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Current & Critical

Bundled Payments: AAOS Conversations Center on CJR and Beyond

By Carolyn LaWell

The advent of the Centers for Medicare & Medicaid’s Comprehensive Care for Joint Replacement (CJR) program fueled AAOS Annual Meeting conversations regarding the best response by hospitals, surgeons and device companies to bundled payment reimbursement models, including those that extend beyond joint reconstruction.

The basics are known. CJR is a five-year pilot program that launches April 1. Hospitals in 67 metropolitan areas will receive a fixed rate for the entire episode of joint reconstruction, stretching from time of surgery though 90 days after the procedure. Starting in year two of the program, hospitals will be monetarily incentivized or penalized for their ability to meet that fixed rate plus corresponding quality metrics. Simply put, payment for nearly one-third of total hip and total knee replacements in the U.S. will be linked to quality and patient satisfaction, as well as cost measures.

One unknown is how the program will directly impact orthopaedic device manufacturers. CJR focuses on the elimination of waste for post-acute care, meaning that hospitals will be incentivized or penalized for their ability to reduce cost in settings such as skilled nursing facilities, home healthcare and in-house physical therapy. There is not an incentive to reduce implant price. That being said, hospitals could seek savings throughout the episode to act as a cushion if they need to pay Medicare for not meeting the post-acute care metrics.

An ancillary effect of CJR is the advancement of bundled payments by private payors and Medicare. Medicare fully intends to use CJR as the test model to further roll out mandatory bundles for high-cost, high-volume procedures. Hospitals that have invested the time and resources to meet Medicare bundled payment pilot programs, such as Bundled Payments for Care Improvement (BPCI), seek to utilize their investments by opting to work more closely with private payors on these models. Private payor contracts could include significant incentives to reduce implant cost.

The risk for device companies, though, is competing only on implant price in a bundled payment era. Opportunity lies in thinking beyond the implant and surgery, and helping hospital customers find value—whether that’s enabling faster recovery, reducing complications, shortening post-acute care or measuring outcomes data. Device companies that share risk in the episode and focus on innovation during and tracking after the procedure will recognize success. 

“The prosthetic companies that are able to work with hospitals and physicians, and partner with them to improve care and improve the utilization of resources at the same time, are the ones that are going to profit from this,” says Thomas C. Barber, M.D., a joint reconstruction surgeon based in Oakland, California and Chair of the AAOS Council on Advocacy. 

Barber says that hospitals want to improve efficiency and productivity in the operating room in order to perform higher volumes of operations in a shorter, safer manner. He points to a decrease in trays as one possible innovation, stressing the word "innovation" can no longer be loosely defined, but must be clinically and economically proven by device makers.

“Small innovations make a big difference as far as cost and as far as time,” he says. “I do think there is going to be room for innovation, but that’s going to be tracked more closely.”

Device companies are taking varying approaches to hospital partnership. Some have said that they’re engaged in conversations, but hospitals aren’t yet sure of the collaboration they need or want. 

Richard Iorio, M.D., is the Dr. William and Susan Jaffe Professor of Orthopaedic Surgery and Chief of the Division of Adult Reconstructive Surgery at NYU Langone Medical System, which is active in bundles in joint reconstruction, spine and cardiac. Iorio noted that until a hospital begins such a program, it’s clueless of the nuances of these reimbursement models. 

Function and Outcomes Research for Comparative Effectiveness in Total Joint Replacement (FORCE-TJR) and Wellbe released a report during AAOS indicating that less than ten percent of hospital respondents are fully prepared for CJR implementation, while 56 percent reported feeling unprepared. 

The reimbursement landscape for joint reconstruction, and most likely other orthopaedic procedures, will look different five years from now. Device companies that take a wait-and-see approach might benefit from the successes and failures of the competition. Other companies want to be seen as a leader in this healthcare shift.

Iorio pointed to DePuy Synthes’ and Medtronic’s focused efforts.

DePuy Synthes announced a strategic alliance with Value Stream Partners, a firm focused on design, development and implementation of bundled payment programs. The collaboration will assist hospitals in improving clinical outcomes, increasing patient satisfaction and lowering overall costs. At AAOS 2015, DePuy Synthes launched ADVANTAGE, a software platform that offers customized, measurable solutions to track the important factors associated with bundled payments: outcomes, patient satisfaction and cost.

Iorio says that he expects software and low-cost implant lines to become part of device company portfolios.

Medtronic has encouraged Medicare to expand its bundled payment initiatives. During a recent earnings call, Omar Ishrak, Medtronic Chairman and CEO, gave few details but said that the company is actively partnering and collaborating with hospital systems, payors and governments, and is focused on technology, services and business models that address value across the continuum of care.

“This continues to drive our organization to move beyond medical devices, to create integrated health solutions that complement and enhance our devices’ value, traditional wraparound services and solutions. By addressing these trends now, we believe we will also uniquely position Medtronic to participate in the emerging bundled payment and risk-sharing models, focused on very specific disease states,” Ishrak says. “Ultimately, we believe this is what will differentiate Medtronic, and uniquely position us to succeed in the ever-changing global healthcare marketplace.”

Another vocal proponent of bundled payments is ConforMIS. Leadership has noted that its largest hospital customers are interested in risk-sharing arrangements with orthopaedic companies. The edge that ConforMIS claims at the outset is its ability to provide long-term outcomes and economic efficiency data for its custom implants and technology. 

ConforMIS leadership has noted that it plans a targeted sales effort in CJR cities. During its 4Q15 earnings call, leadership said that since the publication of CJR in July 2015, the company has signed contracts with more than 50 hospitals.

Another ancillary effect of CJR and bundled payments in general will be the continuation in volume shift of where procedures are performed. 

Hospitals and surgeons will become more specialized in order to reap the incentives of increased outcomes and decreased costs, Barber says. Larger centers are able to better control these factors because of the volume. This could lead to further consolidation at the hospital level and will likely lead to procedures being moved from smaller to larger, more urban hospitals.

“The successful, larger centers have collaborated together as an entity to have a single way of treating patients. That single way can be different from one center to another,” Barber says. “You’re going to see large centers with total joint specific surgeons who are doing large volumes themselves. We’re going to be less and less dependent on general practitioners doing joint replacements.”

Public and private bundled payments will continue to develop in the next decade. Conversations at AAOS centered on the importance of surgeon ownership in bundles (not part of CJR), elimination of waste from the entire episode and a push to extend beyond joint reconstruction and the inpatient setting. The conversation is just beginning. The opportunity for device companies lies in providing proven ideas that meet the evolving challenges of customers and reimbursement.

Carolyn LaWell is ORTHOWORLD’s Chief Content Officer. She can be reached by email