Medicare Comprehensive Care for Joint Replacement - Final Rule Summary

by Gloria Kupferman, Vice President DataGen Group

Overview and Resources

On November 16, 2015 the Centers for Medicare and Medicaid Services (CMS) released its final rule for the Medicare Comprehensive Care for Joint Replacement (CJR) model.  The program will be effective for discharges occurring on or after April 1, 2016, in the 67 designated Metropolitan Statistical Areas (MSAs), unless otherwise noted.

 A copy of the final rule Federal Register (FR) and other resources related to the CJR are available on the CMS website at https://innovation.cms.gov/initiatives/cjr.  

 A brief summary of the major sections of the final rule and changes from the proposed rule is provided below. 

Model Overview and Scope

• Start date: April 1, 2016 (pushed back from a proposed start of January 1, 2016).
• Duration: five program years (the first program year will be the 9-month period from April 1 to December 31, 2016).
• Hospitals in 67 MSAs are required to participate in the CJR program (eight MSAs were removed from the proposed rule list based on additional information about BPCI participation). 
• CJR is very similar in design to Model 2 of the Medicare Bundled Payments for Care Improvement (BPCI) demonstration program.
• Episodes are triggered by an index admission to the acute care setting that is discharged under Medicare Severity Diagnosis Related Group (MS-DRG) 469 or 470.
• CJR episodes include the initial inpatient stay and all Medicare Part A and Part B services for 90 days post discharge, with limited exclusions.
• All providers will be paid according to current Medicare FFS rules, with retrospective reconciliation to the episode target prices on an annual basis.
• Target prices for the two lower extremity joint replacement (LEJR) DRGs will be stratified to reflect the difference between elective procedures and those involving hip fractures (this was not part of the proposed rule and is a direct response to overwhelming comments from the industry).
• Payments for all included services will be compared to the target amounts; CMS will recoup payment amounts exceeding the target or make reconciliation payments for amounts under the target. 
• Prices/payments will include both IPPS operating and capital amounts (the proposed rule included only IPPS operating dollars).
• Hospitals will be responsible for the episodes of care; physicians, post-acute care providers, and conveners cannot participate as episode initiators under this program.
• Hospitals in the 67 MSAs cannot opt out of the program; the only hospitals that are excluded are CAHs and hospitals that are already at risk for LEJR episodes in the BPCI program.  Small and/or rural PPS hospitals are not excluded.
• Patients cannot opt out of the program unless they choose to have their procedure performed in another facility that is not located in one of the mandatory MSAs.
• The target prices will be set based on a phased-in blend of regional and hospital-specific base year data.  The baseline time period will be updated every two years; performance period targets will be updated twice a year.
• The maximum discount factor that will be taken off the top of the target price is 3% (the discount factor was proposed to be 2%).
• The episode discount factor and eligibility for reconciliation payments will be linked to quality performance, which be determined using a composite quality score methodology. (The proposed rule would have held participants to meeting threshold requirements on three separate quality metrics in order to be eligible for reconciliation payments; there was no proposal to link the discount factor to quality performance.)
• Stop-loss and stop-gain limits will be phased-in (the proposed rule did not include a gradual phase-in of these limits).
• Participating hospitals will be provided both aggregated and claim-level Medicare data on their target price calculation and regular updates on performance, hospitals must request the claim-level data in order to receive it while the aggregate data will be provided automatically.  The process for requesting the data was not included in the rule.
• The data on target prices will be provided prior to the April 1 program start (CMS had proposed that the data would be provided within 6 months after the program start and had also proposed that patients could opt out of data sharing).

Mandatory MSAs

CMS selected MSAs with low BPCI saturation and high LEJR volumes.  The selected MSAs were then weighted based on population size and efficiency (i.e. Medicare spending per episode) with higher weight given to more expensive MSAs.  The final 67 MSAs represent a random, stratified sample.  Any hospital that is geographically located in one of the 67 MSAs will be paid under the CJR program rules. 

