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BLOG: The comprehensive care joint replacement model: Why you should care
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At the start of the month, Medicare launched a new mechanism for reimbursement of lower extremity joint replacement in 67 metropolitan areas across the United States. Within the 67 areas, hospitals are required to be under this reimbursement methodology unless the hospital is an episode initiator in Model 2 or 4 of Bundled Payment for Care Improvement, or in Model 1 of that program.
Note that physicians are not required to do anything different. However, hospitals may ask you to make changes to your practice. Here are some frequently asked questions. In addition, if you would like to watch a 1-hour summary of the new rule and the operation of gainsharing programs, send me an email at dglaser@fredlaw.com.
What is CJR?
On Nov. 24, 2015, CMS published a final rule changing the reimbursement for certain lower extremity joint replacement procedures. While the proposed rule referred to “CCJR,” for Comprehensive Care for Joint Replacement, CMS has elected to drop one “C,” referring to the program as “CJR.” Effective April 1, 2016, the rule changes the way almost all prospective payment hospitals in 67 metropolitan statistical areas (MSAs) are compensated for patients admitted with DRG 469 or 470.
Under the program, Medicare will establish a target price for an episode of care that begins when the patient is admitted to the hospital and ends 90 days following the patient’s discharge. The hospital will be responsible for managing costs to meet the target price. If the costs exceed the target, the hospital must repay Medicare. If the costs are lower than the target, the hospital receives a payment from Medicare. The calculation of payments to and from the hospital is complicated, and there are caps on both the amount the hospital can receive and the amount it can be required to repay.
The “episode of care” covers a wide range of services that are provided by other Medicare providers and suppliers, including physicians, therapists, skilled nursing facilities (SNFs) and more. This means the hospitals will be at financial risk for the services provided by these other organizations. (The rule refers to the other organizations as “collaborators.”) Hospitals are permitted, but not required, to negotiate contracts with other care providers (collaborators) so they share in the payments to and/or from Medicare. Direct Medicare payments to all providers and suppliers other than hospitals will be unchanged. For example, physicians will continue to receive fee-for-service payment under the Medicare fee schedule.
A wide range of services are considered part of the episode. Specifically, the following types of services are included in the episode:
- physicians’ services;
- inpatient hospital services (including hospital readmissions);
- inpatient psychiatric facility services;
- long-term care hospital services;
- inpatient rehabilitation facility services;
- SNF services;
- home health agency services;
- hospital outpatient services;
- outpatient therapy services;
- clinical laboratory services;
• durable medical equipment;
• part B drugs and biologicals;
• hospice services; and
• per beneficiary per month payments under models tested under section 1115A of the act.
Note that services in the list will be included in the episode even if they might seem unrelated to the joint replacement procedure. For example, mental health and chemical dependency services are included in the episode. When CMS calculates the target price, it will be using historical data that includes the same bundle of services. However, it is still true that when determining whether a hospital meets the target price, it will examine the patient’s costs for services listed above, even if such services would strike most people as unrelated to joint replacement.
What services are excluded from the episode?
CMS may choose to exclude certain services it considers “unrelated” to the joint replacement. The final rule lists a number of services already determined to be excluded. These include inpatient admissions for oncology, trauma medical and certain chronic diseases, like prostatectomy, and acute surgical diseases, such as appendectomy. CMS may add services to the list over time.
Am I required to participate in CJR?
Only if you are a hospital in one of the 67 MSAs and you are not part of Model 1 of the Bundled Payment for Care Improvement (BPCI) or part of the risk-bearing period for Models 2 or 4. No one else is required to be part of CJR.
Can the hospital require patients to go to certain physicians, therapists or other entities?
No. CMS has made it clear that patients remain free to choose the supplier or provider. In fact, the hospital is generally not permitted to offer an incentive to patients to choose particular providers or suppliers. The hospital is free to recommend patients choose particular physicians and facilities, but the patient is free to choose.
Can a hospital require physicians to share in the gain or risk?
No. There is no legal mechanism under which the hospital can compel such sharing. The hospital may request it, but is not allowed to punish professionals or organizations who refuse.
Are there limits on the gain that can be shared?
Yes. While the hospital and physician (or other participant) can determine many of the terms of the gainsharing arrangement, the regulations place many restrictions on the relationship. First, any gainsharing must be done pursuant to a written collaborator agreement. While there are many restrictions and requirements contained in the regulations, among the more important are:
• The sharing agreement must be reached before care is furnished to any patients;
• The collaborator and hospital must agree upon quality criteria that the collaborator must satisfy in order to receive the payment;
• The total distribution payments paid to a physician practice in a year may not exceed 50% of the total Medicare physician fee schedule payments for services to CJR beneficiaries. In other words, the gainsharing for the CJR payments may not be more than half of what the physician was paid by Medicare for caring for the patients; and
• Only physicians who actually perform services to CJR beneficiaries during at least one episode of care may receive any portion of the gainsharing payment.
Can a hospital require physicians to share the risk?
No. A hospital cannot require anyone to share the downside risk. However, a hospital is free to limit gainsharing payments to physicians who have agreed to accept downside risk, if the hospital so chooses. Physicians (and other collaborators) are free to reject the offer.
Can you enter a gainsharing agreement without also sharing downside risk?
Yes.
Are there any limits on risk sharing?
