The evolution of joint replacement reimbursement: Bundled payment care initiatives and joint replacement

By William Skinner, third-year medical study, Medical College of Georgia, Augusta University; Hamilton Vick, third-year medical student, Medical College of Georgia, Augusta University; and Janis Coffin, DO, FAAFP, FACMPE, MGMA member, chief transformation officer, AU Health, Augusta, Ga.

Total joint arthroplasty (TJA) is a reliable and cost-effective approach to regaining joint function. It is one of the most commonly performed inpatient operations for Medicare beneficiaries, representing more than $7 billion in Centers for Medicare & Medicaid Services (CMS) spending in 2014.1

With a substantial projected increase in the incidence of these procedures, new strategies have been developed to combat rising costs. To accomplish this, CMS is moving away from traditional fee-for-service models and has invested in alternative payment models, one of which is bundled payments.

These payment plans are intended to incentivize multidisciplinary approaches, which foster collaboration among providers and eliminate unnecessary services.2 Bundled Payment for Care Improvement (BPCI) was introduced in 2013.3 This program gave participants four different payment models (one prospective and three retrospective) and rewarded providers primarily based on their improvement compared to past performance.

High-cost or low-performance institutions considered this an appealing program, as they had the greatest opportunity for improvement, while low-cost or high-performance institutions considered it less attractive. Despite its leniency, results from this program have shown promise, revealing reduced costs while maintaining equal quality of care.4

CMS rolled out the Comprehensive Care for Joint Replacement (CJR) model in April 2016. Under this model, CMS agrees to pay a predetermined target price for each patient episode, defined as all relevant services utilized within a 90-day period after discharge in patients with a discharge diagnosis of MS-DRG 469 or 470 (joint replacement with and without major complications or comorbidities, respectively).

In the first year of the model, target prices are assigned based on a hospital’s historical spending for similar operations, moving toward target prices being calculated based completely on regional claims by the fourth year of the program. This is designed to create regional competition and promote cost-saving techniques and collaborative efforts among care providers.5,6

Currently, risk stratification sets different target prices for these operations only if a hip fracture is present without accounting for other comorbid conditions. At the end of each performance year, providers spending below their target cost are eligible for reconciliation payments, while those spending above target price are financially responsible for covering the difference.

In addition to promoting reduced costs, CJR uses three quality measures to ensure that standards do not drop as institutions cut costs:

1. The risk standardized complication rate (RSCR)
2. 30-day risk standardized readmission rate (RSRR)
3. The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAPS) survey

Certain quality metrics must be met for hospitals to be eligible for reconciliation payments.7

Analysis

With any new payment model, it is important to consider the risks and benefits to physicians, hospitals and other providers. CMS has stated that this model will benefit them and Medicare beneficiaries by promoting higher quality of care at a lower cost.

For providers, improving quality of care is certainly an agreeable objective if that metric can be consistently demonstrated. Physicians should consider that lowering the cost of care does not necessarily translate to paycheck cuts under this new model. Rather, it establishes a more competitive market for joint replacements within which the successful hospitals and/or groups stand to benefit from lowering the cost of care compared to regional competitors. Lowering cost of joint replacement care will then be realized as financial gains if actual expenditures total less than Medicare target price totals for a given performance year.

The downside to this model is that those less successful providers who struggle to compete may incur losses if actual expenditures exceed regional target prices.8 Preliminary CJR data from the first year shows that larger, high-volume hospitals, nonprofit teaching hospitals and organizations with integrated post-acute care facilities were the most successful.9

The future of BPCI for joint replacement

Since the first year of the CJR model required no repayments to Medicare as a penalty for not meeting target prices or quality standards and final reconciliations are not calculated until 14 months after each performance year, the results of the CJR model are still unknown. However, with the success seen following the initiation of BPCI, it is likely that these bundled payment models will be expanded to cover more procedures in the future.

There are several opportunities for practices to cut costs without compromising overall quality. The most significant of these is in the post-acute care setting in which there is large variation in cost among institutions. Many studies indicate that specialized care and inpatient rehab facilities after hospital discharge represent a huge cost.

Using care coordinators as a primary contact for patients could result in reduced number of emergency room visits and hospital readmissions that result from confusion between the various providers within an episode. Optimization of modifiable risk factors along with preoperative functional and health status assessments are also cost-effective approaches, as nearly half of readmission costs result from medical complications unrelated to joint replacement surgery.

