GE Healthcare Camden Group Insights Blog

Anticipate Cardiac Episode Payment Models and Get a Head Start on Quality

Posted by Matthew Smith on Sep 20, 2016 2:30:16 PM

By Barbara Letts, Senior Manager, GE Healthcare Camden Group

As we introduced in recent posts, bundled payment programs are not only here to stay but there are more to come. CMS is targeting 90 percent of Medicare payments to be tied to quality or value, and 50 percent of Medicare payments tied to alternative payment models (“APMs”) by 2018. Bundled payments expansion will be a significant contributor.

CMS will likely expand the Comprehensive Care for Joint Replacement (“CJR”), and the recently proposed cardiac bundles called Episode Payment Models (“EPMs”) for heart attacks and bypass surgeries. All mandated and voluntary bundled payments programs are tied to a quality requirement as a condition for payment.

Examples of Programs Tied to Quality or Value

  • Hospital Value-Based Purchasing     
  • Hospital Readmissions Reduction Program
  • Hospital-Acquired Condition Reduction Program       
  • Merit-Based Incentive Payment System

Examples of Programs Tied to APMs

  • Medicare Shared Savings Program   
  • Patient Centered Medical Home
  • Bundled Payments for Care Improvement   
  • Oncology Care Model

Similar to CJR, two factors determine whether your organization will succeed (i.e., receive a reconciliation payment from CMS) under the newly proposed cardiac EPMs.


Quality performance will also be factored into the episode target price calculation. A hospital with “Good” or “Excellent” quality scores would receive a higher target price as a result of reduced discounts and therefore improve their chances to save. The quality scores are composed of the following measures:


  • 30-day, all-cause, risk-standardized mortality post-AMI
  • Excess days in acute care after AMI
  • Voluntary hybrid 30-day, all-cause, risk-standardized mortality eMeasure data submission
Patient Satisfaction
  • Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) score
CMS is considering replacing the current 30-day mortality measure with the Hybrid AMI Mortality measure. The hybrid measure includes the same current 30-day mortality measure as one component using claims data but also includess clinical status information composed of five core elements: age, heart rate, systolic blood pressure, troponin, and creatinine. Currently, CMS uses the AMI mortality measures for payment determination in accordance with the Hospital Value-Based Purchasing Program.

  • 30-day, all-cause, risk-standardized mortality post-CABG
Patient Satisfaction
  • HCAHPS score

CMS plans to add the new CABG mortality measure to the Hospital Inpatient Quality Reporting Program in fiscal year 2017. HCAHPS are not specific to DRGs and reflects elements of care such as communication, pain management, discharge/transition information, cleanliness, and quietness. Additionally, there will be two variations for heart attacks: medical treatment (management) and revascularization (PCI) so there would be two different target prices.

Get Ahead of the Curve: Voluntary Reporting

One of the pain points we’ve seen with clients under CJR is the reporting process for voluntary submission of data. For organizations that have not prepared for bundled payments, it can be a sizeable learning curve just to understand the basic elements and concepts. The Medicare acronyms alone could get you in a tizzy. In regard to quality, if your HCAHPS scores are low and your mortality rates are average, you should consider voluntary reporting of clinical data to ensure acceptable quality scores at a minimum or you will be at risk for no payments even if you demonstrate reduced Medicare cost.

If there is one recommendation we would emphasize, it would be to get ahead of the curve with voluntary reporting. First, understand where you are today in regard to these measures (already being reported). Then, if there is risk of receiving a below-acceptable composite score, adopt a best practice process today for reporting and submitting clinical status information to Medicare whether this is something you develop in-house or contract with a vendor.

Other considerations iclude adopting these measures in other agreements or programs that have a quality requirement. For example, you may have a cardiology physician’s professional services agreement or employment agreement with a quality incentive bonus. Start tying them to other measures that you know are coming your way, and are mandated. This allows for consistency and further aligns incentive payments to other initiatives that have a financial impact on your organization.

