By Barbara Letts, Senior Manager, and Tori Manis, MBA, Senior Manager, The 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.
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.
Ms. Letts is a senior manager with The 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 email@example.com or 310-320-3990.
Ms. Manis is a senior manager with The Camden Group, focusing on bundled payment design, planning, and execution. Other areas of expertise include strategic and business planning, developing and implementing clinically integrated networks, hospital/physician alignment models, and supporting organizations as they plan for the transition to value-based healthcare. She has assisted numerous hospitals, health systems, post-acute care organizations, and other healthcare organizations in their planning and growth efforts. She may be reached at firstname.lastname@example.org or 312-775-1700.