Industry Insights

Why Post-Acute Care Providers Should Prepare for CJR

February 2016
Author:  Chris Murphy

Chris Murphy



Health Care

Two Warren Place
6120 S. Yale Avenue, Suite 1400
Tulsa, OK 74136-4223


Practically every article you read about a new law, regulation or requirement starts with, “On such-and-such date, the Centers for Medicare & Medicaid Services (CMS) issued …” and then proceeds to painstakingly outline the regulatory or legal changes.

This isn’t one of those articles.

Instead, this is a supplement to the detailed overview, designed to help post-acute care (PAC) providers consider how the Comprehensive Care for Joint Replacement (CJR) model, which appears to be a hospital program, could affect PAC operations and their relationships with other providers across the continuum. If you’re looking for a detailed overview of the final rule, CMS, the American Health Care Association, the National Association for Home Care & Hospice and BKD all have tremendous resources to help you understand the provisions of the final CMS rule on the CJR payment model.   

A View from the Clouds

CJR will hold certain hospitals financially accountable for quality and efficiency throughout the care continuum for Lower Extremity Joint Replacements (LEJR) episodes. Here’s a closer look at some crucial program components:

  • Participation is mandatory. CMS selected 67 metropolitan statistical areas (MSA), and participation is not elective for most hospitals in those areas.
  • The CJR program is limited to LEJR episodes and only applies to patients whose acute care falls into MS-DRGs 469 (replacement with major complications or comorbidities) and 470 (replacement without major complications or comorbidities).
  • Payment is based on a target price methodology. CMS will periodically set a target price to evaluate Medicare’s episodic cost from acute admission through a 90-day period following acute discharge.
  • To create savings, CJR implements a risk- and gainsharing model. Reconciliation payments will be made each year to allow participating hospitals either to receive a portion of Medicare’s savings (if cost was below the target) or be responsible for a portion of Medicare’s loss (if cost was above the target). Gainsharing opportunity ranges from 5 percent to 20 percent of the target, and risk potential is capped between zero percent and 20 percent of the target.
  • Providers will continue to receive the historical payments (HHRGs, RUGs or MS-DRGs). The opportunity or risk associated with this program is realized in the annual net reconciliation payment to the hospital. 

Implications for PAC Providers

On the surface, CJR appears to be a hospital program; the hospitals are mandatory participants and all risks and rewards seem to go to the hospitals. But the hospitals get paid a per-discharge amount for these services, and that amount varies based only on outlier payments or whether the patient has major complications or comorbidities. Money talks—and hospitals understand the most significant opportunity to increase gain or decrease loss will occur in the post-acute setting:  on average, 45 percent of all episode payments occur after the anchor discharge. 

Based on BKD’s review of cross-continuum claims data, the biggest variables for the full 90-day episode are created by acute readmission, PAC length of stay and intensity of rehabilitation services. Hospitals are going to align themselves with PAC providers that demonstrate the ability to efficiently provide high-quality care.

What Metrics & Information Will Hospitals Consider?

It’s important to understand how participating hospitals will make their alignment decisions. Here’s some of the information hospitals are likely to evaluate:

  1. Home Health Compare and Nursing Home Compare
    Hospitals will look at star ratings, including survey compliance, quality and staffing metrics, managing daily activities, managing pain and patient survey results.
  2. Historical Medicare payments
    Hospitals will have access to episodic information for all providers in the continuum. A skilled nursing facility (SNF) with long lengths of stay and payments mostly in the ultra-high and very high rehab categories, or a home health agency (HHA) with multiple episodes or high frequency of payment categories based on 20 or more rehab visits, may be perceived as inefficient. For many SNFs and HHAs, this has been common practice under payment models that increase payment based on rehab utilization.
  3. Readmissions experience
    Many hospitals have been tracking readmissions experience by PAC provider since the inception of the Medicare Readmissions Reduction Program for fiscal year 2014.
  4. Care models not impacting Medicare payments
    Hospitals likely will see value in integrating services that aren’t reimbursed by Medicare but can improve outcomes, such as telehealth, private duty nursing or restorative nursing programs, if they are well integrated into the patient’s care.

What Operational Changes Should You Consider?

Much of the hospitals’ decision making related to alignment initially—and potentially to gainsharing in future years—will be based on historical information. PAC providers have little time to make changes to their operations to begin developing a track record of efficient care with good outcomes for LEJR cases. Here are some suggested actions:

  • Evaluate your public quality and patient satisfaction information and try to identify specific operational changes you can make quickly to improve your ratings.
  • Understand your care plan for a typical LEJR patient, including length of stay and rehab intensity. Work closely with your clinical and therapy staff to develop more efficient care plans that have the same or better outcomes. It may be worthwhile to include physicians and hospitals in this development process as well. This may involve adding weekend rehab providers, performing evaluations during the acute stay and developing a restorative nursing program.
  • Readmissions is a trickier issue because patients are readmitted for many reasons. Here are a few ideas:
    • Prevent so-called “social readmissions” by developing communication materials to be used while the patient is still in the acute stay to set reasonable expectations. PAC communications during the acute stay tend to make patients more comfortable in transition.
    • Change your staffing model so your best clinical staff is available upon intake and early in the patient’s post-acute episode.
    • Implement protocols to identify and address changes in condition that could lead to rehospitalization before the readmission is imminent.
    • Get the patient in the right PAC setting the first time! Educate acute care case managers about how to predict a patient’s PAC needs. Is the patient homebound with a good support system? Home care may be the answer. Does the patient have significant chronic illnesses, a poor diet or issues with medication compliance? Skilled nursing may be the best option.

PAC providers need to understand the strengths and weaknesses they present to hospitals—and highlight their strengths while overcoming their weaknesses. A focus on helping solve the hospitals’ problems will be a strong approach.

If you’re thinking, “I’m not in one of the selected MSAs, so this doesn’t affect me,” think again. CMS is sending a clear signal about the future of Medicare payments. We believe CJR is just the beginning and that bundled payments will expand to other MS-DRGs and geographies rapidly. Understanding CJR and changing your operations to address the program’s requirements are a great way to prepare your organization to meet the ever-changing challenges of post-acute care.

If you have questions about the CJR program or bundled payments, don’t hesitate to contact your BKD advisor.

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