CMS Issues Final Rule Extending and Revising Comprehensive Care Joint Replacement Episode-Based Payment Model

The Centers of Medicare and Medicaid Services (CMS) issued a Final Rule (the Rule) on April 29, 2021 extending and making various revisions to the Comprehensive Care for Joint Replacement Model (the CJR Model). The CJR Model is an episode-based alternative payment program that involves hip and knee replacement surgeries for Medicare fee-for-service beneficiaries. The CJR Model began on April 1, 2016 and was scheduled to terminate on September 30, 2021. The extension will continue the CJR Model for hospitals required to participate through December 31, 2024.

As originally designed, the CJR Model was mandatory for hospitals in 67 designated Metropolitan Statistical Areas (MSAs). In 2018, the CJR Model was amended to only be mandatory for hospitals in 34 MSAs who were not rural or low-volume hospitals. Hospitals in the other 33 MSAs, as well as rural and low-volume hospitals in the 34 mandatory MSAs, could participate voluntarily. Currently there are 472 hospitals participating.

The CJR Model tests whether participating hospitals can control costs of the hip and knee replacements. The model sets an episode target price for each participating hospital for each covered hip and knee replacement procedure (MS-DRGs 469 and 470) episode. Each hospital continues to bill the Medicare program as it has. The episode covers all Medicare Part A and B costs (with limited exceptions) commencing with the hospitalization for the procedure and for 90 days post-discharge. The total Medicare Part A and B costs during the hospitalization and 90-days’ post-discharge are then determined and measured against the target price. Based on the reconciliation for all covered procedures by a participating hospital in a Performance Year as adjusted based on quality indicators, the participant hospital is either paid additional sums if total costs are below the target price or will owe money to CMS if costs exceed the target price.

In the most recently concluded Performance Year, 52% of participating hospitals received performance payments totaling $90.5 million in performance payments. For mandatory CJR hospitals during the first three performance years, Medicare savings were $61.6 million. It has also been reported that quality of care measures improved or were maintained under the CJR Model. Unplanned readmissions declined 3.1% and the complication rate declined by 7.4%.

The extension of the program reflects CMS and its Innovation Center’s determination to continue to test the value of this episode-payment model. At the same time, CMS in the Rule made a number of modifications to the CJR Model, reflecting updates it deemed appropriate. The updates largely resulted from Medicare policy changes since inception of the CJR Model.

Among the more significant revisions to the Rule are:

• Three Year Extension: As currently operating, the CJR Model was to terminate with the conclusion of the 5^th Performance Year on September 30, 2021. The Rule extends the CJR Model for three (3) additional Performance Years. Performance Year 6 will be for 15 months, from October 1, 2021 through December 31, 2022. Performance Years 7 and 8 will run through December 31, 2023 and December 31, 2024, respectively. So, the Rule extends the CJR Model for three plus years, through December 31, 2024.
  
  
• Change in the Definition of Episodes: When initiated, the CJR Model only included procedures which were listed on the Inpatient Patient Only list (IPOL), that is, procedures that the Medicare program would only reimburse if performed on an inpatient basis. So, application of the CJR Model only applied to procedures performed on an inpatient basis. Since the start of the CJR Model in April of 2016, Total Knee Arthroplasties (TKA) and certain Total Hip Arthroplasties (THA) have been removed from the IPOL, and now will also be reimbursed by Medicare when performed on an outpatient basis. To reflect this policy change and to avoid an incentive under the CJR Model to continue to have TKAs and certain THAs performed on an inpatient basis when they may properly be performed on an outpatient basis, and to be consistent where possible on site neutrality, the Rule revises the episode definition to include outpatient TKAs and THAs in the CJR Model, and will do so with a blended inpatient/outpatient target price.
  
  
• Modification to Target Price Calculation: The CJR Model has set target prices based on three years of historical episode spending, based on both regional and hospital specific data. The historical spending has been updated by trending forward the other two years of historical data and applying a national trend factor. The CJR Model has also included a national anchor factor applied to account for participant hospitals with a lack of volume, used hospital specific data, and employed a high episode spending cap to account for the effect of catastrophic episode spending amounts that were not reasonably expected.

  In the Rule, among other modifications, CMS (i) will utilize one year of regional only baseline data as opposed to three years of both regional and hospital specific data because of the belief that such an approach will better capture spending trends related to site of service procedures and other market-based changes; (ii) will revise anchor factors and weights as a result of PPS changes and instead will rely upon market trend factors; and (iii) will modify the method to derive high episode spending caps.
  
  

• Timing and Frequency of Reconciliation: Currently, reconciliation occurs in the CJR Model twice after the close of a Performance Year, once after two (2) months and again after 14 months. Principally to avoid administrative expense, the Rule moves the process to one reconciliation for each Performance Year. The reconciliation will occur six (6) months after the end of the Performance Year.
  
  
• Participant Hospitals: As currently operated, the CJR Model is mandatory for hospitals in 34 MSAs and voluntary in 33 MSAs, with the exception that rural and low-volume hospitals in the MSAs have not been required to participate and only could participate if they elected on a one-time basis to opt in. CMS believes that hospitals volunteering to participate introduce selection bias into the results of the CJR Model, as those who participate voluntarily are likely to be ones who believe they are positioned to do well financially in the Model. Beginning with Performance Year 6, only hospitals in the mandatory MSAs which are not rural or low-volume hospitals will be able to participate. Those who volunteered to participate but were not required to do so will no longer be allowed to participate.
  
  
• Beneficiary Notification:. Given the addition of outpatient procedures to the CJR Model, the Rule changes the timing for the requirement to have a Medicare beneficiary receive notice of his/her inclusion in the CJR Model. Now, the beneficiary notification must be given prior to discharge from the anchor hospitalization or prior to discharge from anchor proceeding if performed on an outpatient basis, as applicable. In addition, the Rule requires a participant hospital to provide a beneficiary with written notification of any potential financial liability with non-covered services recommended or presented as part of discharge planning.

By extending the CJR Model for another three (3) plus years CMS, CMS has confirmed its commitment to continue testing alternative payment models that were originated in the Affordable Care Act, including through the use of bundled payments. The CJR Model reflects a continuation of making providers accountable for the cost and quality of the care they provide.