CJR Reconciliation – Maybe You CAN Take It to the Bank

In our previous article on this topic we suggested that participants in the CJR program shouldn’t expect the amounts in their initial Performance Year 1 (PY1) reconciliation to be final, and should instead expect their NPRAs to decrease in the final reconciliation that will occur in 2018. This is because claims will continue to be processed until the final reconciliation, so episode costs will increase while targets will remain constant. This means that the NPRA amounts will inevitably decrease, all other factors being equal. We wrote that article before the initial reconciliation results were available.

But when we started seeing the actual reconciliations from our clients, a different story began to emerge. In the PY1 reconciliation the actual amount of savings that the participant can receive is limited to 5% of the target amount by the “stop-gain” limit. Any additional savings achieved by the hospital beyond that limit accrues entirely to CMS without being shared by the participant. And our clients were particularly successful in this area – of 46 client hospitals having 20 or more episodes in the reconciliation, 25 achieved savings that exceeded the stop-gain limit. Another 11 achieved a surplus that wasn’t limited by the stop-gain amount, while 10 had NPRA losses that aren’t counted against the participant in PY1. These results are shown in the graph below.

Stop-Gain Amount Limits Second Reconciliation Losses

For the 25 hospitals whose NPRA amount exceeded the stop-gain amount, the net episode cost could increase without affecting the final NPRA amount, which contradicts our initial conclusions described above. For example, a hospital with an Initial Reconciliation Amount of $150,000 but a stop-gain limit of $100,000 could have its episode cost increase by $50,000 before its Reconciliation Payment Amount would be affected. This situation occurs in the 25 hospitals shown above. For the 11 hospitals with a positive NPRA that wasn’t limited by the stop-gain factor, additional claims will cause the NPRA to decrease in the second reconciliation as described in our earlier article. And for those with NPRA losses, those losses will increase but since participants aren’t at risk for losses in PY1 this increase in cost would have no effect.

Note that this effect occurs because the stop-gain limit is relatively low – in PY1 it is 5% of the target amount. In PY2 it increases to 10% of the target, meaning that hospitals with higher savings amount will keep more of that savings, but may be subject to reductions in the second reconciliation.

Episode Count Changes Affect Stop-Gain Limits

One other factor that can affect the final settlement amount of hospitals whose Initial Reconciliation Amount exceeds or is close to the stop-gain limit is a change in the number of episodes between the initial and final reconciliation of PY1. Because the stop-gain amount is the sum of the target amounts of all of the episodes, increasing the number of episodes will raise the stop-gain limit, while reducing the number of episodes will lower that limit.  This can have an effect on the final NPRA for hospitals whose Initial Reconciliation Amount is close to the limit. A change in episodes is rare, but occasionally occurs when DRGs are regrouped or are found to have been misclassified between the BPCI and CJR programs. (Thanks to John Kalamaras from DataGen for pointing out this issue.)

Examples

These effects are shown in the table below. In the “First Reconciliation” column below the episode cost is significantly below the target amount, resulting in an Initial NPRA amount of $200,000. However, this amount exceeds the stop-gain limit of 5% of the target amount ($135,000), so the final NPRA is limited to $135,000.

The “Increase in Episode Cost” column shows the effect of additional claims being processed between the initial and final reconciliation, which increases the average episode cost from $25,000 to $25,500. Because targets don’t change, the increase in episode cost decrease the Initial NPRA amount. That amount still exceeds the stop gain limit, though, so the final NPRA isn’t affected.

In the “Decrease in episodes” example, the number of episodes has decreased from 100 to 98, possibly because CMS realized that two of the episodes should have been attributed to BPCI participants. This decreases the total target amount, and hence the stop-gain limit from $135,000 to $132,300, which would reduce the hospital’s final NPRA to that amount.

CJR NPRA Sensitivity Analysis

   
 

First Reconciliation

Increase in Episode Cost

Decrease in Episodes

Episode Count

100

100

98

Average episode cost

 $25,000

 $25,500

 $25,500

Target amount per episode

 $27,000

 $27,000

 $27,000

Total episode cost

 $2,500,000

 $2,550,000

 $2,499,000

Total target amount

 $2,700,000

 $2,700,000

 $2,646,000

Initial NPRA

 $200,000

 $150,000

 $147,000

Stop-gain limit

 $135,000

 $135,000

 $132,300

Final NPRA

 $135,000

 $135,000

 $132,300

 

So the sensitivity of the final NPRA to changes in reconciliation is different between hospitals whose Initial NPRA is limited by the stop-gain amount. Hospitals having significant amounts of savings will probably be able to retain those savings, while those with lower savings amounts may see those savings decrease further in the second reconciliation. Hospitals who plan to compute gainsharing payments after the first reconciliation of PY1 should assess their sensitivity to these potential decreases as shown above.