There could be a lot of unintended consequences from Medicare’s new bundled payment system, unless risk adjustment is added, according to researchers from the University of Michigan Institute for Healthcare Policy and Innovation.

They report that under the Comprehensive Care for Joint Replacement (CJR) system implemented in April — and scheduled for expansion over the next three years — hospitals that treat sicker, older patients, or those who have more complex health problems may lose hundreds of thousands of dollars in reduced CMS payments.

The reason is because these patients require services and care that are more complicated than cost targets mandated by the program.
“Patient complexity matters,” Dr. Chandy Ellimoottil, lead researcher, told HCB News. “Rolling out a one-size-fits-all model could really hurt hospitals that are trying to appropriately treat patients. We don't want to incentivize reducing access to care for Medicare patients who are medically complex."

Bundled payment program in deployment
The Centers for Medicare and Medicaid Services (CMS) recently implemented the CJR bundled payment program, designed to reduce episode payment variation for hip and knee replacements.

The CJR program pays hospitals a preset “bundled” amount for the full range of care provided to the joint replacement patient instead of paying particular charges for each element of care, such as surgery, hospital stay, and postoperative care.

If the spending actually incurred for a full treatment is above a targeted amount, providers could experience reduced CMS payments; if spending is below the target “reconciliation payments” increase.

So far the bundled payment program only applies to hip and knee replacements at 800 hospitals in a limited number of metro areas. But supporters, including former members of the George W. Bush administration, posit that expansion of this model to cover treatment of other conditions at more hospitals will be “an important step beyond CMS payment reforms that have been implemented so far.”

Former Secretary of Health and Human Services, Michael O. Leavitt, argued along with former CMS administrators in The Hill that “hospitals in these expanded episode payment proposals will face substantial ‘downside risk’ - with both more pressure and more payoff to implement more substantial changes in care than under fee-for-service [plans].”

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