Bundled Payment Program Gets Underway, Presents Home Health Opportunity

More than half of the hospitals that will be taking part in a mandatory new payment system for joint replacements are at risk of losing money—and forging better connections with home health agencies could be a crucial factor in avoiding this outcome in the program that starts April 1.

Specifically, 60% of hospitals in the 67 regions participating in the new initiative appear likely to face penalties, according to a new analysis from Washington, D.C.-based research and data analytics firm Avalere Health.

The Comprehensive Care for Joint Replacement (CJR) initiative, first announced last July, represents a new approach to payment reform from the Centers for Medicare & Medicaid Services (CMS). Under the plan, hospitals in affected regions will be responsible for Medicare spending on hip and knee replacement episodes of care, including hospital and post-hospital costs. If spending exceeds certain thresholds—based on the hospitals’ past spending and that of its regional peers—it could be dinged with Medicare penalties.

What’s new is the mandatory aspect of the program.

“Most past CMS initiatives have stimulated activity among early adopters, but the mandatory programs are CMS’ attempt to bring the remaining hospitals into a value-based payment world,” said Josh Seidman, senior vice president at Avalere Health, in a prepared statement. “For many of those providers sitting on the sidelines of alternate payment models, this new initiative will be a wake-up call.”

That wake-up call might be especially rude for the 60% of hospitals where spending for these care episodes exceeds regional norms, as determined by Avalere.

As for how these hospitals might rein in their costs, post-acute care appears to be a large part of the answer.

Nearly 40% of total spending on hip and knee replacements is related to hospital readmissions and post-discharge care, including at post-acute facilities and through home health agencies.

“The reality is that most hospitals don’t know where their patients go after they are discharged,” stated Fred Bentley, vice president at Avalere. “Their success under CJR will hinge on being able to track patients and partner with high-performing post-acute care providers.”

Source: Avalere Health

The average home health spending per CJR episode runs to $2,123, according to Avalere’s analysis of 2012-2014 Medicare claims data. That’s compared to $5,034 for skilled nursing facility care and $13,193 for inpatient hospital stays.

Some Congressional lawmakers attempted a last-minute delay of the program, arguing that providers need more time to prepare, but the legislation appears to have a tough path forward.

Written by Tim Mullaney

Photo Credit: Phalinn Ooi