CMS had proposed 75 MSAs, but deleted 8 after updating the list of BPCI participants to include the October 2015 additions and Model 2 BPCI physician episode initiators.  The MSAs that have been removed from the list are:

• Colorado Springs, CO
• Evansville, IN-KY
• Fort Collins, CO
• Las Vegas-Henderson-Paradise, NV
• Medford, OR
• Richmond, VA
• Rockford, IL
• Virginia Beach-Norfolk-Newport News, VA-NC

Table 1 lists the 67 final MSAs.

Concurrent Models

BPCI awardees that are located in one of the 67 selected MSAs and are currently at-risk for LEJR episodes are excluded from CJR for as long as they continue to participate in the demonstration program for LEJR.  BPCI awardees in the selected MSAs that are not at-risk for LEJR episodes will be subject to  CJR.  The BPCI demonstration is a 3-year program; BPCI participants in the 67 MSAs that had been at-risk for LEJR episodes will automatically convert to the CJR model at the end of the demonstration. Converts will be subject to the CJR program year rules; they will not begin with program year 1 rules.

There are a number of payment innovation models, demonstrations, pilots, etc. that could potentially overlap the CJR model.  In general, BPCI LEJR episodes will take precedence over CJR episodes.  For all of the other payment innovation models: MSSP, Pioneer ACO, OCM, etc., the CJR payment will trump and adjustments will be made to payments/reconciliations in those other programs.

Inclusions / Exclusions – Beneficiaries, Hospitals, Claims

Beneficiaries: Episodes will be initiated only for beneficiaries enrolled in both Medicare FFS Part A and Part B for the entire length of the episode.  Beneficiaries eligible for End Stage Renal Disease coverage, those enrolled in Medicare Advantage plans or having a primary payer other than Medicare are excluded.  Beneficiaries who die at any point during the 90-day episode are also excluded.

Hospitals:  All acute care hospitals located in the 67 selected MSAs that are paid under the Inpatient Prospective Payment System (including Sole Community Hospitals and Medicare Dependent Hospitals that may be reimbursed at a hospital-specific rate) and are not currently participating in Model 1 or at-risk for LEJR episodes under Models 2 or 4 of BPCI. Hospitals outside of the 67 MSAs cannot participate.

Claims: All Part A and B services related to the major joint replacement are included in the 90-day episode.  Claims for services that begin during the episode period and end after the 90-days will be prorated to include only the portion of payments attributable to the episode period.  Unrelated readmissions are defined by DRG and unrelated Part B services are defined by diagnosis code.

Payment

Episode target prices will be set prospectively, but CMS will pay individual providers according to Medicare FFS rules over the course of each program year.  At the end of each program year, the total FFS payments for qualifying episodes will be compared/reconciled to the established targets.  Based upon the outcome of the reconciliation, the initiating hospital will either owe a repayment or receive payment from CMS for over-/underpayments compared to the target.  All reconciliation amounts are due to/from the initiating hospital. 

Target prices:  CMS will set target prices for each LEJR DRG (469 and 470).  There will be a stratification of the target prices to reflect the differences in spending between elective LEJR procedures and those involving hip fractures.  Targets for the first two program years will reflect a three-year baseline period of CY 2012-CY 2014. The baseline period will be updated bi-annually: CYs 2014 – 2016 for program years 3 and 4 and CYs 2016 – 2018 for program year 5.  Every hospital will receive its own set of target prices for each program year that will reflect a phased-in blend of hospital-specific and regional data.  The regional component of the blend will increase over time as follows:

• Program years 1 and 2 –one-third regional and two-thirds hospital-specific;
• Program year 3 – two-thirds regional and one-third hospital-specific;
• Program years 4 and 5 – 100% regional.

Hospitals with fewer than 20 eligible episodes during any baseline period will receive 100% regional targets for the applicable years.

