Watch our introductory video and learn the CJR basics and tips on how to win with bundled payments.
Read on as we explain why bundles matter and reveal the 4 key ways to win at bundled payments.
Bundled Payments: Sometimes called episode-based-payments, a bundled payment is the fixed cost determined by Medicare to cover all of the set treatments that fall under one episode of care.
With the widespread introduction of Medicare bundled payments in 2016, hospitals are more accountable than ever for the care a patient receives. It is now the hospital’s responsibility to ensure that the entire defined episode of care (from admission through to 90-days post-discharge) meets the required quality of care and budget allocated for the procedure. Take for example the joint replacement bundle, Comprehensive Care for Joint Replacement (CJR, formerly called CCJR). Despite many caregivers involved in the episode of care, it is the hospital who is ultimately held accountable for the success of the joint replacement and total cost. The major caveat is that even though the hospital is held responsible for the entire episode of care, each caregiver (like a physical therapist or skilled nursing facility) bills Medicare directly under “fee for service”.
In other words, the hospital who must ensure the quality is high and the spend does not exceed the set target, does not control what is being billed. The hospital does not have billing visibility for each caregiver in real-time. The payment is a retrospective, end-of-year reconciliation with financial consequence placed solely on the hospital.
Episode of Care: An episode of care (“episode”) is defined as the set of services provided to treat a clinical condition or procedure. Each episode of care is defined.
In the Comprehensive Care for Joint Replacement (CJR) bundle, if the cost for the episode of care exceeds the set target determined by Medicare, the hospital must pay a penalty (up to 20% of the episode of care price). If the entire joint replacement surgery costs less than the set benchmark, the hospital gets to keep what remains in the bundle. Bundled payments are a form of risk-contracting–some care organizations will win, others will lose, but everyone will have to learn the rules and strategy of a new system.
What is CJR? Comprehensive Care for Joint Replacements is a bundle introduced by CMS that holds the hospital accountable for the cost and quality of care a patient undergoing a replacement received. Most notably, CJR has made the hospital responsible for a patient’s outcome 90 days after their surgery date.
Why Do Bundles Matter?
Medicare began enrolling health organizations in the CMS Bundled Payments for Care Improvement initiative in 2013. With proven success, the Centers for Medicare and Medicaid have stated that by 2018 50% of fee for service payments will transition into alternative payment models, led by bundles. This means in 4 years we will go from less than $1bn in bundled payments to $240bn. This signifies massive changes for inpatient health and underscores the importance of learning and adopting the best practices of this new system to mitigate risk and ensure financial gain. CJR mandatory bundled payments are set to affect over 800 hospitals (and counting) this year.
Bundled Payments have been introduced by CMS as a way to incentivize high quality and efficient care to patients with defined episodes of care. The goal for CJR, is to force hospitals to quarterback care and costs for patients for the entire episode of care, not just what happens in their facility. This means a more holistic approach to patient care, where coordination is required across the continuum of providers. The theory is that fragmented health care, where each service in an episode runs independently (without a quarterback to keep players in check) results in lower quality care.
If a hospital exceeds the benchmark set for CJR due to inefficiencies, lack of coordination with “fee for service” care providers, or other controlled and uncontrolled factors, they will be charged for the overage at year end. Once fully phased in, the penalty can be up to 20% of the total set episode of care price. As current data shows, many hospitals are exceeding the bundle price.
On the flipside, increased patient volume and financial rewards are real for hospitals who can deliver high quality care and hit performance indicators, while staying under the target cost.
Read on as we walk you through four key ways a hospital can reduce bundle costs.
4 Ways to Reduce CJR Bundle Costs
Once care and costs are under control, hospitals are set-up for bonus payments and higher volume. So how can hospitals improve care and reduce costs–especially when they don’t control the most expensive parts of the episode like post-acute care?
The best way to reduce CJR bundle costs is simple: avoid costly post-acute care all together.
The better prepared a patient is before their surgery, the lower their medical risk on surgery day and more likely it is they can be discharged home or require limited post-acute care. This means a hospital has a much greater, more transparent handle on the costs of CJR.
Here’s how to reduce the likelihood for costly post-acute care as well as three other CJR bundle cost reduction methods.
