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CJR Voluntary Participation—Should I Stay or Should I Go?
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CJR Voluntary Participation—Should I Stay or Should I Go?

Darcie Hurteau and Jonathan Pearce
This article focuses on the financial results that may accrue to a participating hospital throughout the remainder of the Comprehensive Care for Joint Replacement program as a result of the migration from historical baseline to regional target rates, and rebasing of the historical baseline.
 
An example of this analysis for 2 hospitals is shown below (the numbers have been changed slightly to maintain confidentiality). This table shows the following metrics for Diagnosis Related Group 470 non-fracture episodes:
  • The PY1 target amount per episode and the regional target amount per episode
  • The PY1 total episode cost
  • The PY1 total target amount and the regional total target amount
  • The PY1 net program reimbursement amount and the surplus or deficit that would result from applying the PY1 episode cost to the regional target amount
  • The percentage change from the PY1 (hospital-specific) target to the PY4 (regional) target
 
Metric Efficient Hospital A Inefficient Hospital B
Episode Count 275 40
PY1 Target per Episode $23,050 $43,700
Total Episode Cost $5,745,000 $1,902,000
PY1 Total Target $6,320,000 $1,830,000
PY1 NPRA $575,000 -$72,000
PY4 Target per Episode $24,050 $39,900
PY4 Target $6,580,000 $1,674,000
PY4 NPRA $835,000 $-228,000
Target Percent Change 4% -9%
NPRA indicates net program reimbursement amount; PY, performance year.

Hospital A was relatively cost-efficient at the start of the CJR program and managed to moderately reduce episode costs in PY1, achieving a surplus of $575,000. Because it was more cost-efficient than other hospitals in the region during the baseline period, the PY1 target is $1000 lower than the PY4 target that will be implemented in the later years of CJR. Applying the PY4 target to its episode cost during PY1 would create a surplus of $835,000. This hospital will probably elect to remain in the CJR program.

Alternatively, Hospital B had significantly higher costs during PY1 than other hospitals within its region. It was able to slightly reduce its episode cost during that period, achieving a savings of $72,000. However, the PY4 target is significantly lower than the PY1 target; therefore, the transition to regional rates would create significant losses. This hospital will probably elect to leave the CJR program even though its initial financial results were moderately positive.

Conclusions

As described above, the landscape for CJR-participating hospitals will dramatically change throughout the performance period. Hospitals should understand how these changes in the derivation of targets will affect their financial results—and that past performance may not be indicative of future results. Hospitals in voluntary MSAs need to understand the effects of the changes in the financial structure of the CJR program to make an informed participation decision. Hospitals in mandatory MSAs should likewise prepare themselves for the effects of these changes.

 
Copyright AJMC 2006-2017 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
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