Approximately 800 hospitals in 67 Metropolitan Statistical Areas will begin mandatory participation in the Comprehensive Care for Joint Replacement (CJR) Model on April 1, 2016. The CJR bundled payment program applies to MS-DRG 469 (major joint replacement or reattachment of lower extremity with major complications or comorbidities) and MS-DRG 470 (major joint replacement or reattachment of lower extremity without major complications or comorbidities) and covers all Medicare Part A and Part B services in episodes starting with the hospitalization through 90 days post-discharge, with few exceptions.

The CJR Model is part of CMS’ effort to introduce alternative purchasing models and have 90% of Medicare fee-for-service be in value-based purchasing categories by 2018. The CJR Model is the first program requiring certain hospitals to participate in a value-based program model that includes taking downside risk with respect to the care provided.

Under the CJR Model, a participant hospital serves as the hub and must participate over a five-year term. An episode target price is established for each joint replacement, based on Medicare Part A and Part B covered services, including the hospitalization, physician services, post-acute care through 90 days post discharge with LTACHs, SNFs, home health agencies, hospices, and inpatient rehabilitation facilities, DME, Part B drugs, clinical lab, outpatient therapy and more. Each provider bills Medicare on a fee-for-service basis, with the aggregate Part A and Part B payments compared to the episode target price. As a general matter, averaged over all patients receiving a covered joint replacement at the participant hospital in a year, if all payments come in below the target, after factoring in the government’s discount, the hospital and its contracted “Collaborators” share the upside (gainsharing payments). After the initial year in which there is no downside payment, if all aggregate fee-for-service payments exceed the target, the hospital and its contracted Collaborators are required to repay the excess (alignment payments). There are caps to the gainsharing payment and alignment payment that vary over time, and quality performance affects the payment of savings and repayment obligations.

Key Takeaways for Hospitals

While hospitals are the ones with responsibility, they may share up to 50% of the upside and downside by entering into Collaboration Agreements with other providers (called Collaborators) involved in a covered episode of care. There are specific requirements that must be included in each Collaboration Agreement, including engagement in care redesign strategies and a commitment to quality.

The CJR Model also allows for Medicare programmatic waivers. The CJR Model includes waivers of:

1. the SNF three-day requirement for a SNF stay in a three-star rated SNF following a hospitalization,

2. the “incident to” direct supervision requirement for post-charge home visits, and

3. the geographic site requirement for any service on the Medicare-approved telehealth list.

CMS and OIG have also agreed that certain fraud and abuse laws will be waived under certain specified conditions, allowing:

1. sharing of gainsharing and alignment payments with Collaborators pursuant to Collaboration Agreements,

2. Physician Group Practitioners sharing gainsharing payments with its physician collaboration agents, and

3. the provision of certain in-kind beneficiary engagement incentives provided to beneficiaries, which incentives meet specified requirements.

Hospitals and potential Collaborators will need to understand the CJR Model’s design, the detailed requirements for Collaboration Agreements, and the new compliance issues that the model creates. They also will want to develop strategies for successful participation.