Comprehensive Care for Joint Replacement (CJR)

Calculating the Target Price

Target Price Summary• CJR will test a new bundled payment model for

inpatient lower extremity (i.e. hip and knee) joint replacements.

• CMS will calculate a target price for the inpatient procedures and all costs of related care (both Part A and Part B) for the 90 day period following discharge.

• Participating hospitals will be assigned individual target prices for CJR episodes and may receive a portion of any savings compared to the target price and be responsible for repayment of any expenditures above the target price.

Target Price Calculation Methodology

Historical data

• CMS uses three years of historical data to set target prices

• The historical data will be updated every other year during the program

• Both hospital-specific and regional data is

used

Regional pricing• Regional pricing is included in the

calculations to provide gainsharing opportunities for hospitals that are already well-performing

Target prices per performance year• CMS will provide hospitals with a

number of target prices for each performance year, segmented by MS-DRG, presence of hip fracture and submission of optional quality data

Target price normalization• In addition, since CMS will normalize

prices based on various IPPS and OPPS program changes (which go into effect on 10/1 and 1/1 of each calendar year, respectively), CMS will further distinguish target prices for episodes initiated between January 1 and September 30 vs. episodes initiated between October 1 and December 31

CMS’s process for setting target prices

CMS’s process for setting target pricesSet different prices for MS-DRGs 469

and 470, combined with hip fracture status

Use three years of payment data grouped by historical CJR episode start date and update this every other year

Performance Year(s) Payment Data Range

1 and 2 1/1/12 – 12/31/14

3 and 4 1/1/14 – 12/31/16

5 1/1/16 – 12/31/18

1

CMS’s process for setting target prices

The CJR episodes for a hospital will include any historical LEJR BPCI episodes from that hospital if it was previously a BPCI participant

Cap high cost episode payments at two standard deviations of the regional mean

2

CMS’s process for setting target prices

CMS will apply a trending factor to inflate the first two years of historical data to the third year (the trending will be done separately for each combination of MS-DRG and presence of hip fracture)

3

CMS’s process for setting target pricesApply Medicare payment system updates to the historical data to bring it up to

current payments:

CMS creates a weighted update factor for inpatient acute, physician, IRF, SNF, HHA and other services

A hospital-specific update factor is created for each of their components and then they are weighted based on the percentage each component is represented in the hospital’s historical episodes

Regional update factors are created for the same components

4

CMS’s process for setting target pricesBlend hospital-specific and regional

data in a transition from mainly hospital to fully regional over the five performance years

Performance Year(s)

Hospital Portion Regional Portion

1 and 2 2/3 1/3

3 and 4 1/3 2/3

5 N/A 100%

5

CMS’s process for setting target prices

Normalize for provider-specific wage adjustment at the claim level when combining the regional and hospital-specific data (the wage index is re-introduced when the final hospital-specific target prices are set)

CMS will use an estimated labor factor of 0.7 when applying the wage index

6

CMS’s process for setting target prices

Pool the CJR episodes from both MS-DRGs to provide a greater volume of claims (MS-DRG 469 has substantially less volume). The MS-DRGs are un-pooled at the end of the calculations

7

CMS’s process for setting target prices

Apply a discount factor which is Medicare’s portion of the reduced expenditures from the CJR episodes. Different discount factors are used for calculating reconciliation payments and repayments and vary based on quality data scoring

Performance Year

Repayments Discount Factor

Reconciliation Payments Discount Factor

1 N/A 1.5% - 3.0%

2 0.5% - 2.0% 1.5% - 3.0%

3 0.5% - 2.0% 1.5% - 3.0%

4 1.5% - 3.0% 1.5% - 3.0%

5 1.5% - 3.0% 1.5% - 3.0%

8

Other Target Price Considerations

Low volume of episodes• If a hospital has fewer than twenty CJR

episodes in any set of historical data, it will receive 100% regional pricing

• This also applies to a new hospital until it has at least twenty episodes in the historical data

• Hip fracture presence is determined by a list of ICD-9 / ICD-10 codes as published by CMS

Hospital mergers• If a hospital receives a new CCN due to a

merger, CMS will use the historical CJR episodes attributed to the previously existing hospitals

• In calculating the CJR target prices, CMS will use the actual MS-DRG payment, including any reductions due to HACs

HAC reductions• In calculating the CJR target prices,

CMS will use the actual MS-DRG payment, including any reductions due to HACs

Physician participation in Medicare• Payments to physicians who have

opted out of Medicare are not included when calculating target prices

Capital Costs• Capital costs are included in target

price calculations

Target price effective date• The target price in effect on the first day

of the episode will apply to the entire episode

• Target prices will be communicated prior to the performance periods for which they apply

To download the full CJR report, click on the image below