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Centers for Medicare & Medicaid Services' Comprehensive Care for Joint Replacement: The Present and Future for Orthopedic Surgeons

Craig A. Hogan, MD; Melanie F. Sandoval, PhD, MSN, RN; Lauren M. Uhler, MPH

Abstract

The primary aim of this article is to describe the structure and challenges of Medicare and Medicaid reimbursement for a total hip or knee arthroplasty within the context of the Comprehensive Care for Joint Replacement model. The secondary aims are to identify potential challenges for reimbursement and solutions to overcome challenges for the orthopedic surgeon, and to describe and compare the current and projected reimbursement structures for total arthroplasty procedures. Final decisions on reimbursement for total arthroplasty as outlined by the Centers for Medicare & Medicaid Services are reviewed. The impact of these decisions and the effect of the Centers for Medicare & Medicaid Services' payment structure on reimbursement for surgeons and organizations and the effect on patient care are highlighted. [Orthopedics. 2017; 40(2):77–80.]

Abstract

The primary aim of this article is to describe the structure and challenges of Medicare and Medicaid reimbursement for a total hip or knee arthroplasty within the context of the Comprehensive Care for Joint Replacement model. The secondary aims are to identify potential challenges for reimbursement and solutions to overcome challenges for the orthopedic surgeon, and to describe and compare the current and projected reimbursement structures for total arthroplasty procedures. Final decisions on reimbursement for total arthroplasty as outlined by the Centers for Medicare & Medicaid Services are reviewed. The impact of these decisions and the effect of the Centers for Medicare & Medicaid Services' payment structure on reimbursement for surgeons and organizations and the effect on patient care are highlighted. [Orthopedics. 2017; 40(2):77–80.]

Total knee arthroplasty (TKA) and total hip arthroplasty (THA) are highly successful and viable solutions for patients experiencing pain and dysfunction related to degenerative conditions of the knee and hip, and currently represent the largest payments for inpatient procedures under Medicare.1,2 The demand for these procedures is expected to increase exponentially during the next 15 years as the population continues to age.3 The cost associated with a TKA and a THA is highly variable and factors associated with variations in episode-of-care payments, defined by Medicare as a 120-day window, remain unclear.4 For example, in a recent analysis of Medicare administrative data, Cram et al4 concluded the expected Medicare lump sum payment for a TKA episode was highly unpredictable with inconsistency. Payment was largely affected by the presence of patient complications; however, other variations in hospital payments could not be explained.4

The cost of these procedures is affected by several factors. Patient-related factors, including age, comorbid conditions, and lifestyle choices, affect hospital direct costs, including length of stay, and indirect costs, including post-acute care skilled nursing facility services, home health care, and physical therapy.5 Additional factors that may contribute to the cost variability of TKA and THA include geographic variation in the processes used and the quality of the care delivered to patients. Other factors that contribute to the overall costs and variation in cost among patients undergoing total joint arthroplasty, such as surgical technique and operative environment, are outside the scope of this article.

The financial burden of THA and TKA on the US health care system is expected to continue to increase. As a result, payers, providers, and health care policymakers are developing strategies to control costs and improve outcomes related to these procedures. Alternative payment models are being explored as a response to changes in reimbursement. The bundled payment model has been offered as a strategy to improve the quality of care and services and to reduce associated costs.6,7 Bundled payment models provide a fixed reimbursement for all services provided as part of a clinically defined “episode of care.” For example, the services and costs directly and indirectly related to a total knee replacement encompass an episode of care.

The episode of care may vary in definition but typically includes the period of time from 30 days before the date of surgery until a set time at which recovery should be complete (eg, 90 days after discharge).4 The reimbursement for the episode of care can include financial incentives or penalties based on performance measures such as quality indicators, infection rates, and patient satisfaction scores.5 One such bundled payment plan for THA and TKA is the Comprehensive Care for Joint Replacement (CJR) model. This article outlines the CJR program and implications of it for the current state of practice and the future of orthopedic surgery.

