Apoorv Dhir

Apoorv Dhir is a Research Assistant with MVC.

Patients and providers of joint replacement surgery may be uncertain about the impact that CJR will have starting April 1st, 2016. As with all reform, this anxiety is certainly understandable, but don’t worry! Here are 3 reasons why CJR may be a bundle of joy for your hospital and patients.

  1. CJR is a chance to trim down on costs.

When CJR takes effect, Medicare will set a target, standard price (the bundled payment) for each beneficiary undergoing joint replacement surgery. (Note: The amount of the payment will vary based on MS-DRG; you can read more about that here.) The underlying philosophy of bundled payments is to make the initial provider responsible for the entire episode of care. Although this may sound like an added burden, it is actually an important opportunity. Hospitals will now have total control over the cost of the patient’s entire episode of care. This change provides an opportunity to hone in on internal costs (e.g. streamline operations, cost-effective supply purchasing, etc.). Studies have shown that implantable medical devices are one of the largest inpatient expenses in joint replacements and that efforts to control supply costs can lead to downstream savings in both CJR and non-CJR cases.[i] Furthermore, bundled payments will give hospitals more robust purchasing power for post-acute services. This means that hospitals can use their ownership of the episode of care as leverage to negotiate with SNFs and other providers to serve patients with high-quality, cost-effective post-acute care. By enabling hospitals to procure cost-effective post-acute care, CJR will bring positive change to your own hospital’s operations and to the general healthcare value chain alike.

  1. Through CJR paybacks, hospitals can cash in on efficiency.

CJR is considered a retrospective payment model, which means that CMS will continue to pay providers through a fee-for-service system and then reconcile reimbursements, at the end of the year, based on the target set by the accrued bundled payments. As a result, hospitals spending less than the target bundled payments (hospitals that transcend Medicare’s expectations) will be paid the difference. So, not only will you save money for your hospital, but you’ll also be paid extra to do it. Obviously, a change of this magnitude will not be simple; it will take time, energy, and other resources to optimize care in such a way. But, the long-term benefit and opportunities for short-term payout are very important and incredibly exciting.

  1. Patients will receive higher quality, coordinated care as a result of CJR.

Of course, CJR aims to decrease spending without lowering quality of care for patients receiving joint replacement surgery. Accordingly, in order to receive credit for delivering cost-effective care, hospitals must pass on a few important quality measures. CMS will evaluate hospitals based on a risk-standardized complication rate and patient responses to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS). Over time, CJR may incorporate voluntary submission of patient reported outcome (PRO) data after determining their usefulness in assessing performance. More detailed information about the quality measures associated with CJR can be found here. By bundling payments for joint replacements, CJR will give hospitals the prerogative to improve the entire episode of care for each of its patients. From pre-op through post-acute recovery, admitting hospitals will be responsible for the cost-effectiveness and quality of care for their patients. Along with adherence to the aforementioned quality measures, hospitals and other providers will have a strong incentive to communicate and coordinate their efforts, further improving the patient’s experience. Presumably, this approach will reduce variability in costs associated with joint replacements and promote best practices that will reduce inefficiencies all while improving patients’ lives.

In 2014, Medicare spent $7 billion on initial hospitalizations alone and an additional $6 billion on post-acute care services for beneficiaries receiving joint replacement surgery.[ii] Soon, CJR will put Medicare’s largest and most common expenditure to the test of payment reform. The successes and failures of CJR will likely be indicative of the usefulness of bundled payments in other future targeted attempts at conscientious payment reform. To find out more about CJR, click here. To find out if your hospital will be a part of the CJR program starting April 1st, click here. Questions or comments?  We’d love to hear from you.  You can comment on this article, or use the form at the bottom of this page.

[i] https://www.advisory.com/research/financial-leadership-council/at-the-margins/2016/01/sps-supply-costs-and-cjr [ii] Mechanic, “Mandatory Medicare Bundled Payment – Is It Ready for Prime Time?” NEJM