Hip and knee replacements are among the most common total joint replacement surgeries performed in America. With an increased demand and looming costs to Medicare, the CMS has implemented a mandatory bundled payment program called Comprehensive Care for Joint Replacement (CJR).
The Cost of Total Joint Replacement
Total joint replacement (TJR) surgery is performed commonly in the United States, with more than a million procedures being performed per year. Of these, hip and knee replacements are the most common. TJR procedures are recommended for patients suffering from end-stage arthritis, among other things, and most commonly are performed in patients in their early to mid-sixties. The mean age of TJR surgery for hips and knees has decreased significantly over that in previous years (66.3 years to 64.9 for hips and 68 years to 65.9 for knees), with women making up the majority of patients. As the mean age of Americans continues to increase, the number of individuals living with end-stage arthritis and chronic pain seeking to undergo elective total joint replacement surgery will increase as well. Within the next 10 years, there is a 171% projected growth rate for total hip replacement (THR) surgery and a 189% increase in total knee replacement (TKR) surgery. These increases translate to an estimated 635,000 THR and 1.28 million TKR procedures by the year 2030.1
As the number of TJR surgeries increases, so do the numbers of revisions and complications associated with these procedures. While these surgeries are generally considered cost-effective, the projected increase in surgeries performed and amount specifically billed to CMS presents looming costs to healthcare providers, hospitals, insurance companies, and the economy. In 2014, the cost of TJR surgeries amounted to more than $7 billion, and it has continued to increase. Considering the future projected increase of TJR procedures, it was critical to consider fiduciary and implementation strategies that can drive down the cost of these procedures without compromising healthcare delivery or quality of patient care.2
In 2015, Medicare implemented a program of mandatory bundled payment plans for joint replacements, known as the Comprehensive Care for Joint Replacement (CJR) program. This program set a precedent and proved to be an example of utilization of bundled payment plans. Preliminary results show promise for continued development of this type of payment plan across more areas of healthcare delivery. This article examines the structure of CJR and the first two years of implementation of the CJR program in order to give healthcare providers and institutions insight into what has been shown to be successful.3
Why Comprehensive Care for Joint Replacement?
CJR uses a bundled payment model, while tracking quality measures to reduce the cost of an episode of care related to hip and knee arthroplasty. The CJR model is modeled after the Bundled Payments for Care Improvement initiative (implemented in 2013), but it differs in risk, participation, and pricing. It included about 800 hospitals in 67 diverse geographic areas.4 This design incorporates a general representative sample of hospitals with a varying patient population, level of experience, hospital infrastructure, lower extremity joint replacement (LEJR) prevalence, and market position in their local area. Thus, a broad test of the CJR model has been ongoing over the course of several years.
All participating hospitals in CJR receive a retrospective bundled payment, meaning that participants receive payment for all services provided under an “episode of care.” An episode of care under CJR begins with admission to a participating hospital and covers the entirety of the sentinel episode of care (EOC).5
Because complete joint replacement is modeled as a retrospective payment model, participating hospitals receive a set post-care payment for all costs associated with an episode of care.
An EOC ends 90 days post-discharge. The CJR model covers nearly all related services provided, with some minor exclusions specified by CMS. Services covered under CJR include inpatient and physician services, readmission, inpatient psychiatric services, long-term care services, inpatient rehabilitation, skilled nursing facilities, home health services, hospital outpatient services, laboratory testing, medical equipment, and drugs.5
Because CJR is modeled as a retrospective payment model, participating hospitals receive a set post-care payment (“targeted price”) for all costs associated with an EOC. Target prices are not the same across the country, and are defined by CMS for each hospital and regional Metropolitan Statistical Areas at the beginning of each performance year. Although the target price calculation creates a historical and regional competitive structure for spending less per EOC, three quality control measures (at the provider level) also influence the overall reconciliation payment:
Complications during the EOC: The national quality forum (NQF) #1550 Hospital-level Risk Standardized Complication Rate is a measure used to identify complications occurring during the EOC.6
Readmission rate: NQF #1551 Risk-Standardized Readmission Rate defines any unplanned readmissions within 30 days of the hospital discharge date.7
A patient survey: NQF #0166, which is the Hospital Consumer Assessment of Healthcare Providers and Systems, is a 27-item survey that describes the patient’s hospital experience.8
At the end of a claims year/performance year, an annual reconciliation adjudication process occurs in which hospitals that achieve spending below the target price and meet three quality standards are eligible to obtain a reconciliation payment based on the summarized difference between the total claims target price and actual EOC spending. The reconciliation payment becomes the difference between quality-adjusted target price and the actual cost during the EOC. Hospitals that do not meet these quality control metrics or exceed their target price per EOC are responsible for the difference between target price and actual cost. This repayment to CMS is limited to a stop loss amount that will increase from 5% to 20% of CJR claims in performance years 2018 to 2020.2 Target pricing that integrates historical claims, specific cost, and regional influence of other participating hospitals plus quality control adjustments creates an incentive for participating hospitals to be financially responsible for the quality and cost of an EOC.