Additional recommended reading related to cardiac EPMs:

Cardiac Care Bundled Payments

LettsB.jpgMs. Letts is a senior manager with GE Healthcare Camden Group and specializes in financial advisory services for the healthcare industry. She has developed complex financial models for various types of healthcare entities including children’s hospitals, large public hospitals, academic medical centers, community providers, medical foundations, clinically-integrated networks, and hospitals in turnaround situations. She may be reached at



Topics: Bundled Payments, Barbara Letts, CJR, Cardiac Episode Payment Model

The Math Behind CJR: The Top 10 Calculations You Should Be Considering

Posted by Matthew Smith on Mar 23, 2016 3:14:44 PM

By Kelly Tiberio, Manager, and Barbara Letts, Senior Manager, GE HealthCare Camden Group.

In a time when healthcare organizations can shop around for risk-based contracts, the Comprehensive Care for Joint Replacement (“CJR”) mandate creates uncertainty that has hospital C-suite executives cautious if not uncomfortable. “Calculated risk” isn’t an option in the CJR mandate; on the contrary, CJR creates a new paradigm of widespread accountability for the cost of episodic care that the country hasn’t seen before. In less than three weeks, nearly 800 acute care hospitals will begin their mandatory participation in the CJR mandate. While CMS has delayed risk to begin in performance year 2 of the program, the preparation for going at-risk starting January 1, 2017 should start now.

In evaluating their potential upside opportunity and downside risk as hand-picked participants in this program, healthcare executives would be wise to consider the various calculations they can—and should—be making to best understand their organizations’ probability of financial success in CJR. Consider these 10 practical calculations as your hospital or health system embarks upon the new CJR reality.

For illustration purposes, the calculations in this table use a $25,000 baseline price (before the CMS discount is applied) for a lower extremity joint replacement (“LEJR”).  Read about each calculation below the table.

(Click here for a larger image)


Calculation #1: The first question every healthcare executive asks about CJR is: how is this going to impact our bottom line? While the exact answer can only be reached through analysis using baseline data and CMS target pricing, what we know today is that CJR hospitals have until December 31, 2016 to figure out how to minimize their risk exposure in performance years 2 through 5 of the program. Year 4 is when the maximum CJR risk begins (capped at 20 percent). The “repayment amount” is what participant hospitals will owe CMS should they exceed their target price.

Calculation #2: Luckily, the converse scenario to downside risk is upside opportunity. Starting in CJR performance year 1, hospitals can be eligible to receive a reconciliation payment from CMS if their actual performance year episode costs are lower than the CMS target price. But first, hospitals have to achieve a quality threshold in order to reap the savings. The “upside” requires participants to meet a minimum composite quality score, explained in #5 below. Similar to maximum downside risk, maximum upside opportunity is capped at 20 percent in Years 4 and 5.

Calculation #3: Collaborators in CJR consist of providers who are directly involved in the patient care of a hospital’s CJR beneficiaries. A hospital may consider a multi-pronged approach to gain- and risk-sharing in order to incentivize all parties involved to better coordinate care, improve outcomes, and manage episode costs. Physicians are only one type of potential collaborator, but a highly influential stakeholder group in the game. Gainsharing payments to physicians must not exceed 50 percent of a physician’s Physician Fee Schedule payments in a performance year (in the example above, the Medicare FFS payment is $1,500). This is shown as a negative from the hospital’s perspective, as this would be considered an expense of the program. While the maximum calculation is based on the aggregate amount of services the physician bills, including multiple visits and other services after the patient is discharged, in the above sample, we have limited the calculation to just surgery – the one constant we can expect and is by far the largest proportion of the aggregate amount

Calculation #4: Just as reward can be shared with collaborators, so can risk. However, the hospital has to retain at least 50 percent of the repayment obligation to CMS. The remaining 50 percent of risk can be distributed among multiple collaborators, with no single collaborator at risk for more than 25 percent of the repayment amount. “Alignment payments” from collaborators to the hospital can be as equally incentivizing as gainsharing payments in CJR: in a risk-share scenario, everyone has skin in the game.

Calculation #5: Remember Calculation #2? CMS has intentionally linked reconciliation payments to quality performance in CJR. So, if your hospital achieves a windfall of $15,000 because it beat the target price but has not met the minimum quality threshold, there will be no reconciliation payment received from CMS (i.e., money will be left on the table). The quality strategy and methodology behind CJR is complex and involves two required measures and one voluntary measure. Fortunately, CMS will be managing the quality and cost reconciliation process on behalf of participant hospitals each year. But beware: don’t wait for CMS to tell you how your hospital is faring. Get ahead of your performance monitoring and understand where your weaknesses are.

