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PRACTICE
MANAGEMENT
19 Things to Know About Orthopedic Bundled Payments
By Anuja Vaidya
H
ere are 19 things to know about
bundled payments for the second
half of 2016.
Regulatory updates
1. Late last year, CMS finalized the Compre-
hensive 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. e
CJR model went into effect on April 1, 2016.
e 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. e 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 Replace-
ment Model, which reflected updates and
corrections to the previously released baseline
files. e data feed includes episodes begin-
ning in April, May and June. e new format
includes a wage adjustment and a wage stan-
dard. In a Becker's Spine Review article, Kelly
Price, vice president and chief of healthcare
data analytics at Rensselaer, N.Y.-based Data-
Gen, said hospitals should not use this initial
data feed to measure financial performance.
5. Some organizations are concerned poten-
tial downsides of the CJR model. On Sept.
7, the American Academy of Orthopaedic
Surgeons submitted a four-page letter to the
House Budget Committee hearing on the
Center for Medicare and Medicaid Inno-
vation. In the letter, AAOS raised concerns
about how the new Medicare bundled pay-
ment model for joint replacement surgery
would impact orthopedic payments. e
AAOS is also concerned the model imposes
monetary penalties on physicians performing
joint replacement surgeries on disadvantaged
patients since postoperative care is more in-
tensive for these patients.
2
6. In April, CMS extended Bundled Payments
for Care Improvement participation option
deadline. Participants can now extend partic-
ipation in Models 2, 3 and 4 through Sept. 30,
2018. e 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 Hospi-
tals agreed to provide General Electric em-
ployees 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, un-
der 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. ere were
43 surgeons who completed the survey. In ev-
ery scenario, there were surgeons who report-
ed they would change at least one aspect of
their practice with bundled payments — with
24 percent to 49 percent of the surgeons re-
porting change for each scenario. Also, neu-
romonitoring 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 pay-
ment models do not recognize the differences
between various joint replacement procedures.
ere are two Diagnosis Related Group, or
DRG, codes for lower extremity joint replace-
ment — one for high-risk patients and anoth-
er for low-risk patients. But, when estimating
risk, the Bundled Payments for Care Improve-
ment Act and the Comprehensive Care for
Joint Replacement rule lump both groups to-
gether, according to Dr. Kivlahan. Treatment
for low-risk patient could cost an average of
$25,000. However, for high-risk patients, the
costs could an average of $40,000 to $50,000
per episode of care.
11. Providers who are early adopters of bun-
dled payments can increase patient volumes
from payers, according to a study published
in Spine. Fee-for-service reimbursement ac-
counts 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 re-
ducing overall costs, according to a study from
NYU Langone Medical Center in New York.
In the first year of the study, researchers iden-
tified 721 Medicare-eligible patients undergo-
ing total joint replacement. For comparative
purposes, they identified 785 in the third year.
e 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. e 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 com-
plexity. 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 imple-
mented risk adjustment, they would increase
the reconciliation payments to some hospi-
tals by around $114,184 per year.
Bundled payment implementation
14. Increasingly, orthopedic centers are
offering bundled payments. In May, Chica-
go-based Midwest Orthopaedics at Rush be-
came the first academic practice and among
