Q1: What is the significance of the CCJR model?

A1: This is the first time that CMS has required a mandatory model under bundled payments. For hospitals in 75 metropolitan statistical areas, it is now mandatory that they bundle joint replacement patients’ care to include the hospital stay as well as the 90-day post discharge period. This significant step by CMS underscores its commitment to bundled payments as a mechanism to achieve payment and delivery reform goals. It also signals that voluntary participation alone will not allow CMS to meet its stated goal of at least 50% of all Medicare fee-for-service reimbursement to be paid under an alternative payment model by 2018. There will need to be a combination of voluntary and mandatory programs. This is the first significant mandatory program that we have seen.

Also of significance is that unlike the Bundled Payments for Care Improvement (BPCI) initiative where there are many types of providers that can participate and bare risks, CCJR has designated hospitals as the only entity to bare the financial risk with CMS to manage the bundle.

Q2: What are the magnitude and scope of the rule?

A2: Included in the 75 metropolitan statistical areas where the CCJR model is in place, are three of the 10 largest metropolitan areas in the country, including New York City, Los Angeles, and Miami. The volume within the 75 MSAs is roughly 25 percent of all joint replacements performed annually in the United States.

Also, the timeline mandates that this will begin on January 1, 2016, which doesn’t allow providers much time to prepare as we are 6 months from that date. The caveat is that CCJR is not requiring providers to accept downside financial risk in year one, and while the demonstration begins on January 1, 2016, hospitals will not have downside financial risk until January 1, 2017. That allows providers more time to prepare and to gauge what their performance would have been if they were at financial risk.

Hospitals in the MSAs who have not yet engaged in any of the voluntary programs, most notably accountable care organizations (ACO) or BPCI, will have a steep learning curve. There is a lot of data and analytics that will need to be performed to effectively understand and identify the risks and opportunities in their historical and current experience. They will also need to facilitate a number of care redesign initiatives, including dissecting how decisions are made upon hospital discharge as well as aligning themselves with downstream partners that will meet their clinical and financial goals.

Q3: What does CMS hope to accomplish?

A3: CMS’ goal is to reduce spending while maintaining or improving quality. They have estimated that the proposed rule will generate $153 million in savings over 5 years. Also, because bundling initiatives to this point have been voluntary, CMS wants to understand the impact and scalability of bundled payments across different providers and markets. A mandatory program like this increases the representativeness of that participation across the country and gauges the challenges and successes across small markets like Flint, Michigan, as well as large markets like New York City.

Q4: Is the timeline to transition at least 50% of Medicare fee-for-service reimbursement to alternative payment models by 2018 achievable?

A4: The timeline is achievable, but it will require new initiatives and incentives for providers to engage quickly and be prepared to bare downside financial risks and generate Medicare savings within the next 2.5 years. Given the amount of participation in the various ACO programs and the thousands of providers who are voluntarily participating in one of the four models in BPCI, CMS has come a long way toward achieving their goal. There is congruence between the timing of this program and the stated goals of CMS leading to 2018.

Q5: Can this program design be successful?

A5: There are several factors that make this highly likely to work. First, early bundled payment experience through the Acute Care Episode demonstration project and in BPCI shows that providers can be successful under bundled payments structures and that this payment structure can achieve desired outcomes of improving quality and lowering costs. Second, CMS chose joint replacement with lower extremity, a surgical group widely recognized to be more homogeneous and less complicated than many medical conditions, which makes this a logical condition to start with under a mandatory program. Third, there is significant highly published variations in how joint replacement patients are treated across the country in different markets in terms of what types of services they use, how much of the services they use, and how much the services ultimately cost CMS, signaling an opportunity to reduce this variation in a way that lowers overall spending.

Q6: What are the next steps for providers?

A6: If a hospital has been selected to be at risk under this mandatory program, the first step is to define the opportunity through robust data and analytics in order to understand the utilization data in the hospital’s market and identify current care delivery patterns and areas for improvement. The second step is to understand market dynamics by evaluating whether the hospital’s interests align with existing partners that will enable the hospital to be more successful. The third step is to determine future care management and clinical reprogram needs. Finally, develop the clinical innovations, care transitions, and evidenced-based care delivery components that will enable effective management of patients for 90 days after they leave the hospital. This will be critical to ensure understanding of what is happening with patients in the necessary time frame and whether it is consistent with goals under the program and where, if at all, there is an opportunity to intervene if things aren’t going according to plan in that 90-day period.