On August 15, 2017, the Centers for Medicare and Medicaid Services (CMS) proposed changes to their bundled payment models, including the Comprehensive Care for Joint Replacement (CJR) Model.¹ These proposed changes include: 

1. Reducing the number of geographic areas with mandatory participation in the CJR model from 67 to 34, with the rest of the geographic areas having voluntary participation.² Hospitals within voluntary regions have a one-time opportunity to opt out of the model.³ The rules also propose that low-volume and rural hospitals located in the 34 mandatory areas may participate on a voluntary basis for CJR programs.⁴
2. The cancellation of Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) incentive payment model. These programs were originally scheduled to begin January 1, 2018; however, cancelling these models would give CMS more flexibility in developing alternative payment models (APM) that promote higher quality and better coordinated care.⁵

The CJR Model is an alternative payment model (APM) with the goal of promoting better coordinated and more efficient care for hip and knee replacement surgeries.⁶ Hospitals are held financially accountable for CJR episodes of care based on cost and quality metrics established by CMS.⁷ Episodes begin upon the admission of a Medicare beneficiary to a hospital, and end 90 days after the beneficiary is discharged.⁸ Hip and knee replacements are some of the most common inpatient surgeries, with 400,000 procedures performed in 2014.⁹ The total cost for all of these procedures was $7 billion in hospitalizations alone.¹⁰ Although these are high-volume procedures, the cost and quality of these procedures vary widely across providers,¹¹ e.g., through increased rates of hospital acquired infections (HAIs) or poor surgical outcomes at some facilities, which may lead to hospital readmissions. Overall, expenditures by CMS on these procedures range from $16,500 to $33,000, depending on geographic region.¹² CJR payment models were originally created in an attempt to reduce medical outcome variation, and lower overall costs for both CMS and healthcare organizations. EPM and CR models work in a similar fashion to CJR models, but apply to different diagnoses, such as the payment for cardiac and orthopedic-related episodes of care.¹³

It is estimated that approximately 470 acute-care hospitals will continue with the CJR payment model, a decrease from the 800 hospitals that currently participate in the program.¹⁴ This can have a significant impact on the savings that CMS realizes, with savings estimated to be $204 million over the next three years, instead of the $294 million in savings if the program were to continue as is.¹⁵ Further, CMS is expected to realize a loss in savings of approximately $159 million over the next five years with the cancellation of the EPM and CR payment models.¹⁶ There was discussion from CMS regarding the alteration, rather than cancellation, of these models; however, due to the complex nature of altering the EPM and CR designs, CMS opted to cancel the programs altogether.¹⁷

Healthcare industry stakeholders have differing opinions about the potential implications of these proposed changes. Some stakeholders, including leaders of Geisinger Health Plan and Novant Health, are doubtful that a voluntary CJR model will sway enough providers to switch from a fee-for-service model to a value-based model.¹⁸ Making bundled-payment initiatives voluntary may increase the amount of time it takes for the government, and subsequently commercial payors, to adopt VBR models in general, they argue.¹⁹ Conversely, other stakeholders are in favor of the proposed changes by CMS, stating, “[CMS bundled payment models] are so administratively complex that you end up with more paper cuts than actually driving better outcomes.”²⁰ Yet other stakeholders assert that CMS should focus on its other value-based reimbursement (VBR) initiatives, such as the Comprehensive Primary Care Plus (CPC+) model.²¹ This model promotes better quality, efficiency and patient access for primary care through public-private partnerships, such as those between physician practices and the government, to provide practices with additional financial resources and flexibility in making investments.²²

Proposed changes and cancellations for these bundled payment models were made subsequent to the resignation of Patrick Conway, M.D., from his post as director of the CMS’ Center for Medicare and Medicaid Innovation.²³ Conway was an advocate for mandatory VBR models, arguing that they promoted Medicare savings.²⁴ Other agency officials during the Trump Administration, including former HHS Secretary Tom Price and CMS administrator Seema Verma, have stated support for VBR models, such as bundled-payment models; however, they have also expressed concern related to the burden of these programs on providers.²⁵ In a press release dated August 15, 2017, Verma stated that the proposed changes to the bundled payment models will “allow[ ] CMS to test and evaluate improvements in care processes that will improve quality, reduce costs, and ease burdens on hospitals”²⁶ She went on to explain, “Stakeholders have asked for more input on the design of these models. These changes make this possible and give CMS maximum flexibility to test other episode-based models that will bring about innovation and provide better care for Medicare beneficiaries.”²⁷ Moving forward, CMS plans to decrease the number of large mandatory episode payment models, and increase the number of voluntary initiatives in which healthcare organizations can participate.²⁸ Whether shifting reimbursement from volume to value will be most effectively accomplished in smaller increments, rather than with larger, more comprehensive programs, remains to be seen.