Dive Brief:

• A CMS bundled payment model for lower extremity joint replacement (LEJR) procedures reduced average Medicare payments by 3.3 percent compared to a control group, an analysis by healthcare consulting firm Lewin Group found.
• The evaluation of the Comprehensive Care for Joint Replacement (CJR) program, prepared for CMS, said the decrease in costs was primarily due to reduced use of post-acute care institutions.
• There was no change in quality of care, as measured by readmission rates, emergency department visits and mortality, for LEJR patients in the CJR group vs. the control group, according to the report.

Dive Insight:

Hip and knee replacements are the most common inpatient procedures for Medicare beneficiaries. CMS has said the average cost for surgery, hospitalization and recovery varies greatly for the procedures, from $16,500 to as much as $33,000, depending on location.

CMS implemented the CJR model on April 1, 2016 as part of its move toward use of alternative payment models to rein in Medicare spending growth by rewarding value rather than volume. The Lewin Group assessment is one of the first reports to present findings from the early stages of the CJR model and includes LEJR procedures through Dec. 31, 2016.

Participating hospitals said they chose to respond to the model by starting planning earlier, educating patients about discharge to less intensive post-acute care settings, and coordinating with post-acute providers.

The CJR model requires mandatory participation for all hospitals paid under Medicare’s inpatient prospective payment system in select markets. The program uses price targets based on historical payment data and a quality adjustment.  

Hospitals are held financially accountable for the quality and cost of care in an effort to drive collaboration with physicians and post-acute care providers from the initial hospitalization through 90 days post-discharge. CMS assesses whether hospitals met financial and quality targets at the end of each year.

Hospitals that meet targets can earn a reconciliation payment from Medicare. Beginning in year two, hospitals with LEJR spending that exceeded targets were responsible for paying a portion of the difference to Medicare up to a limit. This repayment responsibility will be fully implemented in year four.

Hospitals in the CJR program reported they tried to reduce the number of LEJR patients discharged to skilled nursing facilities and to shorten the length of stay in those facilities. Few hospitals entered into gainsharing agreements with orthopedic surgeons, because they thought the savings would be too small to influence change, the report found.