Medicare payment reform includes both voluntary programs and regulatory mandates. Voluntary programs include, for example, the Medicare Shared Savings Program, the Health Care Innovation Awards, the Oncology Payment Model, and the Bundled Payment for Care Improvement Program. Each program offers incentives for collaboration among providers to improve quality and efficiency in healthcare delivery.
By contrast, regulatory mandates impose financial penalties on individual providers for poor performance on specified metrics (or reward them for above-average performance). These programs include the Hospital Readmission Reduction Program, the Hospital Acquired Condition Reduction Program, and the Hospital and Physician Value-Based Purchasing Programs.
Now, for the first time, the Centers for Medicare & Medicaid Services (CMS) proposes to convert one of the voluntary programs—Bundled Payment for Care Improvement (BPCI)—into a regulatory mandate. Despite the limited evaluative data now available, CMS believes bundled payments hold great promise to improve quality and coordination of care through an entire episode of care. To fully evaluate the impact of bundled payments in different markets, however, CMS believes the selection bias inherent in the current BPCI voluntary program, due to self-selected participation by providers, must be eliminated.
Thus, CMS proposes to make bundled payments mandatory for a limited number of hospitals for a limited number of episodes. On July 14th, the agency published its proposed rule for the Comprehensive Care for Joint Replacement Program (CCJR). Under CCJR, CMS would bundle payments for nearly all Part A and B services related to hip and knee replacement surgeries performed at hospitals located in 75 selected metropolitan statistical areas (MSAs).
Approximately 800 hospitals will be subject to CCJR, and about 111,000 procedures annually—one-quarter of all hip and knee replacement surgeries performed for traditional Medicare beneficiaries— will be impacted by this new program. CMS estimates CCJR will save $153 million, representing 1.2% of the $12.3 billion Medicare expects to spend on these procedures over the next 5 years.
Comments on the proposed rule are due September 8, 2015. Presumably, CMS will publish its final rule implementing CCJR later in the fall, with the 5-year program commencing on January 1, 2016.
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 certain excluded services that are clinically unrelated to the episode).
Which providers are subject to CCJR?
Any hospital located in 1 of the 75 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 selected the 75 MSAs (out of 338 MSAs identified by the U.S. Census Bureau) using a stratified, randomized process to ensure CCJR includes the broadest range of hospitals by facility size, geographic location, population, and historical costs.
As a part of the CCJR proposed rule, CMS will require that hospitals bear the financial risk for the total cost of care furnished by all providers for the included episodes of care. 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, subject to certain conditions. If 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.) The proposed regulations include certain guardrails to protect hospitals from what CMS characterizes as excessive risk.
How will CMS calculate the target pricing?
CMS proposes to calculate each hospital’s preliminary episode target prices annually based on 3 years of historical data. 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 target 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 target price will be based exclusively on regional data.
Once the preliminary episode target price is calculated, CMS then will apply a discount factor to account for Medicare’s share of reduced expenditures. The discount rate will be 1.7% for hospitals that successfully submit patient-reported outcomes data for at least 80% of eligible patients for that performance year. Non-reporting hospitals will be subject to a 2% discount.
With the exception of Year 1, CMS will communicate the target episode prices to each hospital prior to the beginning of the performance year. CMS proposes to share with CCJR hospitals up to 3 years of retrospective claims data, including both summary and raw claims-level data. Hospitals will be required to sign an appropriate data-use agreement to receive this data.
To what degree of financial risk is a hospital exposed?
Recognizing that many CCJR hospitals will need time to analyze data and establish relationships with episode providers, CMS proposes no downside risk in Year 1. Hospitals still will be eligible for reconciliation payments in Year 1 (and each year thereafter) if both:
(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).
(2) The hospital meets or exceeds all 3 specified quality thresholds.
The 3 quality thresholds identified by CMS include:
(1) Hospital-level risk-standardized complication rate following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA).
(2) Hospital-level 30-day all-cause risk-standardized readmission rate following THA and/or TKA.
(3) Yet-to-be-specified Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAPHS) measures.
Starting in Year 2, a hospital with a negative NPRA will be required to repay the difference to CMS, even if the excess cost is attributable to other providers. Repayments are capped at 10% of the applicable target episode price in Year 2 and 20% thereafter. CMS proposes a lower stop-loss limit for rural hospitals, sole community hospitals, Medicare dependent hospitals, and rural referral centers.
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.
Specifically, 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.
The proposed regulations include several specifications for CCJR sharing arrangements, including caps on gainsharing and alignment payments, the timing of such payments, and detailed recordkeeping requirements. Also, CMS proposes 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?
CMS proposes to modify several Medicare payment rules to give CCJR hospitals greater flexibility in pursuing care redesign. These include:
(1) A waiver of the requirement for a 3-day inpatient hospital stay prior to admission for a covered SNF stay under certain conditions.
(2) Allowing payment for certain physician visits to a beneficiary in his or her home via telehealth, regardless of whether the beneficiary resides in a rural or urban area.
(3) Allowing payment for certain types of physician-directed home visits by licensed clinical staff for non-homebound beneficiaries.
(4) Allowing CCJR hospitals to offer certain types of beneficiary inducements to promote compliance with the beneficiary’s plan of care.
CMS also seeks comment regarding whether any specific waivers of the Anti-Kickback Statute, the Stark Law, or the Civil Money Penalties Act would be necessary for successful implementation of the CCJR.
So now what?
For hospitals, orthopedic surgeons, and post-acute care providers in the selected 75 markets, now is the time to start unpacking the details of the proposed CCJR program. Hospital leaders should become educated regarding program requirements, appreciating some details may be refined in the final rule. 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.
To prepare for CCJR’s launch in 2016, providers should begin compiling and analyzing available data regarding the 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 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 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 Martie Ross, David McMillan, or Laura Bond at PYA, (800) 270-9629.
