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:

The State of Rehab Therapy in 2019 - Regular BannerThe State of Rehab Therapy in 2019 - Small Banner

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%


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.

  • The Bundle Conundrum: Should PTs Participate in CJR? Image

    articleNov 9, 2016 | 6 min. read

    The Bundle Conundrum: Should PTs Participate in CJR?

    There a lot of hot topics in health care right now. Among top trending terms like “Affordable Care Act,” “pay-for-performance,” and “value-based care,” you’ve also probably heard “Medicare bundled payments”—specifically, “CJR” (or Comprehensive Care for Joint Replacement ). It’s a new bundled payment model from CMS, and it is of particular importance to outpatient rehab providers. As this article explains, “CJR will support better care for patients who are undergoing elective hip and knee replacement surgeries—the two …

  • Founder Letter: PQRS is Dead, But Your Data-Analysis Efforts Should Live On Image

    articleDec 6, 2016 | 6 min. read

    Founder Letter: PQRS is Dead, But Your Data-Analysis Efforts Should Live On

    If there’s one thing I know about rehab therapists, it’s that we are all very busy people. If your to-do list is anything like mine, it’s growing faster than you can prune it—and has probably expanded onto multiple sheets of paper (or maybe even into multiple notebooks). And regardless of the value associated with each item on the docket, we tend to refer to these tasks as things we “have” to do—not things we “get” to do. …

  • Hot Out of the Oven: Highlights of the 2017 Final Rule for PTs, OTs, and SLPs Image

    articleNov 9, 2016 | 8 min. read

    Hot Out of the Oven: Highlights of the 2017 Final Rule for PTs, OTs, and SLPs

    Halloween may be over, but if you didn’t get your fill of scares, I’ve got the perfect activity for you: reading through 1,401 pages of pure Medicare gobbledygook. Screaming yet? (Or should I check back at around page 500?) I kid, of course; there’s no need for you to slog through this year’s extra meaty Final Rule —which details the Medicare fee schedule and other important Medicare regulatory and reimbursement changes for physical therapy, occupational therapy, and …

  • Founder Letter: My Evaluation of the New PT and OT Eval Codes Image

    articleNov 3, 2016 | 5 min. read

    Founder Letter: My Evaluation of the New PT and OT Eval Codes

    Over the last several years, healthcare providers in general—and rehab therapists, specifically—have been hit with a seemingly constant barrage of regulatory requirements. And the vast majority of these initiatives—PQRS, functional limitation reporting, MPPR, ICD-10, and the like—have either: Had a direct negative impact on our payments, or Forced us to devote extra time to satisfying the criteria of the requirements—with zero compensation for that time. So, it should come as no surprise that the rehab therapy community …

  • Odd Provider Out: Why PT Exclusion from MIPS is Bad for Future Payments Image

    articleMay 4, 2016 | 6 min. read

    Odd Provider Out: Why PT Exclusion from MIPS is Bad for Future Payments

    It’s official: rehab therapists are just a sashay away from exiting the PQRS dance floor. That’s because last week, the Centers for Medicare & Medicaid Services (CMS) issued a proposed final rule that, if adopted, will put into effect the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA). And that, in turn, will give the green light to the Merit-based Incentive Payment System (MIPS) , a brand spankin’-new quality data reporting program that consolidates PQRS , …

  • Breaking News: 2017 MACRA Final Rule Hits Image

    articleOct 17, 2016 | 4 min. read

    Breaking News: 2017 MACRA Final Rule Hits

    After months of heated debate and public commentary—much of it coming from physicians who felt they needed more time to prepare themselves to participate in a brand-new quality reporting program—the Department of Health & Human Services (HHS) on Friday released its final rule on the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) . This act, which will go into effect January 1, 2017, reimburses eligible Medicare physicians based on the quality of care they deliver …

  • CPT Update: Why the Valuation of the New PT and OT Eval Codes is Problematic Image

    articleJul 19, 2016 | 9 min. read

    CPT Update: Why the Valuation of the New PT and OT Eval Codes is Problematic

    The purpose of any type of reform is to drive change. And that’s certainly true when it comes to healthcare—and healthcare payment—reform. But, change often comes slowly—and in the wake of Medicare’s recently issued proposed physician fee schedule for 2017 , I have to wonder whether it’ll come too slowly for physical and occupational therapists. That’s because, while the Centers for Medicare & Medicaid Services (CMS) voiced its support for replacing the existing CPT codes for physical …

  • What the New HCAHPS Proposal Means for the Future of Hospital-Based PT  Image

    articleAug 11, 2016 | 3 min. read

    What the New HCAHPS Proposal Means for the Future of Hospital-Based PT

    When a patient is in pain, that patient wants relief—fast. And even if the patient knows medication is only a temporary fix—and a potentially dangerous one, at that—he or she will probably still choose drugs over longer-lasting, less-instant treatment options like physical therapy. For healthcare providers beholden to payment structures that incentivize patient satisfaction, that preference presents a real pickle: give the patient what he or she wants—long-term consequences be damned—or risk lower satisfaction scores (and potentially …

  • Common Questions from Our New PT and OT Evaluation Codes Webinar Image

    articleDec 19, 2016 | 20 min. read

    Common Questions from Our New PT and OT Evaluation Codes Webinar

    This month’s webinar on the new CPT codes was our biggest one yet—more than 11,000 people registered to attend. With such a large—and clinically diverse—audience, we received a ton of questions. And due to time constraints, our hosts—WebPT’s own Heidi Jannenga and compliance expert Rick Gawenda—weren’t able to get to even a fraction of them during the live broadcast. Not to worry, though; we’ve done our best to answer them all here, in one giant FAQ article. …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.