Calculation #6: Quality incentive payments are “payback” mechanisms that CMS has created to effectively reduce the 3 percent CMS discount taken off the top across all five performance years of CJR. In other words, the better your composite quality score, the higher your potential reconciliation payment from CMS and the lower your repayment amount to CMS. While the maximum 1.5 percent discount reduction may not seem like much of a gift, it adds up when you have 100 or more episodes as illustrated in the example below. CMS will get its 3 percent discount immediately because it is factored into the target price. However, during reconciliation, the quality incentive payment will be applied to the final reconciliation or repayment amount.

Calculation #7: The total episode costs in an inpatient stay plus 90-days post-acute care can add up quickly. CMS credits many of the achievements of the Bundled Payments for Care Improvement program on the reduction of unnecessary post-acute care: reducing SNF utilization, as well as other high-cost post-acute providers, reducing readmissions, and shifting that utilization to clinically appropriate care settings. Evaluating your hospital’s utilization patterns against national and best practice benchmarks is a valuable exercise in understanding where savings can be achieved.

Calculation #8: There are two categories of savings that can be accrued in CJR: internal cost savings (ICS) and positive reconciliation payments from CMS. The ICS methodology is generated, calculated, and owned by the CJR hospital. These funds do not pass through or come from CMS at any time. Hospitals are, however, obligated to report on gain share payments that may have been paid out as a result of ICS generated. (Note: gain share payments to CJR collaborators can only be made once annually, and the payment must combine both ICS and/or positive reconciliation payments into a single payment.) ICS is often generated through a number of channels, such as care redesign that impacts length-of-stay and standardization of implant costs. There is no one-size-fits-all methodology for achieving ICS, and much of the work depends on the hospital’s existing care models, physician alignment initiatives, and clinical infrastructure.

Calculation #9: The adage “it costs money to make money” rings true in CJR. In building your hospital’s CJR program budget, don’t forget that you will need to invest in resources to be successful. Unless your organization is a regional Center of Excellence for joint replacements and is already well below the CMS target price, you probably have work to do. And more importantly, you need resources to actually do the work. Nurse navigators are a proven investment in episodic care because they follow your CJR patients throughout the entire episode, especially as it relates to post-acute care where many patients may fall off a hospital’s radar. Additionally, investments in data analytics software/vendor support and adaptation of existing IT infrastructure are common program costs in bundled payment programs.

Calculation #10: Last but not least, the halo effect. In performance year 5, your hospital will be a well-oiled machine for LEJRs (we hope). You will have invested, redesigned, improved over and over again, and you will have probably failed somewhere along the way, too. That failure becomes a little less daunting when you consider the competency and organizational muscle your hospital will have developed between now and 2020. Why? Because now you’ve done it, you’ve learned how to truly engage your clinical staff, your post-acute partners, your community, and most importantly, your patients. You can replicate all those efforts by expanding your muscle to other clinical episodes and to other payers in your market. Because the end goal in CJR is leveling the cost landscape (picture a bulldozer driven by CMS) and increasing the quality game, your patients and your network will know your hospital is best-in-class. This assumes, however, that you are performing better than your competitors. Remember that since CJR affects an entire market, you must compete not only against CMS’s target price, but against your competitors doing a better job in achieving savings and quality scores. Your CJR experience will also pave the way for other value-based care initiatives and service line strategies your organization may be planning now or on the horizon.

