CMS finalized the proposed bundle payment system for its hip and knee replacement surgery known as the CCJR model on November 16. Even though the final rule makes some changes to the model, which was proposed at the start, by reducing the number of participating metropolitan statistical regions from 75 to 67, over 800 hospitals will be required to participate. The final rule also sets back the start date from Jan 2016 to April 2016, so that hospitals have more time to set up for a demo.
Over the duration of the model, the CCJR is expected to bring in around $343 million in savings to Medicare. Hospitals in the program will be given a single lump payment for the 90-day period of care for hip or knee replacements. The quality and cost of the procedure as well as follow up care will be borne by the hospital.
Hip and knee replacements are the most common inpatient surgery for 55 million beneficiaries at this point. In 2014, close to 400,000 beneficiaries got a hip or knee replaced at a cost falling within the $16,500-$33,000 range. The payment here is meant to improve care coordination from surgery through recovery and rehabilitation. During this period, the bundle will cover Medicare A and Medicare B services as a component of “episode of care” costs.
This model is being called a “Super DRG” in some quarters. If the hospital has a strong quality and spending performance following a replacement surgery, additional pay will be provided as a financial reward to the hospital.
If the hospital’s performance in quality or spending is judged poor, they will be required to repay Medicare for part of the facility received during the episode of care. The payment structure incentivizes hospitals to collaborate with providers in ensuring provision of coordinated care to patients.
The 2014 Medicare expenditure on the hospitalization component of hip and knee replacements ran up to $7 billion. Another added factor was spending for home care and post acute care providers for these procedures, which made up a large share of Medicare expense for joint replacement surgeries and procedures.
CMS thinks there is potential for significant cost reduction and quality improvement, and hence the bundle payment system. This is in keeping with one of the agency’s stated goals over the next few years – a move from procedure-specific claims-based payments to value-based payments. The aim is to have 30 percent of all FFS payments tied to value-based payment models by 2016, and 50 percent by 2018.