Baseline amounts will be trended forward to the performance year using published, payment system-specific update factors weighted by the proportion of spend in each payment system and adjusting for changes in the hospital’s wage index.  Targets will be adjusted to account for the impact of low volumes in DRG 469. 

Discount: Each hospital’s target price will be discounted by 3%.  This discount will be reduced for hospitals that achieve good or excellent performance on the composite quality measure.

Reconciliation and repayment: Actual Medicare spending for CJR episodes will be reconciled retrospectively, following the end of each program/calendar year, with a subsequent true-up one year later to allow for claims lag. Hospitals that produce Medicare program savings below the discounted target price will be eligible to receive reconciliation payments if they also achieve at least an Acceptable performance rating on the composite quality measure.  Hospitals with higher quality rankings (Good or Excellent) will be rewarded with a reduced target discount for calculating reconciliation payments (2% for Good; 1.5% for Excellent).  Hospitals that are deemed Below Acceptable on the composite quality measure will not be eligible to receive reconciliation payments, regardless of the amount of savings they may generate.

Hospitals that produce financial results that exceed the target will be responsible for repaying overages to Medicare. CMS will not recoup for overpayments in year 1, i.e. there is no downside risk in year 1.  In the second and third program years, hospitals that exceed their target will be required to pay back the excess.  For years 2 and 3 of the program, the target discount will be reduced to between 0.5% and 2% depending upon quality performance; the discount will range from 1.5% to 3% in years 4 and 5. 

Limitations on losses and gains: CJR participants will be protected from the impacts of individual episodes with extremely high costs by a high cost threshold.  Any episode payments in excess of the two standard deviations from the mean will not count toward either target or performance period calculations. 

Total losses (for all episodes in a given performance period) will be capped at 5% of the total target amount in year 2, 10% in year 3, and 20% in years 4 and 5.  Losses for Sole Community Hospitals or Medicare Dependent Hospitals are capped at 3% in year 2 and 5% in years 3 through 5.  CMS is also implementing total gains limits as follows: 5% of total target price in program years 1 and 2, 10% in year 3, and 20% in years 4 and 5. 

Quality Measures and Reporting

CMS has rejected its original proposal to require hospitals to meet 3 separate quality standards in order to be eligible for reconciliation payments.  In its place, CMS is adopting a composite quality measure that will be used to determine eligibility for reconciliation payments and to reward hospitals for quality performance.

The composite measure will combine scores on the THA/TKA complications measure (50%) and the HCAHPS patient experience survey measure (40%) as well as recognition for collection and reporting of the new THA/TKA outcomes measure (10%).  The first two measures will be converted into scalar scores based upon the hospital’s decile performance nationally.  The maximum score for THA/TKS complications is 10; the maximum score for HCAHPS is 8; and the score for reporting the THA/TKA outcomes measure is 2. Quality performance in the bottom 30% for a particular measure will receive 0 points.  There will be a small addition of 1 point for significant improvement (more than three deciles) in either the complications or HCAHPS score.  Hence, the maximum achievable quality composite score is 20.

Hospitals will be deemed Below Acceptable, Acceptable, Good, or Excellent based upon their composite score.  Those hospitals that are Below Acceptable will be ineligible to receive reconciliation payments and will be subject to the largest discount (3%) off of the target price.  Hospitals deemed to be Good or Excellent will receive smaller discounts to their target price – what CMS is calling a Quality Incentive Payment.  

Hospitals that do not meet the minimum volume threshold for a measure will be placed in the 50^th percentile for scoring purposes.

Data Sharing

CMS will provide baseline period claims data for episodes attributed to the hospital prior to the start of Year 1 (April 1, 2016).  CMS will provide performance period data on a regular basis (no less frequent than quarterly, monthly if practical). Claims data will be available in 2 formats: 1) Summary claims data; and 2) Beneficiary-level raw claims data.  Participants must their request data; it will not be provided automatically.  CMS will provide aggregated data on average episode spending by DRG for the participant hospital and its region regardless.