Bundled Payments, CJR

TiberioK.jpgMs. Tiberio is a manager with GE Healthcare Camden Group and has worked on a variety of projects involving the diverse, operational, and strategic needs of nonprofit and healthcare organizations. Her areas of focus include bundled payments and other healthcare and payment reform initiatives under the Center for Medicare & Medicaid Innovation. She may be reached at



LettsB.jpgMs. Letts is a senior manager with GE Healthcare Camden Group and specializes in financial advisory services for the healthcare industry. She has developed complex financial models for various types of healthcare entities including children’s hospitals, large public hospitals, academic medical centers, community providers, medical foundations, clinically-integrated networks, and hospitals in turnaround situations. She may be reached at



Topics: Bundled Payments, CMS, Barbara Letts, CJR, Kelly Tiberio

Top 10 Ways to Prepare for the Comprehensive Care for Joint Replacement Model and the Inevitable Bundled Payment Mandate

Posted by Matthew Smith on Jul 24, 2015 1:29:35 PM

By Barbara Letts, Senior Manager, GE Healthcare Camden Group

The time is now for health systems and post-acute providers to engage physicians, create actionable data, and plan for operational and financial changes in order to implement bundled payments for hip and knee replacements. On July 9, 2015, the Centers for Medicare & Medicaid Services (“CMS”) proposed the Comprehensive Care for Joint Replacement (“CCJR”) Model in order to encourage providers across the continuum of care to collaborate, promote price transparency, and drive a new level of cross-continuum accountability.  CMS was smart in their decision to extend the bundle to 90 days as it forces a level of collaboration and accountability that is unprecedented.

The CCJR mandate, a retrospective payment model, is proposed to begin on January 1, 2016, run for 5 years, span across 75 Metropolitan Statistical Areas (“MSA”) areas, and apply to current acute care hospitals in the selected MSAs not currently participating in the Bundled Payments for Care Improvement (“BPCI”) initiative. Given that the average Medicare expenditure for surgery, hospitalization, and recovery for a hip and knee replacement ranges from $16,500 to $33,000 across geographic regions, the CCJR attempts to standardize the cost variation across providers by setting an individual target price, and requires minimum quality reporting to be eligible for a positive reconciliation payment.

Whether providers are ready or not, the bundled payment mandate is coming, and with less than six months until January 1, 2016, there is no shortage of things to do to prepare.

The following represents the top 10 ways for providers to plan for bundled payments under CCJR:

1. Understand Geographic Variation

Medicare fee-for-service claims data made available to BPCI participants has made the healthcare industry acutely aware of the variation in average Medicare spend for high-volume surgeries – such as major joint replacements – especially as it relates to the 90-day post-acute period. While the national average in 2013 showed that 3 in 10 patients were discharged to a skilled nursing facility (“SNF”), and 1 in 10 was discharged to an inpatient rehabilitation facility (“IRF”), the average by geographic area varied greatly, with ranges between 1 and 6 for a SNF and less than 1 and 4 for an IRF. The following chart illustrates the variation in post-acute settings after a hip or knee replacement surgery for some of the specific geographic areas proposed in the CCJR program. While this illustrates the number of patients discharged to various post-acute settings, it does not reflect that number of patients who “bounce around” to other settings during the 90 days post-discharge – further demonstrating variation in managing post-acute care and cost. With a clear understanding of the drivers of variation in your market, including physician practice patterns, discharge planning decisions, and post-acute provider relationships, this data will provide the foundation for action.

2013 Medicare Claims and Variation in Discharge Disposition for Major Joint Replacements (DRGs 469, 470)

2. Know Your Post-Acute Spending

It is essential to analyze your organization’s joint replacement post-acute spending (both utilization and length-of-stay) by care setting and compared to national benchmarks, with a focus on inpatient rehab facility, SNF, and home health costs. Post-acute spending can represent the highest cost category for a bundled payment episode, and significant annualized savings opportunities can be achieved by shifting to lower-cost post-acute settings as clinically appropriate. According to the Medicare Payment Advisory Commission’s Fiscal Year 2011 Data, daily rates across the care continuum for Medicare FFS can vary significantly as noted:

  • Acute Hospital: $1,819/day
  • Inpatient Rehab Facility/Unit: $1,314/day
  • Skilled Nursing/Transitional Care Unit: $432/day
  • Home with Home Health: $190/day

3. Plan for the Impact on Post-Acute Bed Capacity

Providers are reviewing their future bed allocation and are projecting their post-acute bed needs given shifts in care patterns and the resource requirements in these units. It is projected that the number of inpatient rehab facility beds will decline over the next five years as patients are discharged into less acute care settings. With proposals outstanding from both CMS and MedPAC to reduce the payment differential across post-acute sites of care, orthopedic procedures are anticipated to be one of the early procedure targets to ensure the patient is discharged to the right care setting.