The CJR model’s conceptual framework postulates many of the highest-cost DRGs responsible for Medicare’s increased expenditures reside in LEJR. Therefore, the focus on what entity is responsible for cost improvement and intervention (under the CJR model) is at the hospital level. Reduction of the cost of LEJR per episode, increased interprofessional coordination, and maintaining or improving the quality of each EOC are the primary factors that facilitate the CJR model’s objectives.9 Thus, the mandatory CJR experiment will provide a generalizable framework whose data can provide insight to proof of concepts that may lower cost of care and affect all future bundled payment models created by CMS.
Reducing Cost While Balancing Quality Measures in the First Two Performance Years
A second performance year audit of the CJR model was conducted covering episodes occurring April 1, 2016, through December 31, 2017, by CMS Innovation Center to monitor and quantify the potential cost savings and effectiveness of this bundled payment program. The demographics of the four target prices showed no changes in bias toward one DRG or another:
75% of LEJR claims were elective noncomplicated patient claims (DRG 470 elective), with a per EOC cost of $22,837;
19% were fracture noncomplicated claims (DRG 470 fracture) with a per EOC cost of $42,131; and
DRG 469 with or without fracture accounted for the remaining 7% of claims.
o Elective DRG 469 (3% of claims) had an average cost of $39,615.
o The remaining DRG 469 fracture claims averaged $56,346 per EOC.
An average episode payment cost was reported, with an average decrease of 3.7% from control episodes (p <.01), which amounts to an average of $997 decrease per EOC. With this decrease, there was a reported $129 million in savings after reconciliation payments, with approximately $117 saving per episode for Medicare. The CJR model produced an average reduction of episode cost, but failed to show any statistically significant savings to Medicare in the first two performance years. Additionally, the year two audit did not demonstrate a statistically different selection bias toward a healthier, lower-risk patient population, nor was there a change in the volume of elective LEJR.5
The largest driver of reduced cost savings was use of institutional post-acute care (PAC) settings. Institutions discharged fewer patients to inpatient rehabilitation facilities—a 27.4% decrease over controls (p <.01) and decreased the EOC by an average of $357. Skilled nursing facilities saw a decrease of discharged patients, saving $508 per episode, and discharges to home health agencies increased by 10.6%.5 This was not associated with a significant change in payments.
In patient populations with concurrent fracture episodes (MS-DRG 470), there was a shift in PAC selection. Discharge of patients with fracture episodes to inpatient rehabilitation decreased by 16.6% (p <.01); discharge to skilled nursing facilities increased by 3.7%; and discharge to home health agencies increased by 16.5% (p <.05). Changes in PAC caused a decrease of inpatient rehabilitation of $625 (p <.01) per episode. There was an overall decrease of $1267 (p <.01) in average readmission payments per fracture episode.5
Hospitals used risk stratification protocols to find patients who were potentially at risk of increased complications postoperatively.
Quality of care was maintained under the CJR model. There were no observed changes in morbidity, readmission rate, emergency department visits, or mortality. Self-reported survey data revealed no change in patient functional status, pain, and care experience. A dramatic change in how hospitals lowered their cost of LEJR episodes was seen in hospital discharge planning:
75% of CJR hospitals used risk stratification protocols to find patients who were potentially at risk of increased complications postoperatively;
89% implemented same-day post-surgery ambulation and also started physical therapy services for LEJR patients;
92% created pain management practices that push for early postsurgical patient mobility;
81% reported that regularly scheduled follow-up appointments made before hospital discharge was beneficial in aiding patients in their postoperative recovery; and
65% provided follow-up telephone interviews to patients in the 90 days post-discharge, which decreased post-acute care readmissions.
