Hospital expectations remain low for financial performance in the first year of the mandatory bundled-payments program for hip and knee replacements.
Last year, a majority of hospitals expected to lose money in Medicare's mandatory bundled-payment program for hip and knee replacement procedures. The outlook appears to have brightened—slightly.
"We are hearing from many of the hospitals with which we work that the first two-to-three quarters have been challenging, and most opportunities for episode savings are in post-acute costs: rehab and skilled nursing facility (SNF) utilization," Christopher Stanley, MD, MBA, a director at Chicago-based Navigant Consulting said this week.
"It's a bit too early to generate a broad view of how hospitals are performing in 2017 when downside penalties kick in, though we expect many hospitals will incur a penalty under the program in 2017."
On April 1, 2016, the Centers for Medicare & Medicaid Services imposed mandatory participation in bundled payments for hip and knee replacement procedures for about 800 hospitals under Medicare's Comprehensive Care for Joint Replacement reimbursement model.
In two hospital surveys last year, the majority of hospitals polled reported they were not ready for CJR. A FORCE-TJR survey found 56% of hospital orthopedics programs reported being unprepared for CJR.
Avalere Health, a consulting firm, released survey results indicating that 60% of the hospitals required to participate in CJR could lose money in the bundled-payment model when downside risk began in January.
Last year, Fred Bentley, vice president of Avalere's Center for Payment & Delivery Innovation, said he was not surprised over widespread lack of preparedness for CJR.
"[Providers] have really been focused on the care of patients in the four walls of the hospital and not really on the post-discharge side. They have been focused on growing their orthopedics volume and their referrals, and now they're going to be focused on the entire episode. And that's a big shift."
Under the CJR bundled-payment model, each participating hospital has been given a target price for hip and knee replacement procedure episodes, which include the cost of post-acute care. Last year, the cost of hip and knee replacement procedure episodes for Medicare patients varied widely across the country, from $16,500 to $33,000, according to CMS.
Hospital preparedness to participate effectively in CJR has improved, but more work is needed, Stanley says.
"Midway through 2017, I would characterize many of these hospitals as underprepared instead of unprepared. Facilities now know where episode costs occur: initial hospitalization, post-acute, readmissions, etcetera. However, too many hospitals don't know how to affect change in these categories."
Establishing an effective post-acute care strategy is critical to success in CJR, he says.
"We suggest focusing first on post-acute use: narrowing down the number of SNFs that a hospital uses based upon quality, SNF length of stay, and ability to collaborate. Unfortunately, many hospitals are unable or unwilling to change SNF use patterns, which takes away one of the most important tools to succeed in the CJR program."
The Trump administration's approach to bundled-payments programs is maturing but uncertainty remains in the regulatory environment, Stanley says.
"The message from CMS is that CJR and similar mandatory programs will continue for now, though they likely will not expand in number under the current administration."
Christopher Cheney is the CMO editor at HealthLeaders.