5 key thoughts on how CJR bundled payments can unfairly penalize hospitals — And how to fix it

CMS' Comprehensive Care for Joint Replacement bundled payments could penalize some hospitals because it doesn't make risk adjustments for case complexity. A recent article in Health Affairs sought to quantify the difference.

The researchers examined Medicare claim data from patients in Michigan who underwent joint replacement on their lower extremities and applied the payment methods analogous to the bundled payment program CMS intends to implement to determine bonuses and penalties. The researchers found:

1. For each standard deviation increase in the patient's complexity, the reconciliation payments were reduced by $827 per episode, according to the report.

2. If CMS implemented risk adjustment, they would increase the reconciliation payments to some hospitals by around $114,184 per year.

3. The medical complexity of patients was associated with whether hospitals received a penalty or bonus and the magnitude of the reconciliation payments. These findings were consistent with other studies showing underlying factors can influence the cost of care.

4. The study findings show even modest risk adjustment could have major implications for the reconciliation payments with target prices based on regional benchmarks.

5. Factors including the patient's socioeconomic status, marital status, BMI and functional status could be risk-adjusted variables, according to the report.

"The end goal of any alternative payment program should be to provide hospitals with realistic incentives to provide high-quality care and reduce costs," concluded the study authors. "While we believe that the Comprehensive Care for Joint Replacement program could serve as an important step in that direction, the inclusion of risk adjustment based on CMS-HCC risk scores would make the program more equitable for and acceptable to all participants and would limit the potential unintended consequences for Medicare beneficiaries with multiple comorbid conditions."

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