On February 20, 2020, CMS released a proposed rule that would extend the bundled-payment model for joint replacement surgery for an additional three years and broaden its scope to include outpatient procedures (the Proposed Rule). Originally scheduled to expire at the end of 2020, the Proposed Rule would allow CMS to continue the Comprehensive Care for Joint Replacement (CJR) Model from 2021 through 2023. The Proposed Rule, which was published today, February 24, 2020, in the Federal Register, seeks to utilize the extension to evaluate the impact of the proposed changes to the payment model. Comments are due by 5:00 p.m. EST on April 24, 2020.

Begun in April 2016, the CJR Model is an episode-based bundled payment initiative for hip and knee replacements—the most common inpatient services for Medicare beneficiaries. As previously reported , under the current CJR Model, the episode begins with an inpatient hospitalization for a knee or hip replacement and runs through 90-days post-discharge. Participating hospitals are paid one retroactive payment for all services incurred in that time frame. To reconcile the retroactive bundled payment with the total cost of the services, the CJR Model relies upon a complex methodology of quality-adjusted target prices. The total cost of the episode is compared to the relevant quality-adjusted target price. As a result of this comparison, the hospital may either owe a repayment to CMS or receive a shared savings, or reconciliation, payment. Through gainsharing payments, participating hospitals can contract with collaborating physicians and post-acute care providers to share these reconciliation payments.

The Proposed Rule proposes several substantive changes to the CJR Model. Notably, the Proposed Rule proposes to add outpatient total knee and total hip replacements to the definition of “episode.” According to the CMS Fact Sheet, the Proposed Rule also sets forth changes to the target price calculation, including: modifying the basis for the target price from three years of claims data to the most recent one year of claims data; removing the national update factor and twice yearly update to the target prices; removing anchor factors and weights; incorporating additional risk adjustment to the target pricing; and modifying the high episode spending cap calculation methodology. In addition, changes to the reconciliation process are proposed, including: modifying the high episode spending cap calculation methodology used at reconciliation; adding a retrospective trend adjustment factor; and modifying the quality discount factors applicable at reconciliation for participating hospitals with excellent and good quality scores to better recognize high quality care.

CMS has not proposed to expand the geographic scope of the CJR Model. Since the CJR Model is inherently a pilot program, however, the obvious implication is that it may be expanded, potentially nationally, if CMS considers the results of the pilot a success. All hospitals, therefore, have an interest in monitoring the CJR Model as it develops.