Yes. First, unless the hospital owes a repayment to Medicare, the hospital may not collect any money from the collaborators. The hospital may not collect more than 50% of the amount it must repay Medicare from its collaborators. Finally, the hospital may not collect more than 25% of its repayment amount from any single collaborator.
How can hospitals and physicians reduce costs?
The regulations permit great latitude for hospitals and physicians. Any strategy that lowers the charges Medicare receives can lower the Medicare payments and trigger payment to the hospital following the reconciliation process. In addition, the hospital can also attempt to lower costs by reducing its internal expenses. While internal hospital cost reductions will not have an immediate effect on the CJR reconciliation process, these have an immediate impact on the hospital’s economic performance.
Must gainsharing payments be limited to the amount the hospital receives from Medicare after the reconciliation?
No. The gainsharing payment may be based on the amount the hospital is paid or on internal hospital savings, or a combination of the two. If the hospital relies on assistance from physicians to lower its internal costs, the hospital may share the savings with the physician as long as the payment is consistent with Stark, the Medicare anti-kickback statute and other laws.
Can a medical clinic divide any gainsharing payment evenly among its physicians?
It depends. Only physicians who provide care to patients during CJR episodes are eligible to receive any payment. If the physician is eligible to receive a payment, an even split of the money is permitted, but not required.
Must the medical clinic divide the gainsharing payment evenly?
No. The clinic can use a variety of methods to distribute the money as long as every physician who is receiving any payment performed services to CJR patients. The fact that the regulations limit payment to physicians who actually performed services to CJR patients strongly suggests that it is permissible to pay a higher share of the gainsharing to physicians who are more involved in CJR care.
How long may a gainsharing agreement last?
As many of the agreements reviewed in the advisory opinion process were for a term of 1 year, many people believe the term must be limited to 1 year. However, Advisory Opinion 12-22 permitted a 3-year agreement. The Office of Inspector General (OIG) analyzed a hospital’s plan to enter into a 3-year agreement with a cardiology group under which the hospital would share savings and compensate the physicians for co-management of the cardiology unit. The OIG concluded this agreement would not be subject to sanction under the anti-kickback statute. The opinion explicitly recognized that the 3-year term of the agreement was acceptable. On Page 14, the opinion observes that, “The management agreement is written with a 3-year term, and thus is limited in duration.” The fact that the opinion views a 3-year term as “limited” leaves no doubt that a 3-year term can be acceptable. It also leaves little doubt that a longer term is possible. The OIG does seem to believe, however, that an indefinite term is problematic.
The advisory opinions typically note that when savings are linked to a base-year performance, the base year should be updated for future savings. See Advisory Opinion No. 05-02, page 5.
The bottom line is that there is no absolute temporal limit on the gainsharing arrangement. It is clear, however, the assertion that it must always be limited to 1 year is incorrect.
If someone is not in a CJR area, can they use the CJR as a guideline for creating agreements?
Absolutely, though there is no obligation to do so. CJR is a Medicare reimbursement methodology. Some private insurers have used bundled payment methodology for years. Facilities outside the CJR areas will receive standard Medicare reimbursement, but they certainly may enter into gainsharing arrangements or make other attempts to contain costs.
If the hospital and collaborators save money, do they automatically get a payment? What are the methods/metrics CMS will use to rate the hospitals?
No. There are quality metrics as well. Failure to meet quality targets can result in the failure to get a payment (referred to as a reconciliation payment in the rule). In addition, there are quality incentive payments in the program, and they are conditioned on obtaining points that are awarded based on how the hospital compares to other hospitals in the country on the quality metrics.
What are the quality metrics?
There are three quality measures used. The first is the total hip arthroplasty/total knee arthroplasty complication measure, which as the name suggests, is based on complications occurring after the procedure. The following are considered complications under the measure:
● acute myocardial infarction;
● pneumonia, or sepsis/septicemia within 7 days of admission;
● surgical site bleeding, pulmonary embolism or death within 30 days of admission; or
● mechanical complications, periprosthetic joint infection or wound infection within 90 days of admission.
The second is the Hospital Consumer Assessment of Health Providers and Systems Survey Measure survey. This is a patient satisfaction tool that has questions on topics ranging from whether the bathrooms were clean to whether the patient’s pain was well-controlled. (A copy of the survey may be found here: www.hcahpsonline.org/files/HCAHPS%20V10.0%20Appendix%20A%20-%20HCAHPS%20Mail%20Survey%20Materials%20(English)%20March%202015.pdf.)
Patient satisfaction is weighted at 40% of the composite quality score. The third metric is voluntary submission of patient-reported outcomes and limited risk variable data, weighted at 10% of the composite score.
One important note: Collaborators have almost no ability to influence many of the factors measured in this survey. For example, one question relates to the speed with which nurses respond to requests for assistance. Physicians, physical therapists and SNFs are not able to improve nurse response time. It is possible that poor scores on factors entirely outside of your control will prevent you from receiving any additional payment or result in the need to repay funds, should your contract allow recoupment.
In addition, the quality metrics are “graded on a curve.” The quality score depends on where the hospital scores relative to other hospitals in the country. Generally, hospitals must be in the top 70% of hospitals in both of the first two metrics to avoid loss of the reconciliation payment.
Disclosure: Glaser reports no relevant financial disclosures.