Comprehensive Care for Joint Replacement

In July 2015, the Centers for Medicare & Medicaid Services (CMS) introduced a bundled care payment plan for lower extremity joint replacement procedures (largely composed of THA and TKA) for patients with Medicare Part A and B. The main goal of the CJR model is to “improve quality of care for Medicare beneficiaries.”4 After receiving correspondence from numerous health care stakeholders, the CMS released its final ruling in November 2015. Sixty-seven randomly selected metropolitan statistical areas were mandated to participate in this program, with the exception of organizations already participating in a previous CMS bundled payment pilot program (Bundled Payments for Care Improvement).5

The CMS defines an episode of care for a clinical occurrence within the CJR program from the day of surgery to 90 days after surgery. The reimbursement payment includes the anchor stay and 90 days post-surgery care for Medicare beneficiaries and covers facility costs (index hospitalization), post-acute care (short-term nursing care, skilled nursing facility, inpatient rehabilitation facility, and inpatient readmission), and other services (home health, physical therapy, occupational therapy, and postoperative imaging). An anchor stay includes the hospital direct costs, driven by physician services, length of stay, implants, and direct patient care services. The average cost of care for a clinically defined episode of care will be predetermined by Medicare and provided to the payee (institution). This number will change throughout the 5-year program from a localized, hospital-specific average to a regional average. For example, the average payment for a Medicare knee replacement episode (MS-DRG 470) is $26,494, which the CMS would use as the reimbursement for each TKA episode of care under a bundled payment model. In a prospective bundled payment system, the payee assumes the responsibility for allocating the funds appropriately to cover all of the indirect and direct costs of the episode of care.5 However, during the 5-year CJR pilot program, payments will be disbursed using the existing fee-for-service model. At the end of each calendar year, the CMS will retroactively assimilate the financial data from each institution and determine if the episode costs were below or above the target cost associated with the defined episode of care. For example, if an institution performed 100 TKAs and the TKA episode of care reimbursement was predetermined by the CMS to be $20,000 per episode, payments received should total $2,000,000. If the institution spent less than $2,000,000, it would potentially be eligible for an incentive payment, depending on quality metrics including patient satisfaction scores from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) and risk-stratified complications. If the institution received more than the predicted amount, it would be liable for a penalty associated with this excess cost. High patient satisfaction, as reported in the HCAHPS, would potentially minimize the assigned penalty.1,2,5

The CJR model also includes incentives to improve the quality of care. Each institution is responsible for collecting and reporting both preoperative and postoperative patient-reported outcomes at defined intervals. Patient experience scores from the HCAHPS will be evaluated in addition to specific complications that occur during the episode of care to determine eligibility for payment incentives. The complications used to assess the quality of care will be defined by the hospital-level risk-standardized complication rate following elective primary THA and/or TKA (Table).


Summary of Finalized Quality Measure Performance Periods by Year of the CJR Model

Table:

Summary of Finalized Quality Measure Performance Periods by Year of the CJR Model

In the context of this new reimbursement structure proposed by the CMS, institutions and physicians have responded with strategies to minimize costs without compromising patient outcomes through the provision of essential treatment, services, and care to efficiently and effectively treat the patient and cover all expenses associated with a defined episode of care (eg, a THA or a TKA).

Further, private payers often follow Medicare reimbursement practices, basing their reimbursement for procedures on standards set by Medicare. Providers, including those outside of the CJR metropolitan statistical areas, should begin developing strategies to respond to the potential implications of these changes in reimbursement now rather than waiting until the movement toward bundled payments affects the manner in which they are reimbursed by other payers.

Gainsharing

Gainsharing is a partnership between hospitals and physicians with the mutual goals of improving quality, avoiding costs, and enhancing efficiency. Hospitals and physicians who participate in gainsharing agree to share the savings associated with reducing costs and achieving greater efficiencies.6 The success of a gainsharing model is highly dependent on the principle that the physician is well positioned to enhance the quality of patient care and improve hospital operations, with the result being decreased hospital cost and increased efficiency.6

The Role of the Orthopedic Surgeon in Developing the Gainsharing Plan

In a gainsharing model, physicians have the opportunity to work with their hospital colleagues to define the quality measures that are used to distribute any shared savings that are achieved, whereas in a pay-for-performance model, goals to improve clinical efficiency are developed by hospital administration or payers.8 Therefore, the orthopedic surgeon is required to be an active participant in administrative decision-making and quality improvement processes.