4. Develop a Targeted Post-Acute Provider Network

Given that participants in CCJR will be at risk for a 90-day episode post-discharge, acute care providers should carefully assess their post-acute provider networks to ensure their partners are aligned clinically, financially, and strategically by evaluating the following key factors:

  • Vision, goals, and leadership
  • Quality metrics and protocols (e.g., star rating, average length-of-stay, readmission rates, discharge rates)
  • Facility characteristics and offerings (e.g. size, room distribution, capacity, specialties)
  • Staffing and resources (e.g., RN coverage, primary care coverage, electronic health records use)

5. Involve Your Physician and Clinical Leadership Now

Engaging both physician and clinical leadership can make or break your joint replacement bundled payment program. Physicians, nurses, social workers, case managers, physical therapists, and service line leaders will be implementing and tracking the changes required for CCJR, and it is vital to involve them early in the planning process. Convening the right team at the right time will ensure they are contributing to and aligned with the development of the pathways, quality metrics, dashboards, and the process for continual monitoring and improvement.

6. Standardize your care pathways and protocols

Transitioning to one episode pathway pre-, during, and post-joint replacement may be challenging, but it is important to standardize care protocols for joint patients to reduce variability in physician practice patterns. An evidence-based protocol may not apply to each patient depending on age, support system for post-procedure, and other co-morbidities, but encouraging physicians to discuss best practices leads to more effective, more predictable, and more collaborative care across the continuum.

7. Analyze Potential Variation in Supply Cost

To mitigate any potential losses in the CCJR program, organizations need to evaluate opportunities to reduce internal costs. Given that hip and knee implants are high-cost devices, device standardization and other supply chain management strategies should be considered. Focus on the high-cost devices in the near-term, and then evaluate lower cost supplies and product variation in items such as blood products and pharmacy.

8. Reduce Duplicative Services and Testing

In addition to supply costs, organizations should evaluate diagnostic services and tests by analyzing charges and average utilization by physician. Be transparent with physicians and work jointly on attainable reduction targets. Be mindful of any charge capture issues that may skew findings.

9. Assess Current Resources and Infrastructure

To effectively identify and manage bundled payment patients, including outliers, the right resources must be in place as soon as possible. Providers that are successful managing episode-based care utilize nurse navigators (RNs or social workers) to track, manage, and monitor the patient across the episode, with a focus on preventing costly readmissions and assisting patients through clinical and psycho-social follow-up and logistics.  Navigators and analysts have access to clinical information and share outcomes data internally and with post-acute care partners. The right infrastructure must be in place, including patient tracker tools, monthly dashboards, and care processes to effectively and efficiently standardize care delivery.

10. Track Your Clinical Outcomes

This does not have to be an overly complicated process. Keep your measures simple and leverage what is already being measured. Readmissions, mortality rates, complications, infections, mobility post-surgery, and patient experience should be enough to gauge and continue to improve your organization’s performance.

With so many competing initiatives and resources, it is essential to prioritize given the anticipated date of January 1, 2016 for the proposed CCJR mandate to begin. Collaborate with your physicians, understand and track your data in the acute and post-acute setting, allocate resources efficiently, and know this is only the first step in mandated bundled payment programs to come.

New Webinar: The CMS Mandatory 90-Day Bundle—Orthopedic Experts Weigh in on the Clinical, Operational, and Economic Impact

Join The Camden Group on Wednesday, July 29 from 11:15 a.m.-12:15 p.m. (Eastern) for a webinar featuring an exclusive panel discussion with nationally renowned orthopedic experts. 

Joint Episode Webinar, The Camden Group

Ms. Letts is a senior manager with GE Healthcare Camden Group and specializes in financial advisory services for the healthcare industry. She has developed complex financial models for various types of healthcare entities including children’s hospitals, large public hospitals, academic medical centers, community providers, medical foundations, clinically-integrated networks, and hospitals in turnaround situations.


Topics: Bundled Payments, Orthopedics, Joint Episode, Joint Replacement, Medicare Bundled Payments, Barbara Letts

Subscribe to Email Updates

Value Model, Health Analytics

Recent Posts

Posts by Topic

Follow Me