Yesterday, CMS published a proposed rule - called the Comprehensive Care for Joint Replacement (CCJR) Model - which would implement a mandatory bundled payment program for elective hip and knee replacements in 75 geographical areas that include the largest cities such as New York,  L.A. and Miami, as well as smaller markets like Nashville, Memphis, Austin and Tuscaloosa.  CMS hopes the CCJR model will not only cut costs and improve quality, but also boost care coordination for patients between hospitals and other providers. Hospitals will be expected to help patients avoid complications that could cause additional hospital stays by working closely with primary care physicians and various specialists to provide the appropriate follow-up care.

This marks the first time that participation in a bundled payment program has been mandatory, rather than voluntary, and the rule reinforces CMS’s initiative to move 30% of Medicare payments to alternative payment models by 2016 (escalating to 50% by 2018).  All Part A and Part B services are included in the bundle with the exception of services clinically unrelated to the episode.  The new program is not mandatory for providers who are currently participating in selected voluntary joint replacement demonstration projects. 

Under the proposed rule, the episode of care will include all related care within 90 days of hospital discharge. The project will have a five-year performance period, beginning January 1, 2016.  During the performance period, CMS will continue paying hospitals and other providers according to the current Medicare payment methodologies.

After the completion of a performance year, the Medicare claims payments for services furnished to the beneficiary during the episode would be combined to calculate an actual episode payment. The actual episode payment would then be reconciled against an established target price. Up to 20% of the positive calculations would be shared with the participating hospitals (if three quality criteria are met) and up to 20% of negative calculations would require repayment by participating hospitals. There is no downside risk for hospitals in the first year. In year two, hospitals would be required to repay 10% of negative calculations. In years three through five, hospitals would be obligated to repay CMS 20% of negative calculations.

The rule would also waive the current requirement of a 3-day hospital stay to qualify for a skilled nursing facility, although a CMS official verbally stated that a direct admission to a skilled nursing facility is not allowed. 

So, the race is on for partnerships between providers to meet this aggressive timeline.  CMS anticipates that collaborators may include physicians and non-physician practitioners, home health agencies, skilled nursing facilities, long-term care hospitals, physician group practices, inpatient rehab facilities and inpatient and outpatient physical and occupational therapists. Participant hospitals may share payments with collaborators, but are not required to do so. Collaborators would be required to engage with the hospital in its care redesign strategies to be eligible for such payments. Participant hospitals may also share up to 50% of the downside risk with collaborators pursuant to agreements between those entities. No more than 25% of the downside risk may be assigned to any one provider, however.  Collaborators involved in a risk-sharing model are required to notify beneficiaries of the payment model. 

Like with any payment system change, there will be winners and losers.  It seems likely that rehab hospitals and ancillary services may be negatively affected, and home health agencies and telemedicine providers may benefit as some providers shift services to the less expensive home setting. The guaranteed winner is CMS, as the program guarantees CMS a 2% reduction in payment. 

The proposed rule in the Federal Register is available here. The comment period for the proposed rule runs through September 8, 2015.