On Nov. 24, the Centers for Medicare & Medicaid Services will publish in the Federal Register the final rule for the Comprehensive Care Joint Replacement (CJR) Program. The CJR Program is a new payment model that requires hospitals in 68 randomly selected metropolitan areas to take responsibility for the quality and total cost of hip and knee replacement surgeries (MS-DRGs 469 and 470). The hospital where the surgery is performed (also known as the “Episode Initiator”) will be on the hook for the cost and quality of not only the hospital’s services but for professional services, home health, physical therapy and skilled nursing services provided to the Medicare patient during the “episode of care.” The “episode of care” starts at the time of the surgery and continues until 90 days after the patient is discharged from the hospital.

Timing. The CJR Program will start on April 1, 2016 and conclude Dec. 31, 2020.

Payment Methodology. Under the CJR Program, all providers, including the hospital, will be paid regular Medicare fee-for-service rates for the items and services provided to joint replacement patients during the episode of care. On a retrospective basis, CMS will compare the total cost for the services furnished during the episode of care (“actual episode payment”) to the established CJR target price, determined based on historical Medicare cost data. The CJR Program will have only upside risk for hospitals in the first year of the program and two-sided risk in subsequent years. If the actual episode payment is less than the CJR target price and the quality criteria are satisfied, the hospital is eligible for a “reconciliation payment.” Starting in the second year (2017), if the actual episode payment exceeds the CJR target price, Medicare will require the hospital to repay the difference.  

Every year during the five performance years of this model, CJR hospitals will receive separate episode target prices for MS-DRGs 469 and 470, reflecting the differences in spending for episodes initiated by each MS-DRG.

In an effort to mitigate the potential downside risk to hospitals, the CJR regulations include stop loss limits during the second through fifth years. In addition, the calculation of the CJR target price incorporates a risk stratification methodology to adjust the target for patients with hip fractures within MS-DRG 469 and 470.

Quality Score. The amount of a CJR hospital’s reconciliation payment will depend in part on the hospital’s quality score which will be driven by the hospital’s reported complications rate and consumer survey results.

Data from CMS. Upon request, CMS will make three years of baseline data available to CJR hospitals, before the April 1, 2016 start date. On an ongoing basis, aggregate and identifiable data will be available no less than quarterly.

Fraud & Abuse Waivers. Although the final rule itself did not include waivers of any fraud and abuse laws, CMS and the Department of Health and Human Services Office of Inspector General issued a joint statement waiving the Anti-kickback, physician self-referral, and civil monetary penalty laws with respect to certain carefully defined financial relationships between CJR hospitals and collaborating providers involved in the delivery of care to CJR patients. CMS will also permit limited beneficiary incentives that would otherwise implicate the Civil Money Penalty Law or the Anti-kickback statute. 

Coverage Rules Waived. CJR Rule waives selected Medicare coverage rules, including:

• SNF Three-Day Rule. Joint replacement patients will not be required to have a three day hospital stay in order to be eligible for Medicare coverage of treatment in a skilled nursing facility.
• Post Discharge Home Visits. Physician home care visits would not be subject to the direct supervision requirement of “incident to” billing. This would allow a CJR beneficiary to receive post-discharge visits in his or her home or place of residence any time during the episode
• Telehealth. Providers are eligible to receive payment for telehealth services provided to CJR beneficiaries even if the beneficiary is not located in a rural area. In addition the provider does not have to satisfy the originating site requirements to be eligible for payments for telehealth services, which means the beneficiary can receive covered telehealth services from home, rather than a clinical location such as a hospital, clinic or nursing facility.

With the April 1, 2016 implementation date looming, the hospitals forced to participate in the CJR Program face a steep learning curve. They also need to develop appropriate infrastructure on a tight timeline with a broad range of providers in order to meet the CJR Program’s efficiency and quality goals. To assist with the legal analysis and contracting opportunities between CJR hospitals and collaborating providers, Davis Wright Tremaine LLP will be hosting a CJR Webinar on Dec. 8, 2015 as well as a series of Breakfast Briefings on the CJR Program in early January.