Financial Arrangements and Policy Waivers

Waivers:  CMS will provide certain policy waivers only for beneficiaries that are part of a CJR episode of care as follows: 

• Home Health home-bound requirement:  CMS will waive the "incident to" rule to allow a CJR beneficiary that does not satisfy requirements for home health services to receive up to 9 post-discharge home visits during an episode.
• Telehealth: CMS will waive the geographic site requirement for telehealth services as well as the requirement that the eligible telehealth individual be in one of 8 eligible types of sites when the otherwise eligible individual is receiving telehealth services in his or her home.
• SNF 3-day stay: Beginning in Year 2, CMS will waive the 3-day hospital stay required for SNF payment.  Use of this waiver is contingent upon the SNF having an overall quality rating of three stars or better on the Nursing Home Compare website.

CMS and OIG have issued a joint statement that waives the federal anti-kickback statute and the physician self-referral law with respect to certain financial arrangements.  These waivers will protect payments made under gainsharing and share risk agreements that comply with the CJR program requirements.  The joint statement also waives the federal anti-kickback statute and civil monetary penalty law with respect to certain incentives that participating providers may offer to Medicare beneficiaries during an episode.

Financial Arrangements:   Providers who furnish direct care to CJR beneficiaries and intend to share in reconciliation payments or repayments are referred to as “CJR collaborators” and must do so under a written Participation Agreement with the hospital. Collaborator arrangements must be outlined for CMS in a CJR Sharing Arrangement, similar to those required under BPCI, and must stipulate that gainsharing will not be allowed in the event of any integrity issues on the part of the collaborator.  Participating hospitals and their CJR collaborators must agree to the terms of their agreement(s) prior to providing any care under that agreement.  All documentation of the agreement terms and any payments/repayments must be retained for 10 years.

Gainsharing payments fall into two categories: reconciliation payments and internal cost savings (ICS). Gainsharing is voluntary for the hospital, but if agreed to, the hospital must provide these payments annually. Gainsharing cannot be predicated on the volume/value of referrals.  Gainsharing payments made to physicians or physician group practices are capped at 50% of total the Medicare amount approved under the Physician Fee Schedule for services furnished by the physician to CJR beneficiaries during the calendar year.

CJR collaborators can share in downside risk. Payments to hospitals under such an arrangement would be called "alignment payments" and are not allowed if the hospital is not in a repayment situation.  Alignment payments from an individual collaborator cannot exceed 25% of the amount owed to CMS.  The total amount of alignment payments that a hospital receives from all collaborators cannot exceed 50% of the amount owed to CMS.  Alignment payments may be collected at any time.

Beneficiary Incentives: Participant hospitals may provide beneficiary incentives in the form of preventive care items or an item or service that advances a clinical goal for a CJR beneficiary, such as post-surgical monitoring equipment. Hospitals must document items/services that exceed a value of $25.  Items/services involving technology may not exceed $1,000 in value.  Items exceeding a value of $50 must be retrieved from beneficiary at the end of the episode.

Beneficiary Protections

The final rule states that beneficiaries must be notified that they are part of the CJR, but they are not able to opt out; however, the beneficiary’s freedom to choose providers must be maintained. In other words, the beneficiary would be allowed to change providers.  CMS will monitor claims for issues, such as changes in case mix between the baseline and performance period to identify potential cherry-picking, and will publish its findings. CMS will audit participant hospitals' and collaborators' claims to ensure access to care.

Participant hospitals must provide patients with "a complete list of all available post-acute care options in the service area consistent with medical need, including beneficiary cost-sharing and quality information." This proposal does not prevent hospitals from recommending preferred providers in accordance with existing law.

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Table 1 – Mandatory MSAs

Gloria Kupferman is Vice President and Chief of Healthcare Data Analytics for DataGen. She can be reached at GKupferm@hanys.org.