What Can We Learn from the Third Year of CJR?

Findings from the Comprehensive Care for Joint Replacement (CJR) third annual evaluation report demonstrate that bundled payments for lower-extremity joint replacements (LEJR) reduce Medicare expenditures. Over the first three performance years, mandatory CJR hospitals:

However, the 2018 rule change allowing LEJRs in the outpatient setting may impact the model’s ability to achieve savings in later performance years. To address these declining savings, CMS issued a proposed rule in early 2020 that would incorporate outpatient hip and knee replacements into the episode of care definition and extend the model another three years. Commercial payers have also introduced policies that transition cases to the outpatient setting.

Given this expected market shift, providers should take note of the following key findings to ensure their orthopedic service line is designed for future success, regardless of their participation in the CJR model.

Higher volume yields higher savings

According to the evaluation report, “the average reconciliation payment per episode was higher for hospitals that had higher composite quality scores, had higher LEJR volume, were not for profit, and served less-complex patient populations.^[1] Lower-volume hospitals typically aren’t able to realize the efficiency gains from economies of scale or care standardization that higher-volume facilities can, and the impact of repayments to CMS can be significant—particularly as target prices decrease. Now may be the time to consider rationalizing LEJR cases at low-volume facilities and performing them at a single, high-volume location within your health system.

Internal improvement is not enough

In the third performance year, a lower proportion of CJR participant hospitals earned reconciliation payments than in previous years, since a larger share of the target price was based on the regional average episode payments.^[2] Focusing on internal savings may create gainsharing opportunities with your surgeons, but it won’t generate reconciliation payments at the end of the performance year. And with the potential inclusion of outpatient cases beginning in 2021, blended target prices will likely go down. Continuing to focus on reducing the total episode cost will be critical for generating ongoing reconciliation payments.

Collaboration is crucial to success

The relationships between the hospital and orthopedic surgeons shaped hospitals’ responses to the CJR model.^[3] Hospitals that employed their surgeons often had success collaborating on the development and implementation of care redesign initiatives, whereas hospitals that did not employ their surgeons ran into barriers (e.g., physician ownership of competing ambulatory surgery centers).

For those hospitals that do not employ their physicians, developing an effective physician alignment strategy, such as comanagement, or implementing a CJR gainsharing program will encourage collaboration on cost-saving efforts, enhance physician support for quality and process improvement initiatives, and promote patient-centered care redesign efforts.

The shift to outpatient settings is inevitable

The evaluation found that overall, “mandatory CJR hospitals were less likely than other hospitals to provide TKA in the hospital outpatient setting.^[4] However, participants that transitioned a higher of volume of cases to the outpatient setting reported numerous keys to their success, such as “establishing an outpatient default status for all TKA patients, enhancing internal documentation review and auditing processes, and modifying or creating new algorithms, intake forms, or other tools.^[5]

With the proposed inclusion of lower-cost outpatient cases in the episode of care definition, target prices will likely experience an immediate and potentially significant decrease. Those hospitals that continue to perform knee and hip replacements in the inpatient setting may struggle to generate enough savings to receive reconciliation payments from CMS. Rather than wait for this to take place, service line leaders should begin to act on these findings now in order to be prepared for the policy change.

Looking Ahead

CMS is committed to testing a mandatory bundled payment model that relies on regional spending benchmarks, regardless of where the surgery takes place. In light of this evolution, providers should consider proactive strategies that put them in a position to manage the near-team landscape, which will include shifts in volume and risk arrangements.

Published February 10, 2021