1. Reduce Post-Acute Care by Improving Patient Health and Preparedness Before Surgery
Unlike other episodes of care, CJR is a scheduled elective surgery with a proven preoperative path toward an optimal outcome. Therein lies a massive cost-savings and patient risk-reduction opportunity for the hospital.
The best way to control bundle costs, with the highest return on investment, is by getting patients ready to go home after surgery through proper patient preparation. The healthier and better prepared a patient is walking into surgery, the less costly the episode of care will be. CMS data shows that CJR episode costs go up in a linear fashion as the number of chronic diseases increase. Most CJR patients have 4-5 chronic diseases at the time of surgery. Controlling chronic disease before the procedure is not only critical for patient health, but for quality assurance and cost control. Beyond keeping chronic disease at bay, pre-op preparation is another massive factor in reducing bundle costs. A study with over 4700 patients showed that just 1-2 hours of pre-op prep, focused on “nesting” the home for a safe return and training on how to use assistive walking devices, yields an average drop in episode cost of $1,215.
PreHab programs, like PeerWell, are designed to cover the wide-range of preoperative exercises required to prepare a patient to show competency on activities of daily living in the hospital. This means a daily checklist of tasks that encourage proper nutrition to boost healing, opioid-free pain management, as well home prep, practicing the daily living movements required for hospital discharge, and more. Patient recovery can start before surgery takes place with the early introduction of a PreHab program that gets patients to work towards optimizing their health and preparedness. Aligning patient and medical provider goals creates an unparalleled, incentivized win-win.
2. Manage Patient Discharge
After a total joint replacement, 85% of patients are discharged to a post-acute care provider and most of those patients are discharged to a second post-acute care provider. This comes at a significant cost, often more than the billable cost of the surgery itself. If a patient is discharged to a Skilled Nursing Facility (SNF), the episode cost has likely doubled, resulting in an overage for the hospital.
It goes without saying that necessary post-acute care shouldn’t be avoided if the patient requires it. However, creating a discharge plan that encourages doctors to recommend patients who are unable to go straight home go to pre-approved vendors is a way to exert indirect control over rising costs. In addition, as previously mentioned, patients who have completed a PreHab program, practiced the competence activities required for discharge home (like climbing stairs and getting on and off the toilet), and ultimately, are healthier and better prepped for surgery, are more likely to require less post-acute care.
3. Build a Real Hospital/Doctor Partnership
Developing true partnership with doctors is an important, fundamental step in making bundled payments work for any health organization. Doctors help determine standards for care settings, orchestrate PreHab and pre-op surgery prep, choose the patient discharge location, and influence patient choice of post-acute care provider. Hospital doctors, specifically the orthopaedic surgeons performing the procedure have a lot of power over costly decisions being made. The issue is that most orthopedic surgeons do not believe the hospital is a strategic partner.
Involving doctors early in bundle program care design is essential to building something that works. Gainsharing when efficient episodes have been executed is something that can incentivize surgeons to cooperate and get on board with cost-saving treatment. Gainsharing is a relatively plug and play feature of CJR and can be a great way get everyone on the same team
4. Curate a Network of Care Providers
It’s up to each care organization to select the best care available at a reasonable cost. Of course, a hospital cannot impede a patient’s ability to select their provider, but a doctor can suggest where patients go. Selecting post-acute care providers should be based on whether they meet operational standards like standardized admissions and good electronic records. Also due diligence should be done in order to examine their care planning protocols and their staffing to ensure patients have a good chance of achieving great outcomes.
Building out a network of pre-approved hospitals as well as more formal collaborators (this is in reference to gainsharing) will directly affect the bottom line of an organization.
Gainsharing in Bundled Payments: An incentivized plan where the reward bonus that is shared amongst pre-designated health care providers, called “collaborators”, when an episode of care costs less than set target.
Like in any risk-sharing system, the opportunity to come out ahead is reliant on how quickly you move, adapt and invest in building a strategy that is customized to your organization. For the major piece of the puzzle that is reducing post-acute costs by bettering preoperative patient health and preparedness, we can help.
If you’re a hospital or doctor interested in taking a proactive approach toward the CJR bundle, sign-up for PeerWell. We’d be happy to discuss how our PreHab program, designed for joint replacement candidates, can help you successfully transition into bundled payments.