Mandatory bundled payments go live today. Are you ready?

'Partnerships are absolutely critical for success in CJR,' Lazerow says

The Daily Briefing's Aly Seidel sat down with Rob Lazerow, a practice manager with the Health Care Advisory Board, to discuss what the launch of CMS's first mandatory bundled payment program means for providers across the nation.

Question: The Comprehensive Care for Joint Replacement (CJR) model—CMS's first mandatory bundled payment program—launches tomorrow. As you talk to hospital leaders in the 67 metro areas who will participate in CJR, do you think they're ready?

rob lazerow

Rob Lazerow: With nearly 800 hospitals subject to CJR when it goes live tomorrow, it's safe to say there's variation in hospitals' readiness. Ironically, the organizations that would likely be the most ready—hospitals already participating in CMS's Bundled Payments for Care Improvement Initiative for orthopedics—are exempt from CJR.

But the good news is that hospitals have some time to get fully up to speed. Even though CJR officially launches on April 1, the program doesn't include any downside financial risk until next January. So hospitals can potentially earn bonuses by reducing spending across joint replacement episodes, but any hospitals that exceed their cost targets won't actually owe money back to CMS this year.

Even though hospitals have some time before facing downside risk, they can't wait to focus on quality improvement. Their 2016 performance on quality metrics, such as complication rates, will factor into their quality score through 2019. So given CJR's strong tie between quality scores and financial targets, there's no time to delay on the quality front.

Q: Can you provide some insight into how hospitals have been preparing for the CJR launch?

Lazerow: Hospitals started by identifying opportunities to reduce spending and improve quality across the bundled episode. Similar to past orthopedic bundled payment programs, this often began by focusing on implant costs. But unlike some of the earlier bundling efforts, CJR includes all related spending for 90 days post-discharge, and spending on post-discharge care drives most of the variation between low- and high-cost episodes. So to earn bonuses during the annual reconciliation process, hospitals need to reduce spending on post-discharge care. It's essential for success.

After identifying savings opportunities, hospitals have been building partnerships to manage full episodes of care. CJR holds hospitals accountable for total episode spending, but hospitals can't deliver efficient episodes alone. So partnerships are absolutely critical for success in CJR, and hospital leaders are partnering with two types of providers. First, orthopedic surgeons, since they're central to completing successful procedures. Plus, they have huge influence over discharge disposition—where the patient goes after leaving the hospital. And second, post-acute care providers, who can help ensure patients receive high-quality care in the right setting and don't end up getting readmitted to the hospital.

DOWNLOAD: How to build a stronger hospital-specialist partnership

Q: As CJR goes live, what challenges do you expect to reveal themselves in the coming weeks—and what can providers do to navigate them?

Lazerow: Building meaningful partnerships isn't easy—and it's more than just designing a gainsharing model. Especially compared with many other types of physicians, orthopedic surgeons are still likely to maintain private practices. So hospitals need to engage these independent surgeons and work with them to create effective, reliable, and comprehensive care plans. It's key for improving quality and managing spending.

And for many hospitals, partnering with post-acute providers is relatively new. Many hospital leaders have limited insight into the performance of specific skilled nursing facilities (SNFs) beyond the publicly available star ratings. So hospitals need to figure out which local SNFs and home health agencies are the best—the highest quality and lowest cost—and then build effective partnerships with them.

Several health system leaders have asked us if they need to go out an acquire SNFs to successfully manage CJR. Our guidance has been to focus on partnership, rather than ownership.

Q: Let's switch tracks for a moment. While this is good advice if your hospital is one of the selected markets, what about other providers? Should they be watching how CJR shakes out?

Lazerow: Absolutely. Whether they're located in one of the 67 markets or not, hospital leaders should pay attention to CJR. Remember, this bundling model was developed by CMS's Innovation Center, which was established by the Affordable Care Act (ACA) to test and scale new payment models. And under the ACA, any of the Innovation Center's programs that are certified as successful can be expanded without new legislation from Congress. So if CJR is proven successful, I think we should expect that CMS would look to scale the model nationally.

Q: You bring up a great point: the Innovation Center is testing quite a few different payment models. Where does CJR fit across the broader landscape of payment reform?

Lazerow: It's important to remember that CJR—and bundled payment more broadly—is just one component of payment transformation underway right now. In early 2015, HHS Secretary Sylvia Mathews Burwell announced an ambitious timeline for the transition to alternative payment models (APMs), so think bundles, ACOs, and potentially even capitation models, too.

The big difference is that CJR is mandatory. The rest of the APMs are voluntary, so participation is a strategic decision for providers. CJR signals CMS's willingness to mandate payment change if needed. That's a big deal. I think CJR—and potentially future bundling programs—will play a big role in helping HHS meet its 2018 goal of making 50 percent of Medicare payments through APMs.

And remember, HHS recently announced that they've met the 2016 goal of having 30 percent of Medicare payments tied to APMs. They met their end-of-year goal at the beginning of the year. That progress doesn't even include CJR, since it hadn't launched yet.

Q: So for providers watching this unfold, what can they do to stay on the forefront of the issue?

Lazerow: We've done a ton of research on CJR and bundled payments more broadly. For health care leaders trying to get up to speed on CJR, check out the on-demand webconference my colleague Eric Fontana and I led that unpacks the details of the program. We also just published a new white paper called The Integrated Care Advantage, which looks at how hospitals can manage bundles for Medicare and then use their experience to win business from private payers and employers, too.

I'd also encourage Advisory Board members to call or email me if there's anything we can do to help them navigate CJR.

One step toward CJR success: Know your joint replacement episode spending

In response to CJR, the Advisory Board's Data and Analytics Group has developed a tool to help you assess your episodic spending and ensure your organization is on track.

Our Joint Replacement Episode Profiler allows you to view national average episodic spending allocation by site of service and time intervals following anchor discharge, as well as modify your view from five to 90 days following anchor hospitalization.

Access the tool

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