The Michigan Value Collaborative

Helping Michigan hospitals achieve their best possible patient outcomes at the lowest reasonable cost

Tag: CJR

10 key questions to ask about any new bundled payment program

Jim Dupree

Jim Dupree, MD, MPH, is Co-Director of MVC and Assistant Professor of Urology at University of Michigan.

Bundled payments seem to be everywhere these days.  For episodic care, like surgeries or acute medical conditions, bundled payments attempt to improve quality and decrease costs for the duration of the care window. Bundled payments are meant to align incentives between all of the various providers who care for a patient during the episode.

Bundled payments have been used by the Centers for Medicare & Medicaid Services (CMS) for many years through their voluntary Bundled Payments for Care Improvement initiative.  Most recently, CMS enacted its first mandatory bundled payment program, the Comprehensive Care for Joint Replacement.  Bundled payments are also found in the private insurance market and even outside the insurance market all together.  Some large employers are now contracting directly with hospitals to provide bundles of surgical care for their employees.  And we can expect to see bundled payment programs flourish after passage of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, which incentivizes physicians to participate in alternative payment models like bundled payments. 

But, not all bundled payment programs are the same; each bundle will have different structure and rules.  Here are 10 key questions you should ask about each new program:

  1. What is the target condition, and how is it defined? What are the inclusion and exclusion criteria for patients to qualify for the bundle?
  2. For bundles based on hospitalizations, are pre-admission services included in the bundle?
  3. What is the time window for the bundle? Most bundles attempt to capture care for 30 to 90 days after discharge.
  4. How is patient choice accommodated in the bundle?
  5. What are the bundle’s quality measures? How do those quality measures help ensure that important, needed care is not withheld from patients?
  6. Are all services and types of care within the time window attributed to the bundle? If not, how is it determined which services are and are not attributed to the bundle?
  7. What type of risk adjustment is used in the calculation of episode costs?
  8. Does the target bundled price incorporate regional variation, teaching status, or other structural characteristics of your hospital?
  9. How much variation do you think exists for that services?
  10. What are your current episode costs for that condition, and how do you compare to your peers?

All of this data is available for MVC member hospitals to help them understand their local care episodes. For additional reading, Health Affairs recently released an excellent summary about designing bundled payment initiatives.

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. 

3 Reasons Why the Comprehensive Care for Joint Replacement (CJR) Model May Be a Bundle of Joy

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] [ii] Mechanic, “Mandatory Medicare Bundled Payment – Is It Ready for Prime Time?” NEJM