These factors led to the Joint Commission’s implementation of data collection on four performance measures for all total hip and knee replacement certified programs. These measures took effect Jan. 1, 2018, and include use of regional anesthesia, postoperative ambulation on the day of surgery, discharge to home and preoperative functional/health assessment.10

Implant costs also represent an area of wide variability that can be improved. Many of the high-cost prosthetics have unproven clinical benefits over their lower cost alternatives. Methods to combat these high prices include implementation of implant selection protocols, resource use committees and sharing information on implant costs with patients to allow them to play a more active role in the decision. Additionally, expansion of the American Joint Replacement Registry can lead to more effective comparative studies between different prostheses and provide a competitive environment in the future development and improvement of prosthetics.11

Other improvements may come from modification of the bundled payment models themselves. Non-modifiable risk factors have been shown to influence 30-day readmission rates, and current models do little to adjust target prices based on these differences. Studies have also shown that the mean cost of care up to 30 days postoperatively is nearly double for patients with major comorbidities or complications compared to those with no comorbidities.12

While complication rates of TJA are low, the costs of complications are profound and reduce profitability, as they are not reimbursed under the bundle. This disincentivizes surgeons from operating on high-risk patients under the bundled payment models. Improvement in risk adjustment protocols can reduce the bias toward low-risk, uncomplicated patients.13

New bundled payment models continue to evolve. The latest was introduced by CMS in January 2018 and is called BPCI-Advanced, which piggybacks off the CJR model. While CJR initially mandated participation from hospitals in certain metropolitan areas, BPCI-Advanced is a purely voluntary model. This model includes the lower extremity joint replacements covered under CJR and expands to cover additional episodes including, but not limited to, spinal procedures, upper extremity joint replacements, fractures and multiple cardiopulmonary conditions.14,15

The potential benefits associated with widespread implementation of bundled payment models are quickly gaining traction with CMS. It is in the best interest of providers to educate themselves on these new models to implement systems for future success.

Key takeaways

• In addition to promoting cost-saving strategies, overall and fostering collaboration among care providers, the Comprehensive Care for Joint Replacement (CJR) model will benefit CMS and Medicare beneficiaries by improving quality of care at a lower cost at a preset target price for each patient episode.
• The disadvantage of this model is that low-cost, high-performance providers may incur losses if actual expenditures exceed regional target prices while preliminary CJR data from the first year indicate that high-cost, low-performance institutions were more successful.
• Additional opportunities for practices to cut costs without endangering overall quality include: using care coordinators as a primary contact for patients, preoperative functional and health status assessments, assessing methods to combat high implant costs and improvements in risk adjustment protocols.

Notes

1. Centers for Medicare & Medicaid Services. “Comprehensive care for joint replacement model.” Accessed Sept. 16, 2018. Available from: bit.ly/2xenlp6.
2. Ibid.
3. McLawhorn AS, Buller LT. “Bundled payments in total joint replacement: Keeping our care affordable and high in quality.” Curr Rev Musculoskelet Med. 2017;10:370-377. doi:10.1007/s12178-017-9423-6.
4. Centers for Medicare & Medicaid Services. “Bundled Payments for Care Improvement (BPCI) Initiative: General Information.” Available from: bit.ly/2MFQ4bh.
5. Ibid.
6. Ibid.
7. Centers for Medicare & Medicaid Services. “Consensus core set: Orthopedics measures version 1.0.” Available from: go.cms.gov/2xpx8cf.
8. Ibid.
9. Navathe AS, Liao JM, Shah Y, et al. “Characteristics of hospitals earning savings in the first year of mandatory bundled payment for hip and knee surgery.” JAMA Intern Med. 2018;319(9):930-932. doi:10.1001/jama.2018.0678.
10. The Joint Commission. “Performance measures for Advanced Certification in Total Hip and Total Knee Replacement.” Available from: bit.ly/2pdGMtN.
11. CMS.
12. Bozic KJ, Ward L, Vail TP, et al. “Bundled payments in total joint arthroplasty: Targeting opportunities for quality improvement and cost reduction.” Clin Orthop Relat Res. 2014;472(1):188-93.
13. CMS.
14. Centers for Medicare & Medicaid Services. “CMS announces new payment model to improve quality, coordination, and cost-effectiveness for both inpatient and outpatient care.” Jan. 9, 2018. Available from: go.cms.gov/2QD5j8g.
15. Centers for Medicare & Medicaid Services. “BPCI-Advanced.” Available from: bit.ly/2NOe00U.