Orthopedic surgeons' expertise and active participation on committees and in administrative decision-making are necessary for the financial success of their institutions under bundled payment models. Through participation in administrative decision-making, orthopedic surgeons may influence the success of the program and the financial success of the participants. Areas in which orthopedic surgeons must take on leadership roles include decision-making around operational flow; quality improvement initiatives; the creation of evidence-based, standardized clinical care pathways to reduce unnecessary and costly services; and in identifying metrics of cost savings and improved efficiency.

Additional Implications of the CJR Model for the Orthopedic Surgeon

Implications of the CJR model for orthopedic surgeons include a need for them to deliver services more efficiently, effectively, and appropriately without negatively impacting the quality of care. This increased focus on efficiency and outcomes will require physicians to work closely with health care institutions' quality and clinical teams to develop evidence-based, standardized clinical care pathways that enable effective and efficient, high-quality clinical care. The roles, functions, and responsibilities of each care provider should be clearly defined within each phase of care, including a preoperative pathway, an intraoperative pathway, and a postoperative pathway. Further, the clinical pathways must include a focus on addressing modifiable patient risk factors and minimizing complications.

A mindful initial approach would involve addressing, if possible, the modifiable risk factors (eg, smoking, body mass index greater than 40 kg/m2) of patients seen initially in another setting before approving them as candidates for particular surgical procedures. Unfortunately, well-studied, validated models of risk modification are not widely available. Some modifiable risk factors are known, but further research is needed on how these risk factors affect the incidence of complications. Known modifiable patient-related risk factors that will need to be optimized before surgical intervention include, but are not limited to, diabetes mellitus, tobacco use, obesity (body mass index greater than 40 kg/m2), and behavioral health disorders (eg, anxiety and depression).

Clinical pathway development should focus on multidisciplinary, evidence-based practices and protocols that are cost-effective and known to improve quality and minimize complications. Providers and staff at all levels must be more cognizant of the costs associated with an anchor stay and post-acute care. Well- defined performance metrics must be developed that reflect the quality measures outlined by the CMS. Further, information that would affect the bundled payment associated with an episode of care should be shared with providers and administrators in the outpatient, acute care, and post-acute care settings.

Increased partnerships with anesthesia and hospitalist providers will be required to address pain control and analgesia, to plan preoperatively for the perioperative phase of care (entire phase of anchor stay), and to determine the most appropriate postoperative pain control measures.

Additionally, the post-acute care phase of this episode, which is the completion of the 90-day period following discharge from the hospital, offers organizations another opportunity. This redesign can and should be done through a partnership between orthopedic surgeons and their respective organizations. The main transition of care from the hospital to home, a subacute rehabilitation facility, or an acute rehabilitation facility needs to be managed. It is essential to place a priority on transitioning patients to home if possible. This can allow organizations to avoid excess non–value-added care. This starts at the initial office visit by defining those patients at risk of needing further care following the anchor stay. Several validated questionnaires are available to guide organizations regarding the relative risk of a patient needing further services besides home care following discharge. Optimization at this step can help to set patients up for success prior to entering the hospital. Within the population of patients who are discharged directly to home, the management of home care services is important. Partnering with home health care providers and organizations to deliver value-added care in a directed manner with definable outcomes could assist significantly with the performance in a bundle.

Some portion of patients will require a higher level of care (subacute or acute rehabilitation) following discharge from the hospital. They will often seek recommendations from the physician or care manager, who should partner with preferred providers who can offer excellent care at a low cost. The performance of these preferred providers must be graded continuously with a scorecard regarding details such as length of stay and readmission rates. This period in the episode of care, if managed correctly, offers to provide organizations with huge cost savings and benefits to the overall outcomes of the episode.

The details of the CJR program have been previously published.5 Few individuals fully understand each piece of the new requirements. In some institutions, information has been provided in a fragmented, rather than a comprehensive, manner. For example, clinical care pathway knowledge and costs may have been fully discussed with and presented to providers, but quality metrics and definitions may have been provided only to quality leaders. Further, there may be limited understanding regarding how institutions' HCAHPS scores are determined and how these scores can influence financial rewards or penalties for exceeding target TKA and THA costs. Orthopedic surgeons must fully understand the components of bundled payment models of care. At a minimum, they must know where to access the information.

