How CJR will encourage and incentivize regional centers of excellence

Comprehensive Care for Joint Replacement (CJR) is a new CMS program announced in July, 2015 that creates the first mandatory bundled payment program. During the five-year term of the program, which commences on April 1, 2016, CJR puts hospitals at risk for the total cost of an episode of care for Total Joint replacement (DRGs 469 and 470), which includes the 90-day post-acute period. The program covers 67 Metropolitan Statistical Areas (MSAs), representing approximately 25% of all Total Joint replacements paid for by Medicare each year.

Although CJR is a new program, it is similar to Model 2 of the CMS Bundled Payment for Care Improvement Program (BPCI) and many of the goals and outcomes of these programs are generally understood. Those who focus on such matters (and you appear to be one of them) broadly know that the intended goals and outcomes of these programs include higher quality care, lower cost care, increased patient satisfaction, and increased transparency through published quality data. But there are other intended outcomes of such programs that are not as widely understood. CMS recognizes that providers that perform the same procedure frequently become more efficient and have higher quality outcomes than providers that rarely perform a procedure. In a number of ways, CJR will penalize low quality, high cost providers, which may cause them to stop performing Total Joint procedures, driving volume to the high quality, low cost providers (who often already have a high market share) who could receive bonuses under the CJR program due to superior cost and quality performance.

So how does CJR encourage and incentivize this? In a number of ways. CJR differs from BPCI in some important respects that go the heart of this discussion. In BPCI, the risk-bearing party has a Target Price (which is compared to actual CMS claims during the program to determine whether there has been a profit or loss on the episode of care) based on a fixed set of three years of claims data. This claims data is trended forward and subjected to certain other adjustments, but the same three-year set of claims data remains the basis of the Target Price for the entire three year term of the program.

There were unintended consequences to this approach. If the providers were inefficient during this three-year period of time, the result is a high Target Price, typically with a big opportunity to reduce costs going forward by reducing post-acute costs by discharging appropriate patients home or with home health rather than to SNFs or inpatient rehab. In fact, the provider may have already changed this discharge pattern since the three-year period the Target Price was based on and has an opportunity to earn large savings just by maintaining current practices. On the other hand, if the providers were forward-thinking and progressive, they likely already had changed their discharge patterns before or during the three-year period that the Target Price is based on, resulting in a low Target Price with little or no opportunity to reduce costs going forward. Since BPCI is a voluntary program that requires the risk-bearing party to take both upside and downside risk, those who participated tended to be those who had High Target prices and a good opportunity. So one unintended consequence of BPCI was to encourage participation by providers who had been inefficient in the past and discourage providers that had been efficient in the past.

CJR changes this in several important ways:

1) CJR is mandatory in the 67 MSAs it covers, so hospitals in those areas do not have a choice as to whether to participate or not.

2 The CJR Target Price is set using a method that is different from that used in BPCI. In CJR the Target Price is also set by reference to three years of claims data, but this three year period changes as the program progresses. Under CJR, this three year period is moved up by one year every other year, so the Target Price is based on newer claims data as the program progresses. This is important because it is reasonable to assume that episode claim costs will be reduced over time as participants in BPCI and CJR reduce their post-acute episode costs in reaction to the incentives of these programs. This is expected to lead to lower Target Prices (and less opportunity) as the program progresses and Target Prices are based on more and more recent data.

3) Another important difference is that under BPCI, the Target Price is based not only on the unchanging same three years of claims data but also is based only on the claims data from the participating hospital, SNF or physicians group. In the first two years of the CJR program, two-thirds of the Target Price is initially calculated by examining the hospital's data from the three-year time period and one-third is based on the data for the three year time period from the region in which the hospital is located. The country is divided into 9 regions, so these regions are very large and encompass both urban and rural areas. As the CJR program progresses, the Target Price calculation shifts, so that by the third year of the program the Target Price is based on two-thirds regional data and one-third on the hospital's data, and in the fourth and fifth years of the program the Target Prices are based solely on regional costs. This means that efficient hospitals whose episode costs are below the regional costs will be rewarded with bonuses representing the "gains" from there episodes while hospitals whose episode costs are above the regional costs will have to pay penalties representing the "losses" from their episodes.

So CJR does not permit, as BPCI does, a "static" opportunity to continue based solely on the claims data for a fixed period of time and from a single set of providers where participation is voluntary and only those with good opportunities (which likely means they were inefficient in the past) are incented to participate. In CJR all hospitals must participate and CMS continually "raises the bar" required to achieve savings by basing the Target Prices on more and more recent years and by shifting to calculating the Target Prices based on regional costs. The past performance of the specific hospital becomes irrelevant over time and the ability of the hospital to stay ahead of ever-updated (and likely reducing) regional costs become the key to success. This approach rewards hospitals that are and remain efficient at controlling their episode costs.

