19 more things to know about orthopedic bundled payments — September 2016

Practice Management

The healthcare industry is firmly heading into the era of bundled payments. Earlier this year, Becker's ASC Review published the article "Bundled payments: 28 things to know for spine, orthopedics & ASCs." Here are 19 more things to know about bundled payments for the second half of 2016.

Regulatory updates
1. Late last year, CMS finalized the Comprehensive Care for Joint Replacement model, under which acute-care hospitals in certain selected geographic locations will receive retrospective bundled payments for episodes of care for lower extremity joint replacement or reattachment of a lower extremity. The CJR model went into effect on April 1, 2016. The model is required for the 794 hospitals located in 67 metropolitan statistical areas throughout the country.1


2. An Avalere analysis detailed the average cost per CJR episode by care setting:


•    Inpatient hospital stay: $13,193
•    Skilled nursing facility: $5,034
•    Inpatient rehabilitation facility: $1,568
•    Home health agency: $2,123
•    Physician: $1,675
•    Hospital readmissions: $1,155
•    Outpatient: $604
•    Durable medical equipment: $122

3. The total Medicare payment in CJR per episode will be $25,565 with 39 percent tied to post-discharge care, according to the same Avalere analysis.


4. CMS recently released the first data feed of the Comprehensive Care for Joint Replacement Model, which reflected updates and corrections to the previously released baseline files. The data feed includes episodes beginning in April, May and June. The new format includes a wage adjustment and a wage standard. In a Becker's Spine Review article, Kelly Price, vice president and chief of healthcare data analytics at Rensselaer, N.Y.-based DataGen, said hospitals should not use this initial data feed to measure financial performance.


5. Some organizations are concerned potential downsides of the CJR model. On Sept. 7, 2015, the American Academy of Orthopaedic Surgeons submitted a four-page letter to the House Budget Committee hearing on the Center for Medicare & Medicaid Innovation. In the letter, AAOS raised concerns about how the new Medicare bundled payment model for joint replacement surgery would impact orthopedic payments. The AAOS is also concerned the model imposes monetary penalties on physicians performing joint replacement surgeries on disadvantaged patients since postoperative care is more intensive for these patients.2 

6. In April, CMS extended Bundled Payments for Care Improvement participation option deadline. Participants can now extend participation in Models 2, 3 and 4 through Sept. 30, 2018. The initiative has 1,522 participants.

Hospital-employer bundled payment partnerships
7. Companies are beginning to partner with healthcare facilities to initiate bundled payment programs for their employees. In June, Cleveland-based University Hospitals agreed to provide General Electric employees with joint replacement care as part of the company's National Hip and Knee Replacement Centers of Excellence Program, which offers a bundled payment model.


8. Similarly in April, Chicago-based Rush Health signed a direct employer contract to provide orthopedic and spine surgeries to United Airlines' employees. Employees who receive surgery at Rush Health facilities, under the partnership, are not responsible for co-payment and coinsurance costs.


Clinical/financial research on bundled payments
9. A study published in the International Journal of Spine Surgery examined bundled payments and how they could affect resource utilization during spine surgery. There were 43 surgeons who completed the survey. In every scenario, there were surgeons who reported they would change at least one aspect of their practice with bundled payments — with 24 percent to 49 percent of the surgeons reporting change for each scenario. Also, neuromonitoring would decrease in all scenarios by an average of 21 percent.3


10. At the Bundled Payment Summit in June, Coleen Kivlahan, MD, of the University of California San Francisco, noted alternate payment models do not recognize the differences between various joint replacement procedures. There are two Diagnosis Related Group, or DRG, codes for lower extremity joint replacement — one for high-risk patients and another for low-risk patients. But, when estimating risk, the Bundled Payments for Care Improvement Act and the Comprehensive Care for Joint Replacement rule lumps both groups together, according to Dr. Kivlahan. Treatment for low-risk patient could cost an average of $25,000. However, for high-risk patients, the costs could average between $40,000 and $50,000 per episode of care.


11. Providers who are early adopters of bundled payments can increase patient volumes from payers, according to a study published in Spine. Fee-for-service reimbursement accounts for a majority of revenue, but several organizations expect 30 percent to 45 percent of their spine volume to be covered under bundled payments within three years, the study found.4


12. A bundled payments program for total joint replacements resulted in improvements in quality of care and patient outcomes while reducing overall costs, according to a study from NYU Langone Medical Center in New York. In the first year of the study, researchers identified 721 Medicare-eligible patients undergoing total joint replacement patients. For comparative purposes, they identified 785 in the third year. The study found that average hospital length of stay decreased from 3.58 days to 2.96 days from the first year to the third year. The average cost to CMS of the episode of care decreased from $34,249 to $27,541 from year one to year three of the program.


13. A recent article in Health Affairs found that CMS' CJR model for bundled payments could penalize some hospitals because it doesn't make risk adjustments for case complexity. According to the article, for each standard deviation increase in the patient's complexity, the reconciliation payments were reduced by $827 per episode. If CMS implemented risk adjustment, they would increase the reconciliation payments to some hospitals by around $114,184 per year.


Bundled payment implementation
14. Increasingly, orthopedic centers are offering bundled payments. In May, Chicago-based Midwest Orthopaedics at Rush became the first academic practice and among the first orthopedic groups in the nation to offer patients these kinds of bundled payments. The practice offers the program for the following five procedures:

•    ACL repair: $10,800
•    Hip arthroscopy: $13,250
•    Knee arthroscopy: $5,000
•    Rotator cuff repair: $11,300
•    Shoulder arthroscopy: $10,000


15. Charlotte, N.C.-based OrthoCarolina published an article in the New England Journal of Medicine Catalyst detailing its process for creating a physician-owned bundled payment. The group was able to lower costs by 10 percent to 30 percent as well as improve outcomes for hip and knee replacement surgery.5  


16. Two hospital surveys released last month found the majority of hospitals polled are not ready for CMS' Comprehensive Care for Joint Replacement reimbursement model. A FORCE-TJR survey found 56 percent of hospital orthopedics programs report being unprepared for CJR. Avalere Health's survey results indicated 60 percent of the hospitals required to participate in CJR could lose money in the bundled payment model when downside risk begins in January 2017.


17. Half of all physicians, 78 percent of hospitals and 80 percent of payers find bundled payments appealing, according to a booz&co infographic on Stragety+Business. Additionally, more than 80 percent of hospitals with bundle experience have improved patient engagement, increased alignment with physicians and further reduced administrative costs. 


18. Zimmer Biomet recently launched a suite of clinical services and technologies that especially targets orthopedic providers who are part of the CJR program. The suite, Signature Solutions, integrates into the established Zimmer Biomet consulting platform. The core components include interactive patient engagement tools for patient education, communication and adherence to protocols as well as data mining and analysis platform to collect patient-reported outcomes, among other services.


19. Stryker Performance Solutions, the business unit of Stryker's Reconstructive Division, partners with hospitals and physician practices to help improve healthcare quality, patient satisfaction and profitability. It offers a new digital tool called Episode Performance Manager, which translates raw claims data from CMS into reports. The reports compare the performance of hospitals participating in CMS' CJR model.




1AAOS Academy News
2AAOS letter
3International Journal of Spine Surgery study
4Spine study
5New England Journal of Medicine Catalyst article


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