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Three Moves the Administration Should Make to Advance its Joint Replacement Payment Model

In the transition to value-based payment models, healthcare providers are starting to see positive results as they learn and build the capabilities and partnerships needed for future economic viability. One such model that the Centers for Medicare & Medicaid Services (CMS) launched in April 2016 is aimed at achieving higher quality care at lower costs for joint replacements. Deemed the Comprehensive Care for Joint Replacement (CJR) program, this specialty value-based payment model has shown promise.

The CJR model is significantly reducing healthcare spending while improving quality.

A national survey and study of 104 surgeons found that those participating in the CJR model had significantly greater use of practices aimed at improving post-discharge care. This included developing narrow networks of high-quality post-acute care providers, using telehealth services and reducing unnecessary utilization of skilled nursing facilities (SNFs) among surgeons practicing in CJR. These analyses are consistent with other studies that find that bundled payments create incentives to invest in identifying high-quality and effective post-discharge care to more effectively manage costs. Additionally, a NEJM study found that the mandatory CJR bundled payment program achieved a 3 percent reduction in spending for hip and knee replacements over a two-year period.

Premier® members participating in the CJR program are also seeing positive results and have consistently outperformed their peers by 30 percent in achieving savings payments. These cost savings were achieved while maintaining or improving quality, measured by their “excellent” quality scores. Premier CJR participants have noted reduced unnecessary utilization, the introduction of enhanced care management for lower extremity joint replacement (LEJR) patients and fewer complications following procedures.

With millions of dollars in cost savings, the CJR program is significantly reducing unnecessary healthcare spending for the federal government, while generating a new source of revenue for participants and, most importantly, providing better, more coordinated care for patients. However, as with other value-based payment programs – especially those pushing providers to assume more risk – there is room for improvement.

While the model is required of approximately 395 IPPS hospitals in 34 different metropolitan statistical areas with an additional 76 hospitals voluntarily participating, the demonstration is set to wrap up in December 2020. The Office of Management and Budget is currently reviewing a proposed rule to extend the program with some modifications. Ultimately, the goal of all Innovation Center models is to test approaches that could be expanded. In extending the model, adjustments to the program must consider how it could be implemented as a permanent program.

In working closely with successful CJR participants, Premier has developed three key recommendations that CMS should consider if it extends the model.


1. Test approaches to transition to fixed target bundled payment without additional discount.

The current methodology for the CJR model could limit the ability for providers to succeed if the duration is extended. The percentage of hospitals earning a reconciliation payment is declining. In model year three, comparison against one’s own earlier performance and the corresponding regional performance in the model caused difficulties in achieving a reconciliation payment. Sustaining the pace of cost reduction to support a 3 percent discount compared to performance in earlier CJR model years proved challenging, as additional efficiency gains typically create smaller marginal gains than initial interventions.

CJR lends itself well to fixed target, given that it is a surgical rather than medical bundle, and is typically less medically complex and at lower risk for outlier spending for procedures performed by a given provider. A fixed target bundle provides recognition of providers’ efforts to date to increase efficiency for LEJR procedures, and acknowledgement that future gains are likely to represent incremental gains in savings that may not support inclusion of a significant discount on baseline spending.

A fixed target bundle would reflect a benchmark inclusive of efficiency gains already achieved under CJR. A regional spending index could be applied to the fixed target bundle amount to account for geographic differences in spending and input costs. Providers could further be incentivized to attain high performance through a payment bonus to those that attain quality performance within the top quartile of participants.

2. Align incentives for joint replacement across settings by including LEJR procedures performed in outpatient settings.

Providers have made efficiency gains on the inpatient LEJR procedures included in the model. However, some of these procedures may be candidates for surgery in an outpatient department or ambulatory surgical center. If procedures are moved from the inpatient setting to outpatient, it would result in decreased costs for the Medicare program.

The corresponding outpatient procedure codes are not included in CJR, creating misaligned incentives for optimizing the appropriate care setting. If a hospital moves lower acuity LEJR procedures to outpatient under the current structure, hospitals risk degradation of performance under the program, as length of stay and expense would increase due to higher median acuity for the remaining LEJR patients. CMS must adjust the target prices to account for shifting lower acuity patients to outpatient settings.

3. Develop and use measures specific to the populations and settings of care in the model.

Providers should be measured upon quality indicators that they are able to influence through care redesign. CJR participants report a limited number of quality measures, given the narrow scope of the program.

One of the measures in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey reports patient experience across the entire hospital population of which patients in the CJR program represent only a small portion, especially in future years when more joints will be done in an outpatient or ASC setting. The HCAHPS measure does not substantially reflect the performance of orthopedic providers and creates a duplicative penalty for CJR hospitals since it is also included in the Hospital Value-Based Purchasing Program. As such, HCAPHS should be excluded from the program.

The voluntary collection of patient-reported outcomes data through the CJR program is a promising step towards evaluating outcomes that are specific to this payment model. However, reporting this measure has been resource intensive for many CJR participants. CMS should give greater incentives to participants who voluntarily report patient-reported outcome as well as provide additional information on the status of outcomes data collection and how the data will may be used in future quality measurement.

While CJR has progressed, there have been many lessons learned. Successful participants have achieved gains that are worth continuing. The Administration should strongly consider these three enhancements to the model in extending it. The modifications would enhance model stability, encourage continued participation, reduce provider burden and address unintended consequences in the move to risk-based payment.


Premier continues to advocate for our members and encourages the adoption of laws and regulations that improve quality and value in healthcare. Stay up to date on Premier’s advocacy efforts.

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