If you’ve been paying attention to the WebPT Blog—or healthcare chatter in general this year—you’re probably already familiar with Medicare bundled payments, specifically CMS’s Comprehensive Care for Joint Replacement (CJR) payment model. If not, check out this article and this one, because there are definitely opportunities for PTs to participate. In addition to those great posts—which detail the basics of the program as well as things to consider when deciding whether or not to participate—we thought we’d run through a few examples to help clarify how participating could impact your practice. First, though, a word about discounts and quality scores as well as stop-gain and stop-loss limits:

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Discounts and Quality Scores

As Charlotte Bohnett explained in this post, each year during this five-year program, CMS will provide each eligible hospital with target pricing for major joint replacements or reattachments of lower extremities—with and without major complications or comorbidities. (To learn how CMS will determine these annual target prices, go to Bohnett’s post and scroll to the second-to-last paragraph under the “How does CJR work?” header.) As Rick Gawenda outlined in his 2016 Ascend presentation, “CMS will also use a simple risk stratification methodology to set different target prices for patients hip fracture within each MS-DRG.”

CMS will then reduce that number by 3%, thus making it a more challenging upper limit and reducing the amount of money that hospitals can earn by participating in the program. The reduction also increases the amount of money hospitals may have to repay. That being said, hospitals can lower this reduction rate by achieving a stellar quality score (this is what’s known as the Quality Incentive Payment). That’s why Bohnett strongly recommends that PTs know their hospital’s quality score before hopping on board.

If that still seems a little fuzzy, global services company MiraMed created a great chart that outlines the CJR discount structure, which we’ve recreated below. This should help clear things up. Basically, the better the hospital’s quality score, the more money the hospital (and therefore participating PTs) stand to earn, and the less they’ll have to repay. Hospitals with quality scores that fall below the acceptable limit (four) won’t receive any reconciliation payment—even if their actual spend falls below the limit. Hospitals with scores that fall between four and six are eligible to receive reconciliation payments; however, they are not eligible for the Quality Incentive Payment, which means CMS’s 3% discount will remain intact. On the upper side of the spectrum, hospitals with excellent quality levels will be able to bring the discount down significantly, thereby putting themselves in the position to earn more—or spend less.

CJR Discount Structure
Composite Quality Score (out of 20) < 4 4–6 6–13.2 > 13.2
Quality Level Below Acceptable Acceptable Good Excellent
Eligible for Reconciliation Payment No Yes Yes Yes
Eligible for Quality Incentive Payment No No Yes Yes
Reconciliation Payment Discount 3% 3% 2% 1.5%
Repayment Discount (First Year) N/A N/A N/A N/A
Repayment Discount (Years Two and Three) 2% 2% 1% .5%
Repayment Discount (Years Four and Five) 3% 3% 2% 1.5%

Stop-Gain and Stop-Loss Limits

In addition to to the restrictions that Medicare has placed on risk and reward sharing—namely that providers can’t be held responsible for more than 25% of repayment amounts and can’t receive more than 50% of the value of the services they provide in reconciliation payments and internal cost savings (based on the Medicare Fee Schedule)—Medicare has also created stop-gain and stop-loss limits to cap what hospitals can earn or spend in a given program year. According to Reflexion Health, during the first program year, “Medicare will not penalize hospitals for incurred costs that exceed the target price but will limit the max reconciliation amount to 5% of the target price.” However, “both stop-gain and stop-loss limits will gradually increase to 20% by years four and five.” Both Reflexion and Gawenda created charts detailing the limits, which we’ve merged and recreated here:

Year Stop-Gain Limit Stop-Loss Limit
1: April to December 2016 5% N/A
2: 2017 5% 5%
3: 2018 10% 10%
4: 2019 20% 20%
5: 2020 20% 20%

Examples

Example 1

MiraMed provided a super-simple example table—which we’ve adapted below—that does a great job of explaining the basics of the Medicare bundled payment model:

CMS Spend Target Price Result
$20,000 $23,000 CMS pays hospital $3,000
$25,000 $23,000 Hospital pays CMS $2,000

In other words, if a hospital spends more than Medicare’s target price, the hospital pays CMS; if the hospital spends less than Medicare’s target price, CMS pays the hospital. Seems pretty straightforward, right? If only all cases were this simple.

Example 2

Reflexion Health provided a more comprehensive example—which we’ve adapted below—that addresses a few more of the CJR program specifics.

In program year three, ABC Hospital treats 25 total knee replacement cases—with a target price per episode of $25,000—for a total target price of $625,000. The hospital actually spends only $550,000 for all the cases, which means it came in under the target by $75,000. However, because the stop-gain limit for program year three is 10%, the reconciliation amount for all 25 episodes would be $62,500 (i.e., 10% of $625,000).

Now, if the same hospital spent $700,000 for 25 total knee replacements in program year three, coming in at $75,000 over the target price, the repayment amount would also be capped at 10% of the target price: $62,500.

Example 3

Finally, in his Ascend presentation, Gawenda gave an even more thorough example that weaves physical therapy into the CJR story. So, we thought we’d run through it for you here, too. Ready? Here goes:

In program year four (2019), a hospital enters into a financial agreement with Rick Gawenda, a physical therapist at Awesome Physical Therapy, and the terms of the contract stipulate that Gawenda accepts 25% of the financial risk of repayment—and 25% of the reward of reconciliation. The target price for the hospital is $24,000 per case—and after CMS’s automatic 3% reduction, the new target price is $23,280. That year, the hospital performs 75 total knee replacements and refers all of them to Gawenda for PT.

The overall target price for the hospital that year (75*$23,280) is $1,746,000—and the hospital actually comes in at $1,547,450, which puts it under the target price by $198,550. In 2019, the hospital had a quality score of 11.2, which brings CMS’s 3% reduction down to 2%, making the new target price $23,520 per case, or $1,764,000 for all 75. Now the hospital is $216,550 under the new target price and the stop-gain limit in year four is 20%, which means CMS would pay the hospital the full reconciliation payment of $216,550 because it is less than 20% of the new aggregate target price of $1,764,000. As a result, Gawenda would receive 25% of $216,550 ($43,310), capped at 50% of the Medicare fee schedule equivalent of his services. (For example, if Gawenda provided $100,000 worth of PT services, he would receive the full $43,310; however, if he only provided $80,000 worth of services, he would only receive 50%, or $40,000.)


There you have it: three CJR examples as well as some more information about discounts, quality scores, and limits. Has your clinic decided whether to participate in CJR? Tell us what factors influenced your decision in the comment section below.

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