Conclusion

The CJR model proposed by the CMS has the potential to enhance care coordination across providers and care settings, improve patient outcomes, and reduce the overall cost of the episode of care. The intended benefits to Medicare beneficiaries (improved coordination and quality of care) and to society (reduced costs for 2 common, resource-intensive procedures) are clear. Providers and institutions must be responsible and fiduciary stewards of monies provided by the CMS for qualifying services while maintaining or improving the quality of care provided to patients. These aims may be accomplished by providers across the episode of care working together to provide more standardized and coordinated and, ultimately, a higher quality of care. Operationalization of the CJR model will most certainly involve an individualized plan for each hospital. However, this article has provided guidance and recommendations that can be used as a foundation. The extent to which the CJR model will achieve its goal of more efficient, higher quality care and what effects it will have on providers remain unknown.

References

  1. Suter LG, Grady JN, Lin Z, et al. 2013Measure updates and specifications: elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) all-cause unplanned 30-day risk-standardized readmission measure (version 2.0). New Haven, CT: Yale New-Haven Health Services Corporation/Center for Outcomes Research and Evaluation; 2013.
  2. Bozic KJ, Rubash HE, Sculco TP, Berry DJ. An analysis of Medicare payment policy for total joint arthroplasty. J Arthroplasty. 2008; 23(6)(suppl 1):133–138. doi:10.1016/j.arth.2008.04.013 [CrossRef]
  3. Kurtz S, Ong K, Lau E, Mowat F, Halpern M. Projections of primary and revision hip and knee arthroplasty in the United States from 2005 to 2030. J Bone Joint Surg Am. 2007; 89(4):780–785.
  4. Cram P, Ravi B, Vaughan-Sarrazin MS, Lu X, Li Y, Hawker G. What drives variation in episode-of-care payments for primary TKA? An analysis of Medicare administrative data. Clin Orthop Relat Res. 2015; 473(11):3337–3347. doi:10.1007/s11999-015-4445-0 [CrossRef]
  5. Medicare program; comprehensive care for joint replacement payment model for acute care hospitals furnishing lower extremity joint replacement services. Fed Regist. 2015; 80(226):73274–73554. To be coded at 42 CFR Part 510.
  6. Healy WL. Gainsharing: a primer for orthopaedic surgeons. J Bone Joint Surg Am. 2006; 88(8):1880–1887.
  7. Bushnell BD. Physician-hospital alignment in orthopedic surgery. Orthopedics. 2015; 38(9):e806–e812. doi:10.3928/01477447-20150902-59 [CrossRef]
  8. Roche J. AAOS takes stance on bundled payments and gainsharing. AAOS Now. http://www.aaos.org/AAOSNow/2009/May/reimbursement/reimbursement3/?ssopc=1. Accessed April 28, 2016.

Summary of Finalized Quality Measure Performance Periods by Year of the CJR Model

Measure TitleCJR Model Year

1st2nd3rd4th5th
THA/TKA complicationsaApril 1, 2013, to March 31, 2016April 1, 2014, to March 31, 2017April 1, 2015, toMarch 31, 2018April 1, 2016, to March 31, 2019April 1, 2017, to March 31, 2020
HCAHPSbJuly 1, 2015, toJune 30, 2016July 1, 2016, to June 30, 2017July 1, 2017, to June 30, 2018July 1, 2018, to June 30, 2019July 1, 2019, to June 30, 2020
Authors

The authors are from the Department of Orthopedics (CAH, MFS), Division of Adult Reconstruction, University of Colorado–Denver, School of Medicine, Aurora, Colorado; and the Department of Surgery and Perioperative Care (LMU), University of Texas at Austin, Dell Medical School, Austin, Texas.

The authors have no relevant financial relationships to disclose.

Correspondence should be addressed to: Craig A. Hogan, MD, Department of Orthopedics, Division of Adult Reconstruction, University of Colorado–Denver, School of Medicine, 12605 E 16th Ave, Aurora, CO 80045 ( Craig.Hogan@ucdenver.edu).

10.3928/01477447-20170302-03

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