CMS to penalize underperforming hospitals when it comes to hip and knee replacement

The Centers for Medicare & Medicaid Services is revamping its payment model for hip and knee replacement by tying payments (or penalties) to patient recovery. Its latest foray into bundled payments is part of a broader attempt to tie 90% of payments to incentive programs by 2018, as the agency shifts away from the fee-for-service model.

CMS points out that that the rate of procedural complications from 400,000-plus federally reimbursed procedures per year, is three times higher at some hospitals than others. Common problems include infections at the site of surgery and implant failure. Also, the average Medicare expenditure as a result of surgery and the subsequent recovery period ranges from $16,500 to $33,000 across geographic areas, at a cost of more than $7 billion for the hospitalizations alone.

The Comprehensive Care for Joint Replacement (CJR) model, to be implemented beginning April 1, 2016, puts hospitals located in 67 Metropolitan Statistical Areas in charge of ensuring cost-effective surgery and patient recovery for 90 days following discharge (also referred to as the "full episode of care").

"Depending on the participant hospital's quality and aggregate spending performance during the CJR episode, the hospital may receive an additional payment from Medicare, or--starting in year two of the model--may need to repay Medicare for a portion of the episode spending if spending exceeds targets established for the model. As a result, hospitals will need to work with physicians and post-acute care providers, such as home health agencies and skilled nursing facilities, to ensure patients get the coordinated care they need. The CJR model creates incentives that encourage collaboration among hospitals, physicians and other clinicians, and post-acute providers, as we believe this collaboration will be essential to success. Engagement with patients and care planning will also be critical to success," wrote CMS chief medical officer Dr. Patrick Conway in a blog post published by Health Affairs.

"By incentivizing the hospital to think through a broad range of care issues, we believe that hospitals will take preventive measures to ensure that patients receive the care they need and reduce costly services, such as hospital re-admissions and lengthy post-acute care stays, when clinically appropriate," he continued.

Publication of the final rule took into account almost 400 comments on the draft version, which was published in July. CMS delayed implementation by three months from the proposed deadline of Jan. 1.

The potential bonus reimbursement and repayments for underperformers are being phased in gradually. There will be no repayments in year one of the program, repayments will be capped at 5% of reimbursement in year two, 10% in year three and 20% in years four and 5. The bonus reimbursement for high performers will follow a similar path, CMS said in a release.

In addition, CMS said it is finalizing "an alternative, composite quality score methodology."

Expect additional payment methodologies that provide hospitals with financial incentives to generate good outcome and also encourage coordination with downstream providers by tying payments to patient recovery. In the blog post, Conway said the CJR model "will provide CMS with valuable information on the effects of this payment model across a range of hospitals with varying levels of experience with bundled payment, which can be used in determining the viability of expansion of the model in the future."

The CJR builds on the smaller, voluntary Bundled Payments for Care Improvement initiative for lower extremity joint replacement episode, he said.

"Today, we are embarking on one of the most important steps we will take to improve the quality and value of care for hundreds of thousands of Americans who have hip and knee replacements through Medicare every year," said Health and Human Services Secretary Sylvia Burwell in a statement. "By focusing on episodes of care, rather than a piecemeal system, we provide hospitals and physicians an incentive to work together to deliver the best care possible to patients."

- read the CMS release
- here's the final rule in the Federal Register
- here's the blog post in Health Affairs

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