Presurgical patient education classes became an important part of setting realistic postoperative goals and informing patients about possible difficulties. Classes included caregiver expectations for milestones needed for discharge and caregiver engagement with the patient. Cumulatively, these helped facilitate quick and safe discharges, optimized outcomes for patients at higher risk, and drove down overall postsurgical cost.5
Protocol changes increased the involvement of the orthopedic surgeon and PAC provider in the decision-making process. With the hospital responsible for the care of the patient 90 days post-discharge, participating hospitals are strengthening their programs in the PAC setting and are adding incentives for providers to follow their patients through recovery. This, in part, can be accomplished by engaging orthopedic surgeons to redirect patient discharge from inpatient or skilled nursing facilities to home health agencies, and stressing that increased care coordination after discharge directly reduces readmissions. More importantly, data sharing is a critical strategy to directly engage physicians in episode cost, quality measures, and PAC utilization. Hospital administrators interviewed stated that CJR performance data were effective in helping them work with surgeons to shift discharge location, and 73% of hospitals reported directly engaging their surgeons to influence CJR model changes.5
Hospitals are increasingly participating in gainsharing, a method of distributing profits among employees, with orthopedic surgeons. Hospital administrators indicated gainsharing was the most successful strategy to engage physician participation in implementing the hospital’s response to CJR model changes. The benefit in gainsharing not only is financial, but also demonstrates the physician’s willingness to implement new clinical ideas and encourage new care processes. PAC providers are similarly engaged, with 45% of hospitals in CJR implementing regular meetings to encourage easier access to sharing patient records between the hospital and PAC, increase care coordination with orthopedic surgeons, and understand the provider’s expectation for discharge.5
TJR is a growing burden for healthcare spending, and CMS has implemented CJR in order to maintain quality of care while reducing cost. Evaluation of the first two performance years has demonstrated that CJR does successfully reduce the average cost of an EOC. Despite these changes, there is still uncertainty whether the program is saving money for CMS, or whether, after reconciliation payments are made, it is costing CMS. Notwithstanding, the bundled payment model introduced by CJR is a promising program to decrease TJR expenditures and a model for bundled payment plans in other areas of healthcare as well. Decreases in cost are achieved through reduced use of institutional PAC, resulting in hospitals increasing patient education, discharge planning, home physical therapy, and communication between PAC physicians and surgeons. Representatives note positive outcomes and reduced internal cost, suggesting a renewed focus on reducing internal costs through increased data usage and physician engagement via gain sharing. As the bundled payment model is more widely implemented, the scope of healthcare continues to shift. Although the shift continues to promote increasing quality of care, planning around the EOC, and communication across medical disciplines, patients will remain both the center and beneficiaries of these changes.
1. Projected volume of primary and revision total joint replacement in the U.S. 2030 to 2060 AAOS. (2018, March 3). https://aaos-annualmeeting-presskit.org/2018/research-news/sloan_tjr/. Accessed November 22, 2019.
2. Mclawhorn A, Buller L. Bundled payments in total joint replacement: keeping our care affordable and high in quality. Rev Musculoskelet Med. 2017;10:370-377.
3. Barnett ML, Wilcock A, McWilliams JM, et al. Two-year evaluation of mandatory bundled payments for joint replacement. N Engl J Med. 2019;380:252–262.
4. Press MJ, Rajkumar R, Conway PH. Medicare’s new bundled payments: design, strategy, and evolution. JAMA. Published online December 17, 2015. doi:10.1001/jama.2015.18161.
5. CMS Comprehensive Care for Joint Replacement Model: Performance Year 2 Evaluation Report. The Lewin Group; 2019: Prepared for Jessica McNeely Research and Rapid Cycle Evaluation Group & Center for Medicare & Medicaid Innovation. Contract number: HHSM-500-2014-00033I.
6. National Quality Forum 1550: Hospital-level risk-standardized complication rate (RSCR) following elective primary total hip arthroplasty and/or total knee arthroplasty. Centers for Medicare & Medicaid Services.
7. National Quality Forum 1551: Hospital level 30 day risk standardized readmission rate (RSRR) following total hip arthroplasty and/or total knee arthroplasty. Centers for Medicare & Medicaid Services. Available at: http://www.qualityforum.org/QPS/1551.
8. National Quality Forum. Patient Experience and Function, Spring 2019: CDP Report. Department of Health and Human Services Contract HHSM-500-2017-00060I Task Order HHSM-500-T0001. (2019, August 1). https://www.qualityforum.org/Projects/n-r/Patient_Experience_and_FunctionDraft_Report_for_Comment_-_Spring_2019.aspx.
9. Centers for Medicare Medicaid Services. Comprehensive Care for Joint Replacement payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services; Final Rule 2015;1-282.