On November 16, 2015, CMS finalized the Comprehensive Care for Joint Replacement (CJR) model.  Starting April 1, 2016, certain hospitals will receive retrospective bundled payments for lower extremity joint replacement (LEJR) or lower extremity reattachment, including all related care provided within 90 days of discharge.  In general, IPPS hospitals located in 67 metropolitan statistical areas (MSAs) are required to participate—an estimated 800 hospitals total.  This is a reduction from the 75 MSAs proposed by CMS.  The program will run for five performance periods through December 31, 2020, and is estimated to save Medicare approximately $343 million.

LEJR episodes of care are limited to MS-DRGs 469 and 470 (major joint replacement or reattachment of lower extremity with and without Major Complication or Comorbidities).  CMS specifically targeted LEJR episodes because they “are high-expenditure, high utilization procedures . . . [with] significant variation in spending . . . .”  Payment will bundle together the LEJR procedure and inpatient stay and all related care covered under Medicare Parts A and B within 90 days of discharge, including hospital care, post-acute care, and physician services.  Under the model, a participating hospital could contract with other providers and suppliers (skilled nursing facilities, long-term care hospitals, rehabilitation facilities, physicians, etc.) to share payments and penalties, with some limitations.

The performance periods will generally run for one calendar year, with the exception of the first performance period, which will run from April 1, 2016 to December 31, 2016.  During each performance year, hospitals and other providers will be paid according to normal fee-for-service systems.  At the end of a given year, based on claims data, CMS will reconcile the actual LEJR episode payment against a CJR target price.  The price will vary based on complexity of the case (e.g., higher spending targets for hip fractures), and CMS will additionally consider quality performance and post-episode spending.  If the hospital spent less than the target price, the hospital will receive a reconciliation payment; otherwise, the hospital will be required to repay the difference.  CMS will make reconciliation payments for all performance years, but will not require repayment until performance year 2.  Furthermore, CMS established stop-loss limits (5 percent in year 2, 10 percent in year 3, and 20 percent in years 4 and 5) for hospitals other than rural hospitals, Medicare-dependent hospitals, rural referral centers and sole community hospitals (whose limits are 3 percent in year 2 and 5 percent in years 3 through 5).  Similar protections exist for CMS, such that the reconciliation payment will be limited to 5 percent of the target price in years 1 and 2, and so on.

The list of participating hospitals is available here, and is based on 67 MSAs, which are counties with a core urban area with a population of at least 5,000 people.  CMS excluded certain MSAs if they had a low number of LEJR episodes, and non-MSA counties are ineligible.  Hospitals already participating in certain models of the Bundled Payments for Care Improvement program are exempt from the CJR model.  Beneficiaries covered under Medicare Advantage or those for whom Medicare is not the primary payor are also excluded from the model.

A copy of the CJR final rule is available here and is expected to be published in the Federal Register on November 24, 2015.  A summary of the program is available here.