CMS Drops Half of the MSAs from CJR

Well, how do we explain THIS one? After less than a year of what appears to be successful participation in the CJR program by about 700 hospitals, CMS suddenly announced that it is halving the number of mandatory metropolitan statistical areas (MSAs), and allowing hospitals in the remaining MSAs to discontinue participation in the CJR program. But why make this change? Many of us are betting that the real reason goes back to then–Representative Tom Price’s letter to CMS opposing implementation of any mandatory bundled payment programs. So our guess is that now–Secretary Price has ordered these programs to be discontinued (in the case of the Episode Payment Model), or significantly reduced as in CJR, and the CMS staff had to figure out how to do it. And after reading the proposed rule we have to admire the creativity of the CMS team charged with coming up with the tortured logic to reverse previous decisions and implement this new ruling.

Under the proposed changes, CJR participants in the 33 MSAs that would be designated as "voluntary" would have until January 31, 2018 to submit a letter indicating their desire to continue in the CJR program. CJR would terminate for hospitals who did not submit this letter on February 1, 2018, and this termination would eliminate any episodes that had ended after December 31, 2017. At that point, the remaining CJR-participating hospitals would be subject to targets that are composed of one-third the hospital benchmark rate and two-thirds the regional rates, transitioning to 100% regional rates for the following two years. It shouldn't be a difficult decision for these hospitals to assess whether their costs exceed those of the region, and to elect to participate if their costs are below the regional targets. In this case, hospitals would be virtually assured of creating a surplus in the remaining three years of the CJR program.

This fact is not unnoticed by CMS in the proposed rule; in fact CMS stipulates that it believes that only hospitals creating a surplus, or no greater than 3% loss, would continue to participate in the program.  (An observer may wonder what having only winners participate in a demonstration project actually demonstrates, but such concerns are apparently less significant than other considerations.) So between now and next January hospitals in the voluntary MSAs will be scrambling to analyze how their current episode costs compared to the regional targets, and to estimate the savings or losses that would occur over the next three performance years. Higher-cost hospitals that were probably not enamored by the CJR program to begin with will undoubtedly drop out; already-efficient hospitals whose costs are below the region will continue to participate, and hospitals whose costs are close to the regional average will have to decide whether to ramp up their care coordination efforts or simply give up.

Fortunately CMS does provide enough data in the CJR claims files to allow calculation of episode financial results using the regional average as a target, although the regional targets are likely to change before the performance periods in which they are fully implemented. While this analysis will not provide a definitive projection of future financial results, it may help clarify the decision for some hospitals whose costs are significantly above or below the regional averages.

Another change noted in this notice, although it resulted from the previous EPM rule, was that the final reconciliation for performance year 1 will utilize different quality calculations from those used in the initial reconciliation, and therefore the final reconciliation may differ significantly from the initial reconciliation. We've previously written here about changes that may occur between the two reconciliations of the same performance period due to additional claims being paid in the interim (although that issue may be mitigated by these factors), and that financial plans such as gainsharing payments should not be based on the initial reconciliation. This additional factor supports waiting until the final reconciliation for any final financial decisions.

In the ever-changing world of healthcare payment there are rarely surprises, but we have to admit to have been caught totally off guard by this change to CJR. Because it's already in progress and apparently showing positive results we believed that it would be off-limits to changes by the new administration. Obviously, we were wrong.