As the CJR program progresses, hospitals that cannot bring their episode costs below those in their region will be required to pay CMS the loss from each episode performed there. While there is no downside risk in the first year of the CJR program and limited risk in the second year, the downside risk ramps up in the third and following years and hospitals that cannot improve their total joint programs enough to effectively compete with their regional costs will likely stop performing elective total joints rather than continue to pay the penalties. This volume will be taken up by the hospitals whose episode costs are below the regionally-based Target Price, who will also realize gains in their episodes that they can share to attract and retain the top performing physicians in the market. Thus, through a combination of bonuses for better performance (creating more ability to gain share) and reduced Target Prices leading to fewer competing hospitals, top performing hospitals will earn more volume, demonstrate better outcomes and attract the top performing physicians, becoming regional Centers of Excellence with whom other hospitals will have difficulty competing.

While today CJR is not yet in every market of the country, it is widely expected to be expanded and most believe CJR, or a program much like it, will become a mandatory bundled payment program for total joint replacement episodes of care nationwide. In preparation for this, hospitals should make sure they are well prepared to execute on the three core competencies required for success in bundled payment programs: Understanding your data and claims costs; Redesigning your care; and Aligning with your physicians. Stryker Performance Solutions has a well-established program that drive risk-based success by addressing these critical needs.

About the authors:

Paul Jawin, JD
Vice President, Alignment, Strategy and Reform, Stryker Performance Solutions
Paul brings more than 30 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.

Paul is a regular speaker at industry conferences and events, including the American Academy of Orthopaedic Surgeons Hospital-Physician Alignment Symposium. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.

Lisa Fraser, MHA
Program Manager, Stryker Performance Solutions
In her role as a Program Manager, Lisa consults with clients on innovative payment reform strategies, such as co-management arrangements, bundled payment initiatives and accountable care organizations. Her extensive experience in organizational strategic planning, project management and program implementation allows her to help customers improve service line performance and turn healthcare reform into opportunity.

Previously, Lisa was a Strategic Management Consultant on the Organization and Strategy team at Booz Allen Hamilton in Washington, D.C. She graduated from Duke University with a Bachelor of Arts degree in Public Policy and earned a Master of Health Administration degree from the University of North Carolina at Chapel Hill. 

1.800.616.1406  spsinfo@stryker.com

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.​

Comprehensive Care for Joint Replacement (CJR) is a new CMS program announced in July, 2015 that creates the first mandatory bundled payment program. During the five-year term of the program, which commences on April 1, 2016, CJR puts hospitals at risk for the total cost of an episode of care for Total Joint replacement (DRGs 469 and 470), which includes the 90-day post-acute period.  The program covers 67 Metropolitan Statistical Areas (MSAs), representing approximately 25% of all Total Joint replacements paid for by Medicare each year.

 

Although CJR is a new program, it is similar to Model 2 of the CMS Bundled Payment for Care Improvement Program (BPCI) and many of the goals and outcomes of these programs are generally understood.    Those who focus on such matters (and you appear to be one of them) broadly know that the intended goals and outcomes of these programs include higher quality care, lower cost care, increased patient satisfaction, and increased transparency through published quality data.  But there are other intended outcomes of such programs that are not as widely understood.  CMS recognizes that providers that perform the same procedure frequently become more efficient and have higher quality outcomes than providers that rarely perform a procedure.  In a number of ways, CJR will penalize low quality, high cost providers, which may cause them to stop performing Total Joint procedures, driving volume to the high quality, low cost providers (who often already have a high market share) who could receive bonuses under the CJR program due to superior cost and quality performance.

 

So how does CJR encourage and incentivize this?  In a number of ways.  CJR differs from BPCI in some important respects that go the heart of this discussion.  In BPCI, the risk-bearing party has a Target Price (which is compared to actual CMS claims during the program to determine whether there has been a profit or loss on the episode of care) based on a fixed set of three years of claims data.  This claims data is trended forward and subjected to certain other adjustments, but the same three-year set of claims data remains the basis of the Target Price for the entire three year term of the program. 

 

There were unintended consequences to this approach.  If the providers were inefficient during this three-year period of time, the result is a high Target Price, typically with a big opportunity to reduce costs going forward by reducing post-acute costs by discharging appropriate patients home or with home health rather than to SNFs or inpatient rehab.  In fact, the provider may have already changed this discharge pattern since the three-year period the Target Price was based on and has an opportunity to earn large savings just by maintaining current practices.  On the other hand, if the providers were forward-thinking and progressive, they likely already had changed their discharge patterns before or during the three-year period that the Target Price is based on, resulting in a low Target Price with little or no opportunity to reduce costs going forward.  Since BPCI is a voluntary program that requires the risk-bearing party to take both upside and downside risk, those who participated tended to be those who had High Target prices and a good opportunity.  So one unintended consequence of BPCI was to encourage participation by providers who had been inefficient in the past and discourage providers that had been efficient in the past.

