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Current & Critical

CMS Proposes Mandatory Joint Recon Bundled Payments

The U.S. Centers for Medicare & Medicaid Services (CMS) proposed a mandatory bundled payment model that, once passed, could impact joint reconstruction implant pricing.

Earlier in 2015, CMS announced long-term goals to move the majority of reimbursement to value-based purchasing models, allowing hospitals to voluntarily implement models like bundled payments. The proposed Comprehensive Care for Joint Replacement (CCJR, or CJR as it is now known) Payment Model would take the decision-making power out of hospitals’ hands, making bundled payments mandatory in 75 cities representing 35 percent of the population.

CMS chose to focus on lower extremity joint replacement because hip and knee reconstruction is the most common inpatient surgery that Medicare beneficiaries receive, and the average expenditure for surgery, hospitalization and recovery ranges from $16,500 to $33,000. (To ward off confusion, please note that CMS includes hip and knee in its definition of lower extremities.)

CMS predicts that by incentivizing all stakeholders—hospitals, physicians, home health agencies, nursing facilities, etc.—to work together to reduce complications and readmissions, this specific program will yield Medicare savings of $153 million over its five-year period.

Which of your customers would this affect? The proposal calls to implement CCJR in cities of all sizes and geographic regions, including Bismarck, Los Angeles, Miami, Nashville and New York.

 


Top reasons for
hospital readmission
following TKA or THA

Surgical site infections-18.8 percent

Prosthesis issues-7.5 percent

Venous thromboembolism-6.3 percent

Bleeding-6.3 percent

Orthopaedic related-5.1 percent

Pulmonary-3.2 percent

Cardiac-2.4 percent

CNS or CVA-2.4 percent

Ileus or Obstruction-2.3 percent

Sepsis-2.1 percent

  Source: The American College of
Surgeons National Surgical 

Quality Improvement Program

   

How would it affect your customers? Under the test model, CMS will set prices that include the cost of surgery and post-90-day care. Hospitals that spend below the target price will receive the difference from CMS, while those that spend above the target price must return the difference to CMS. A two percent cut in the target price is expected to be applied each year.

How would it affect device companies? This would most likely enhance hip and knee implant price pressure, especially as hospitals face decreasing target rates throughout the program, and may lead to continual vendor consolidation.

Comparable to current bundled payment programs, CCJR promotes surgeon gainsharing. Hospitals have driven down implant costs by consolidating the manufacturers from which they purchase. A mandatory program would give hospitals greater leverage to incentivize surgeons to switch implant brands and receive a share of savings.

At ORTHOWORLD’s Symposium in January 2015, bundled payments—specifically, “episode of care”—was the one phrase Doug Kohrs asked attendees to remember and research. Mr. Kohrs, who is past President and CEO of Tornier and now heavily involved in investing in and leading startups, told device companies to focus on assisting hospitals in not only reducing cost but improving quality, especially post-surgery.

That concept of quality isn’t lost with the proposed CCJR program. In addition to meeting target rates, hospitals must meet specific quality performance requirements related to complication and readmission rates before they could receive payment from CMS. These requirements would also increase each year in order to drive continuous improvement.

CMS is accepting public comments on the proposal through September 8 with an expectation of finalizing the rule by end of year. The proposal calls for launching the program in January 2016, but industry experts have said hospital pushback might result in a date change. - Carolyn LaWell

 

In 2013, more than 400,000 primary hip and knee inpatient procedures cost more than $7 billion for hospitalization alone. Multiple ICD-9-CM codes describe the procedures covered under the proposed CCJR program. The table below represents a distribution of hospital claims per procedure codes for fiscal years 2011 to 2014. Those procedures marked with zero percent indicate representation of less than 0.5 percent of total claims. 
 

ICD-9-CM 
Procedure Code
Code Descriptor FY
2014
FY
2013
FY
2012
FY
2011
81.54 Total knee replacement 57% 58% 58% 58%
81.51 Total hip replacement 30% 29% 29% 28%
81.52 Partial hip replacement 12% 13% 13% 14%
81.56 Total ankle replacement 0% 0% 0% 0%
00.85 Resurfacing hip, total acetabulum and femoral head 0% 0% 0% 0%
00.86 Resurfacing hip, partial femoral head 0% 0% 0% 0%
00.87 Resurfacing hip, partial acetabulum 0% 0% 0% 0%
84.27 Lower leg or ankle reattachment 0% 0% 0% 0%