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Navigate Effectively through Medicare’s CJR Program (Part 1)

November 10, 2016
by Debra Mathias, consultant, Freed Associates
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Experience is no substitute for expediency.

Consider the example of Edward John Smith, captain of the maiden (and final) voyage of the RMS Titanic in 1912. Despite being one of the world’s most experienced sea captains, Smith failed to change the Titanic’s course or reduce speed, even though he knew his ship was headed straight into a massive iceberg zone. We all know how that story ends.

Similarly, despite a massive sea change in health care from fee-for-service payments to bundled outcome-based reimbursement, experienced health care executives appear slow to change course or adapt to this transformation, potentially impairing the future viability of their organizations. While many health care systems are addressing (or making plans to address) the changes from fee-for-service to bundled payments, there are still gaping holes.

Debra Mathias

For example, up to 60 percent of hospitals participating in Medicare’s mandatory new Comprehensive Care for Joint Replacement (CJR) reimbursement model, which began on April 1, 2016, could face financial penalties in year two of the CJR program when downside risk begins, based on an analysis from this past spring from Avalere, a health care advisory firm. It doesn’t need to be this way.

In this two-part series, we detail the steps that hospitals should take to successfully navigate through the new CJR model. In part one, we address background information on the CJR model and a list of internal steps for hospitals to take. In part two, we explore the role of post-acute care (PAC) networks in the CJR model, and the value of reviewing CJR data and metrics.

Act before Year-End

Sophisticated, high-performing providers that are managing their CJR patients across the care continuum will reap the benefits of the new CJR program, which rewards hospitals that meet its quality and cost goals. Conversely, hospitals that wait until 2017 to begin to address CJR’s quality and patient experience requirements will likely pay a steep price – literally and figuratively – in terms of reduced Medicare reimbursements (discounts begin in 2018-see Freed Associates CJR Discount Table, below) and potentially negative reputational costs. Hospital CJR performance, which is specific to fee-for-service Medicare, is publicly available.

With a wave of additional bundled payment models expected in the future, the CJR model is only the tip of the proverbial iceberg, as the Centers for Medicare and Medicaid Services (CMS) continue to push the industry toward value-based payments. On July 25, 2016, the the Department of Health and Human Services (HHS) announced that the next bundle will include cardiac patients including those who have had surgery, heart failure, etc. Acute care providers should be using the relatively simple CJR diagnostic group to develop care coordination and post-acute care strategies to prepare for the cardiac bundled payment model and other mandatory bundled payment models coming from HHS that are much more complex and have historically higher post-acute care utilization and readmission rates.

Based on initial CMS reports of value-based payment cost savings, the rationale for this shift could not be clearer. The Obama administration announced in March 2016 that it had reached its initial goal to tie a larger percentage of Medicare payments to alternative payment models (APMs). Early last year, HHS said it would seek to make 30 percent of Medicare payments for hospitals and physicians through APMs such as accountable care organizations and bundled payments by the end of 2016, and make 50 percent of Medicare payments through APMs by the end of 2018.

Hospitals seeking to comply with the bundled payment changes – especially those with a high volume of fee-for-service Medicare patients, as well as those that haven’t been participating in one of the Bundled Payments for Care Improvement (BPCI) programs – should be evaluating, testing (or piloting) and implementing their CJR response efforts by the end of 2016 to comply with the new CJR mandate.

To help determine where your hospital system stands in terms of CJR preparedness, below is a comparative readiness checklist.

Initial CJR Action Steps

By now, every hospital participating in CJR should have completed at least the following four initial action steps:

Use the CJR calculator. Every acute facility under the CJR mandate should have obtained the CMS CJR data file and calculated its actual performance against the target price. Evaluating the episode costs from both an acute and post-acute perspective will allow the provider to focus on quality and/or cost issues as the CJR program is fully implemented.

Evaluate care coordination expertise. Providers should evaluate their care coordination expertise and practices (e.g., staff, protocols, pathways, technology) to ensure that high-risk patients are identified and managed in both the acute and post-acute care (PAC) environments. High-risk CJR patients can be identified using a functional assessment tool, such as the Activity Measure for Post-Acute Care (AM-PAC), prior to their admission, during their stay, and in the post-acute care setting.


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