Bundled Payments: Are They Finally Here?

Bundled Payments: Are They Finally Here?


Healthcare providers around the country are attempting to move toward population health in order to meet the triple aim of better quality care, patient satisfaction and lower costs. But without a mandate, progress to date has been slow. Most providers, in fact, report they were in at least one risk-based contract with a payor, but still predominately function in the fee-for-service world.

In the next two years, Medicare will increasingly move towards value-based payments with financial incentives for hospitals to manage patients' medical costs across the continuum of care. As part of this effort, the Centers for Medicare & Medicaid Services (CMS) announced late last year that it is taking a key step towards value-based payments and bundled payments by establishing the Comprehensive Care for Joint Replacement Model (the CCJR Model), which will go into effect on April 1, 2016. Under the CCJR Model, hospitals in selected areas will be responsible for all related care within 90 days of hospital discharge after a hospital-based lower extremity joint replacement (LEJR) procedure to a Medicare beneficiary. CMS defined LEJR procedures to include most hip and knee joint replacements as well as certain other lower extremity joint replacements.

CMS selected hospitals in 67 geographic areas for mandatory participation in the CCJR Model and it is estimated that just over 800 hospitals nationally will be required to participate. Its stated goal is to give hospitals a financial incentive to work with physicians, home health agencies and other post-acute facilities to coordinate care after a LEJR. CMS is promising to provide spending and utilization data as well as “best practices” in order to help the impacted hospitals make educated care coordination decisions. CMS is also gradually phasing in financial rewards for hospitals when total payments for LEJR episodes of care are less than the pre-determined benchmarks.

CMS reported hip and knee joint replacements are among the most prevalent inpatient surgeries for Medicare beneficiaries. During 2014, there were more than 400,000 such surgeries, and Medicare spent in excess of $7 billion for the inpatient stays related to these surgeries. Medicare reports that average total Medicare expenditure for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 nationally.

On reflection, the CCJR Model is not truly a bundled payment initiative where one provider receives all the payment for an episode of care. Rather, it is another measure whereby hospitals are being held accountable for the total costs of an episode of care even though they are not in control of all the providers who are participating in the care. The bundled price gives hospitals a strong incentive to tightly manage costs after patients leave the hospital and to coordinate with inpatient rehabilitation facilities, nursing homes and home healthcare. Effective implementation of the CCJR model should improve the quality and efficiency of care for Medicare beneficiaries, which is essential to meeting the triple aim.

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