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Episodes of Care:  Can Hearts Be Far Behind?

Richard Clark - CFA St. Louis office

The evolution of Medicare reimbursement to providers has just taken a huge leap forward this month (April 1, 2016) with the advent of CMS’s Comprehensive Care for Joint Replacement (CJR) payment model. 

 This comes only 3 years after CMS announced (January 31, 2013) the health care organizations selected to participate in the Bundled Payments for Care Improvement initiative, an innovative new payment model.  Under the Bundled Payments for Care Improvement initiative, organizations have entered into payment arrangements that include financial and performance accountability for episodes of care.

For cardiac care providers, CJR provides a glimpse into what our future holds.  According to an July 9, 2015 press release:

“We are committed to changing our healthcare system to pay for quality over quantity, so that we spend our dollars more wisely and improve care for patients,” said Health and Human Services Secretary Sylvia M. Burwell. “Today, we are taking another important step to improve the quality of care for the hundreds of thousands of Americans who have hip and knee replacements through Medicare every year. By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care. This model will incentivize providing patients with the right care the first time and finding better ways to help them recover successfully. It will reward providers and doctors for helping patients get and stay healthy.  And it’s what we hear that many doctors and providers want – to be able to give the best care possible to their patients.”

Model Design (from

The CJR model holds participant hospitals financially accountable for the quality and cost of a CJR episode of care and incentivizes increased coordination of care among hospitals, physicians, and post-acute care providers. The episode of care begins with an admission to a participant hospital of a beneficiary and ends 90 days post-discharge in order to cover the complete period of recovery for beneficiaries. The episode includes all related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries, with the exception of certain exclusions.

Every year during the approximate five performance years of this model, CJR hospitals will receive separate episode target prices for the affected MS-DRGs.  All providers and suppliers are paid under the usual payment system rules and procedures of the Medicare program for episode services throughout the year. At the end of a model performance year, actual spending for the episode (total expenditures for related services under Medicare Parts A and B) is compared to the Medicare target episode price for the responsible hospital.  Depending on the participant hospital’s quality and episode spending performance, the hospital may receive an additional payment from Medicare or be required to repay Medicare for a portion of the episode spending.

ICMS has implemented the CJR model in 67 geographic areas, defined by metropolitan statistical areas (MSAs).  Except for those participating in Model 1 or Models 2 or 4 of the Bundled Payments for Care Improvement (BPCI) initiative for LEJR episodes, hospitals paid under the Inpatient Prospective Payment System (IPPS) and located in the MSAs selected are required to participate in the CJR model.  As of November 16, 2015, approximately 800 hospitals are required to participate in the CJR model.

In the CJR model, beneficiaries retain their freedom of choice to choose services and providers. Physicians and hospitals are expected to continue to meet current standards required by the Medicare program. All existing safeguards to protect beneficiaries and patients remain in place. The rule also describes additional monitoring of claims data from participant hospitals to ensure that hospitals continue to provide all necessary services.

You can read the final rule on the Federal Register.

Impact on CV Services Providers

It is likely that the CJR model will eventually be deemed a “success” by CMS and they will look to other services for expansion.  Cardiovascular services is a next logical step.  On February 26, 2016, CFA posted a blog about cardiovascular bundled pricing.  The implementation of the CJR model reinforces CFA’s position that certain key capabilities will be critical to the future success of cardiovascular services providers.  These capabilities include the following:

Baseline Capabilities for CV Providers

  1.      Information – Information drives the process.  Defining costs, setting prices, monitoring quality and managing these elements over time will be crucial.  Hospitals will need to understand the circumstances that lead to variability in outcomes, cost, length of stay, resource consumption and other factors in order to control the means of production.

  2.     Standardization – The creation of and adherence to best practice protocols, clinical pathways and guidelines of treatment define the standard of practice, coalesce clinical input and serve as the basis for costing analysis and pricing decisions.  Driving out “unnecessary” variation leads to predictability, enhances quality, and solidifies physician and other practitioner commitment to the process required to produce a predictable “product” and compete in the “Care IMprovement” environment.

  3.     Care Coordination – With clinical, outcome, financial and other performance standards in place, care coordination across the continuum (potentially involving multiple facilities and organizations) must be paramount.  Many hospitals are now selecting home care and post-acute care partners they can work with and incentivize.  Coordination could include patient education, scheduling, transition planning, and other activities to insure smooth and faultless transitions.

  4.   Physician Support – Physician support is critical.  Standardization and care coordination processes are driven by physician and other practitioner leadership, planning and active participation.  Physicians must provide necessary clinical leadership and actively support efforts to re-engineer care, streamline processes, boost quality outcomes and manage performance metrics, all under an appropriate hospital/physician alignment model that properly incentivizes participants for managing episodes of care.    
  1.   Administrative Support – Administrative commitment may require new organizational structures, reporting relationships, care and business philosophies and specialized manpower, as well as technology and infrastructure (including EHR and CVIS).

  2.   Supply or “Value-Chain” Management – Competing on price and other metrics will force hospitals to re-consider their supply (or “value-chain”) processes to continually tailor supply chain, procurement, and vendor and product selection, as well as refining value analysis processes to increase the cost-quality-value philosophy.

  3.   Re-Engineered Business Systems – Careful planning and resource allocation is required to keep the revenue stream both current and accurate.

  4.   The New Definition of Episodes of Care – An episode of care historically stopped at the time of discharge.  Now it may involve multiple organizations (think home care and skilled nursing) that will need to be coordinated, contracted, and managed into an overall care process.  Relationships will need to be set in place and properly managed to optimize care coordination and patient transition.

  5.   Constant Clinical Innovation – Processes need to be in place to constantly monitor all of the care processes and performance indicators and innovation applied when necessary to make periodic adjustments.  Systems and personnel must be in place to both monitor and innovate when required.

Honing these capabilities will be key to success in a market ruled by the likely next CMS clinical comprehensive care payment model:  Comprehensive Care for CABG, or Valve, or PCI, or CHF, or whatever is ultimately chosen by CMS.

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