 

CJR changes this in several important ways:

 

1) CJR is mandatory in the 67 MSAs it covers, so hospitals in those areas do not have a choice as to whether to participate or not. 

 

2 The CJR Target Price is set using a method that is different from that used in BPCI.  In CJR the Target Price is also set by reference to three years of claims data, but this three year period changes as the program progresses.  Under CJR, this three year period is moved up by one year every other year, so the Target Price is based on newer claims data as the program progresses.  This is important because it is reasonable to assume that episode claim costs will be reduced over time as participants in BPCI and CJR reduce their post-acute episode costs in reaction to the incentives of these programs.  This is expected to lead to lower Target Prices (and less opportunity) as the program progresses and Target Prices are based on more and more recent data.   

 

3) Another important difference is that under BPCI, the Target Price is based not only on the unchanging same three years of claims data but also is based only on the claims data from the participating hospital, SNF or physicians group.  In the first two years of the CJR program, two-thirds of the Target Price is initially calculated by examining the hospital’s data from the three-year time period and one-third is based on the data for the three year time period from the region in which the hospital is located.  The country is divided into 9 regions, so these regions are very large and encompass both urban and rural areas.  As the CJR program progresses, the Target Price calculation shifts, so that by the third year of the program the Target Price is based on two-thirds regional data and one-third on the hospital’s data, and in the fourth and fifth years of the program the Target Prices are based solely on regional costs.  This means that efficient hospitals whose episode costs are below the regional costs will be rewarded with bonuses representing the “gains” from there episodes while hospitals whose episode costs are above the regional costs will have to pay penalties representing the “losses” from their episodes. 

 

So CJR does not permit, as BPCI does, a “static” opportunity to continue based solely on the claims data for a fixed period of time and from a single set of providers where participation is voluntary and only those with good opportunities (which likely means they were inefficient in the past) are incented to participate.  In CJR all hospitals must participate and CMS continually “raises the bar” required to achieve savings by basing the Target Prices on more and more recent years and by shifting to calculating the Target Prices based on regional costs.  The past performance of the specific hospital becomes irrelevant over time and the ability of the hospital to stay ahead of ever-updated (and likely reducing) regional costs become the key to success.  This approach rewards hospitals that are and remain efficient at controlling their episode costs.

 

As the CJR program progresses, hospitals that cannot bring their episode costs below those in their region will be required to pay CMS the loss from each episode performed there.  While there is no downside risk in the first year of the CJR program and limited risk in the second year, the downside risk ramps up in the third and following years and hospitals that cannot improve their total joint programs enough to effectively compete with their regional costs will likely stop performing elective total joints rather than continue to pay the penalties.  This volume will be taken up by the hospitals whose episode costs are below the regionally-based Target Price, who will also realize gains in their episodes that they can share to attract and retain the top performing physicians in the market.  Thus, through a combination of bonuses for better performance (creating more ability to gain share) and reduced Target Prices leading to fewer competing hospitals, top performing hospitals will earn more volume, demonstrate better outcomes and attract the top performing physicians, becoming regional Centers of Excellence with whom other hospitals will have difficulty competing. 

 

While today CJR is not yet in every market of the country, it is widely expected to be expanded and most believe CJR, or a program much like it, will become a mandatory bundled payment program for total joint replacement episodes of care nationwide.  In preparation for this, hospitals should make sure they are well prepared to execute on the three core competencies required for success in bundled payment programs: Understanding your data and claims costs; Redesigning your care; and Aligning with your physicians.  Stryker Performance Solutions has a well-established program that drive risk-based success by addressing these critical needs.  

 

About the authors:

Paul Jawin, JD

Vice President, Alignment, Strategy and Reform, , Stryker Performance Solutions

Paul brings more than 30 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.

 

Paul is a regular speaker at industry conferences and events, including the American Academy of Orthopaedic Surgeons Hospital-Physician Alignment Symposium. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.

 

Lisa Fraser, MHA

Program Manager, Stryker Performance Solutions

In her role as a Program Manager, Lisa consults with clients on innovative payment reform strategies, such as co-management arrangements, bundled payment initiatives and accountable care organizations. Her extensive experience in organizational strategic planning, project management and program implementation allows her to help customers improve service line performance and turn healthcare reform into opportunity.

 

Previously, Lisa was a Strategic Management Consultant on the Organization and Strategy team at Booz Allen Hamilton in Washington, D.C. She graduated from Duke University with a Bachelor of Arts degree in Public Policy and earned a Master of Health Administration degree from the University of North Carolina at Chapel Hill.

© Copyright ASC COMMUNICATIONS 2018. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.

 

Top 40 Articles from the Past 6 Months