On May 3, 2021, the Centers for Medicare & Medicaid Services (CMS) published an 81-page final rule to both extend and change the Comprehensive Care for Joint Replacement (CJR) model. We previously reported on the proposed rule here. The CJR model was initially implemented by way of notice-and-comment rulemaking in April 2016; the recent final rule will extend the CJR model by an additional three years through December 31, 2024.

Purpose of CMS’s CJR Model

The CJR model is intended to target and minimize cost inefficiencies and support more robust care for Medicare beneficiaries who undergo hip and knee replacements—also known as lower extremity joint replacements (LEJR). According to CMS, LEJR are the most common inpatient surgeries performed on Medicare beneficiaries and represent a substantial cost. In 2014 alone, more than 400,000 surgeries resulted in an outlay of $7 billion just for hospitalizations.

By bundling payment and quality measurement for an episode of care associated with LEJR, the CJR model’s aim is to incentivize disparate providers such as hospitals, physicians, and post-acute care providers to coordinate and improve quality of care and outcomes from surgery through recovery and rehabilitation. The episode of care begins with the admission of a Medicare beneficiary to a participating hospital—whether for inpatient or outpatient care—and ends 90 days post-discharge in order to cover the period necessary for recovery and rehabilitation. With certain exceptions, the episode covers all related items and services under Medicare Parts A and B.

Participation and Cost Reductions

The final CJR model establishes 34 mandatory metropolitan statistical areas (MSAs), while excluding rural or low-volume hospitals in those geographic areas. Taking into account an additional 33 MSAs in which participation is voluntary, as of January 2021 approximately 432 hospitals participate in the CJR model.

CMS’s initial evaluation of the CJR model’s first three years, as well as an independent study published in the New England Journal of Medicine, indicate lower episode costs among CJR-participating hospitals as compared to non-participating hospitals, with no apparent negative impact on quality of care.

Highlights of the Final Rule

With only minor modifications to the proposed rule, the highlights of the final rule include:

Outpatient Treatment. Notably, the final rule follows through on CMS’s proposal to extend the CJR model’s definition of an episode of care to include outpatient total knee arthroplasty and total hip arthroplasty. CMS’s stated goal in implementing this change reflects both an industry shift toward outpatient care for LEJR, as well as an effort to avoid the unintended outcome of incentivizing a provider to choose the more costly inpatient setting for reimbursement than would otherwise be medically necessary. Inclusion of outpatient procedures will not only expand CJR eligibility for providers, but should also ultimately lower costs for Medicare beneficiaries.

Ambulatory Surgical Procedures. In response to comments garnered during the comment period for the proposed rule, as of 2021, all procedures included in the CJR model can now be performed in the ambulatory surgical center (ASC) setting.

Target Price Calculation. The final rule modifies the CJR model’s basis for the target price (i.e., the forecast price for an LEJR episode based on a blend of inpatient/outpatient cost, hip fracture status, and average regional spending) by discarding a three-year data trend in favor of a single year. The final rule also discontinues the use of the regional and hospital anchor weighting steps in the target price calculation methodology as volume issues are no longer a concern. Lastly, the final CJR model incorporates additional risk adjustment to the target pricing and modifies the high episode spending cap calculation methodology.