Medicare Releases Final Rule on Joint Replacement Payments

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By Michael D. Williamson

Nov. 16 — Hospitals will be held accountable for the quality of care they deliver to Medicare fee-for-service beneficiaries for hip and knee replacements from surgery through recovery under a final rule issued Nov. 16.

A statement from the Department of Health and Human Services said that through the Comprehensive Care for Joint Replacement (CCJR) payment model final rule (CMS-5516-F), hospitals in 67 geographic areas will receive additional payments if quality and spending performance are strong. If not, hospitals in those 67 areas “potentially have to repay Medicare for a portion of the spending for care surrounding a lower extremity joint replacement (LEJR) procedure,” the statement said.

The first model performance period begins April 1.

Delayed Start Date

The April 1 start date is a change from the CCJR proposed rule. In the proposal, the CMS had said it would start the program Jan. 1.

The Centers for Medicare & Medicaid Services issued the proposed rule (80 Fed. Reg. 41,197) in July (132 HCDR, 7/10/15). Comments (CMS-5516-P) were due Sept. 8 (175 HCDR, 9/10/15).

According to the final rule, the CMS estimates the model will apply to about $1.2 billion in episode spending in 2016 and $3 billion in episode spending in 2020. The model will conclude Dec. 31, 2020. The CCJR program is likely to net approximately $343 million in savings to Medicare over the duration of the model, the final rule said.

How Model Works

Under the CCJR model, hospitals where hip or knee replacement and/or other major leg procedures take place will be accountable for the costs and quality of related care from the time of the surgery through 90 days after hospital discharge—what is called an episode of care, according to a Nov. 16 CMS fact sheet.

Depending on the hospital's quality and cost performance during the episode, the hospital will either earn a financial reward or, beginning with the second performance year, be required to repay Medicare for a portion of the spending above an established target. This payment structure gives hospitals an incentive to work with physicians, home health agencies, skilled nursing facilities and other providers to make sure beneficiaries receive the coordinated care they need with the goal of reducing avoidable hospitalizations and complications, according to the fact sheet.

This model is being tested in 67 geographic areas throughout the country, and nearly all hospitals in those geographic areas are required to participate, the fact sheet said.

A Nov. 16 Health Affairs blog post written by CMS officials further detailed which hospitals will be subject to participation in the model. Acute care hospitals paid under the inpatient prospective payment system and located in the 67 selected metropolitan statistical areas will be included in the model, with the exception of hospitals currently participating in Model 1 or Models 2 or 4 of the Bundled Payments for Care Improvement initiative for LEJR episodes, the blog post said.

The Center for Medicare and Medicaid Innovation at the CMS will administer the CCJR model.

Risks of Uncoordinated Care

More than 400,000 Medicare beneficiaries received a hip or knee replacement in 2014, at a cost of more than $7 billion for the hospitalizations alone, the statement said. Even though there's a high volume of knee and hip replacements for beneficiaries, quality and costs of care for these surgeries still vary greatly among providers, the HHS said.

For instance, the rate of complications, like infections or implant failures, after surgery can be more than three times higher for procedures performed at some hospitals than at others, according to the statement. Furthermore, the average total Medicare expenditure for surgery, hospitalization and recovery per patient ranges from $16,500 to $33,000 across geographic areas.

Quality and cost variations are due partly to the way Medicare beneficiaries receive care, the fact sheet said. Before the CCJR model, there weren't enough incentives “to coordinate the whole episode of care, from surgery to recovery,” and a patient's health suffered as a result, the CMS said in the fact sheet.

HHS Secretary Sylvia Mathews Burwell said in the department's statement that by focusing “on episodes of care, rather than a piecemeal system, we provide hospitals and physicians an incentive to work together to deliver the best care possible to patients.”

The rule is set for publication in the Federal Register on Nov. 24.

Hospital Industry Response

In a Nov. 16 statement, Rick Pollack, the president and chief executive officer of the American Hospital Association, said the group was pleased that the CMS and the HHS Office of the Inspector General “recognized the importance of assuring that participating hospitals can pursue the program's goals without running afoul of fraud and abuse laws. These legal protections are critical to hospitals’ ability to coordinate care among all caregivers.”

The AHA leader said his group also appreciated “the delay in program's start date until April 1, 2016, but remain[s] concerned that hospitals will still be pressed to put in place the processes and procedures necessary for the program.”

“Additionally, we appreciate that CMS made changes to the quality measurement provisions to allow more flexibility, while encouraging high-quality patient care.” Pollack said “while we had urged CMS to limit the program only to elective knee and hip replacements, we appreciate that they recognized elective and non-elective procedures are clinically different and require different levels of resources.”

To contact the reporter on this story: Michael D. Williamson in Washington at

To contact the editor responsible for this story: Brent Bierman at

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