Making Medicare's Hip and Knee Replacement Bundles Work

Laird Harrison


April 28, 2016

In This Article

Medicare Bundling Program Challenges

But CJR falls short of ideal from the practitioner's perspective, says Dr Barber. "The details can be concerning."

The program affects two Medicare severity-diagnosis related group (MS-DRG) codes: 469 (major joint replacement or reattachment of lower extremity with major complications or comorbidities) and 470 (major joint replacement or reattachment of lower extremity without major complications or comorbidities).[2]

Every year for 5 years, CMS will issue to hospitals bundled target prices for the two codes. It will set different target prices for elective hip replacements vs hip fractures within each MS-DRG. It will base the target prices at first on the hospital's historic performance, then gradually shift to setting prices based on what hospitals are charging in the same geographic area.[2]

CMS will reimburse the hospitals under the conventional fee-for-service program throughout the year. At the end of the year, it will compare actual spending for the episode with the bundled target price for the responsible hospital. It will pay a bonus to hospitals whose total charges were below the target price, and require repayment from hospitals whose total charges were above the target price.[2]

To receive bonuses, the hospitals must meet a minimum level of quality based on complication rates and patient surveys.[2]

To prepare for the change, Dr Barber says, hospitals will need systems to track quality and costs. They will have to collaborate closely with skilled nursing facilities and home-healthcare providers, and put those collaborations into contracts.

In a survey released March 3 by Function and Outcomes Research for Comparative Effectiveness in Total Joint Replacement and Wellbe, only 9% of hospitals said they were "fully prepared" for CJR.[3]

Although the new system doesn't directly address payments to surgeons, it will affect them because the law allows the hospitals to contract with surgeons and other providers to share the bonuses or penalties under the CJR. And hospitals can't improve quality and reduce costs without surgeons' help, says Dr Barber. "Surgeons will be very involved at some point in time. The question is, when are the hospitals going to contract with them to help reduce the cost of post-acute care?"


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