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CMS Issues Rules for Comprehensive Care for Joint Replacement (CJR) Model

(January 7, 2015): On November 15, the Centers for Medicare and Medicaid Services (“CMS”) finalized regulations on a program that will implement a new payment model under Medicare Parts A and B in which acute care hospitals in certain selected geographic areas will receive retrospective bundled payments for episodes of care for lower joint replacement or reattachment, referred to as the CJR model. The program will affect approximately 800 hospitals in 67 MSAs and will cover the cost of virtually all care that is related to the treatment of Medicare patients receiving joint replacement including the initial hospitalization through 90 days after discharge.

Under the program, CMS will set a target price based on three years of historical data for the costs of such care. The target price will be based on a blend of hospital-specific and regional pricing during the first three years, and moving to 100% regional pricing during years four and five. The target price will be the historical cost data minus 3%. However, hospitals can regain 1% to 1.5% of this amount based upon their performance and improvement scores on two quality measures. Additionally, hospitals that achieve a minimum composite quality score will be eligible to receive a bonus payment if the actual cost of care is less than the target rate. Finally, beginning in year two, hospitals will be at risk to repay Medicare if the actual spending on these cases exceeds the target price.

Hospitals that are located in one of the covered MSAs but that participate in the Bundled Payment Initiative under certain models will be exempt from the CJR model. Additionally, patients who are covered under either the ESRD program, a Medicare managed care program, or a United Mine Workers of America health plan will not be covered.

Since they will, in essence, be financially responsible for the costs of care under the CJR program, hospitals will be permitted to enter into certain types of financial gainsharing arrangements with other downstream providers in the process. These include SNFs, HHAs, LTCHs, IRFs, physician practice groups, physicians, non-physician practitioners and suppliers of outpatient therapy, and may include sharing performance based reconciliation payments and certain types of internal cost savings. Additionally, hospitals may also assign a portion of downside risk to their collaborators. However, CMS will deal directly with hospitals with respect to payment and recoupment responsibilities, which, in turn, will be responsible for any payments to, or recoupments from, their collaborators.

Under the program, CMS will waive the SNF three-day hospital stay requirement beginning in the second performance year – the year in which hospitals become potentially responsible for repaying any funds to the Medicare program, but only for facilities that maintain a three star or better rating over a certain period. This places an even greater premium on facilities to provide quality services and to maintain a high star rating. Additionally, CMS will waive direct supervision requirements for “incident to” physician services, thus enabling clinical staff to make home visits under certain circumstances. Finally, the program provides for certain waivers for telehealth services to be covered by Medicare.

The CJR program provides yet another opportunity for collaboration between hospitals and downstream providers such as SNFs, HHAs, physicians, and others as part of the movement away from volume based to value based payments. This will require downstream providers to maintain a high level of quality, as well as strong case management and other care giving and administrative capabilities. And it will require both creativity and competence in contracting and negotiating skills on the part of all participants. Additionally, it will provide an expansion of Medicare payment for certain types of telehealth services.

Michael CookAnyone seeking further information and assistance in this area should contact Michael Cook of our Firm. Michael has many years of experience in assisting providers in the area of collaboration going back to the initial sub-acute movement, as well as in assisting downstream providers in quality of care issues that are crucial to maintaining their status as a valued participant.  For a free consultation, call Michael at: (202) 298-8750.

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