunities does a CCJR hospital have to pursue care redesign?
To afford CCJR hospitals greater flexibility in pursuing care redesign, CMS has exercised its statutory authority to vary specific payment rules as necessary to implement alternative payment models. Specifically, CMS has approved the following:
- A waiver of the requirement for a 3-day inpatient hospital stay prior to admission for a covered SNF stay under specific conditions detailed in the regulations.
- Allowing payment for telehealth services furnished to the patient in his or her home, regardless of whether the beneficiary resides in a rural or urban area.
- Allowing payment for up to 9 home visits by licensed clinical staff for non-homebound beneficiaries (i.e., requiring only general supervision under the “incident to” rules).
Additionally, CMS and the Office of Inspector General (OIG) published a joint notice on November 16 regarding waiver of certain fraud and abuse laws in connection with CCJR. The waivers are narrow, especially as compared to those afforded to participants in the Medicare Shared Savings Program. They relate only to (1) distribution of gainsharing payments and payment of alignment payments under sharing arrangements; (2) distribution payments from a physician group practice to a practice collaboration agent; and (3) patient engagement incentives provided by participant hospitals to Medicare beneficiaries in episodes. Each waiver has several specific requirements, all of which must be satisfied for a provider to enjoy its protections.
How will CCJR impact Medicare beneficiaries?
CCJR hospitals must notify beneficiaries of the model’s requirements at the time of admission in the manner specified by CMS. Hospitals also must require as a condition of any sharing arrangement that the collaborators notify beneficiaries of the existence of a sharing arrangement. In the case of physicians, this notification must occur at the point of the decision to proceed to surgery, or, in the case of other collaborators, prior to the furnishing of the first joint-replacement-related service provided by the collaborator. Also, as part of discharge planning, CCJR hospitals must inform beneficiaries of all Medicare-participating PAC providers/suppliers in an area but may identify those providers/suppliers that the hospital considers to be preferred.
So now what?
For hospitals, orthopedic surgeons, and post-acute care providers in the selected 67 markets, now is the time to start unpacking the details of the CCJR program. Hospital leaders should become educated regarding program requirements. These leaders, in turn, should invite potential CCJR collaborators into conversations regarding the program, thus beginning to build the trust relationships that will be key to success.
Hospitals also should bring laser-beam focus to improving performance on CCJR’s two quality performance measures. A hospital’s CQS, which is based on these measures, determines eligibility for any reconciliation payment and can vary the amount owing to or owed by the hospital by 1.5 percentage points.
To prepare for CCJR’s launch in April 2016, providers should begin compiling and analyzing available data regarding CCJR episodes to identify potential cost savings opportunities. Once CMS makes historical claims data available to individual hospitals, these opportunities will come into clearer focus.
PYA has extensive experience supporting providers participating in CCJR’s older sibling, BPCI, both with technical compliance and development and implementation of care redesign plans. PYA can partner with your organization to develop and implement a successful CCJR strategy.
- PYA offers interactive educational opportunities for leadership teams to understand the details of the CCJR program and its impact on the organization.
- PYA’s performance improvement experts can identify and support implementation of strategies to improve key quality scores.
- PYA can assist a hospital with developing and implementing processes to ensure full compliance with CCJR regulatory requirements.
- PYA Analytics’ computational scientists have deep and wide experience extracting knowledge from CMS claims data, including opportunities for greater efficiency and cost savings.
- Drawing on its extensive experience in the development and operation of clinically integrated networks and clinical co-management and gainsharing arrangements, PYA can facilitate communications between a hospital and potential CCJR collaboratives, and support development of mutual strategies for success.
- PYA provides financial modeling to help an organization understand and respond to the potential financial impact of CCJR.
For additional information, please contact David McMillan or Martie Ross at (800) 270-9629.