Understanding CJR Payment Reconciliation
This month marked the end of the first year of Comprehensive Care for Joint Replacement (CJR), the Centers for Medicare & Medicaid Services’ (CMS’s) first-ever mandated bundled payment program. Approximately 800 acute care hospitals paid under the inpatient prospective payment system (IPPS) are included in the CJR model.
This week, CMS distributed to CJR participants reconciliation reports identifying potential reconciliation payment amounts (where applicable) for performance-year one (PY1) of CJR, which include rewards for quality performance. CJR reconciliation is the process of comparing actual episode spending with quality-adjusted target pricing to determine potential reconciliation payments (or repayment in future performance years) for CJR episodes.
Cases that are not eligible for CJR will be canceled and may explain a lower number of cases in a reconciliation report than an organization had anticipated. Common reasons cases do not qualify for CJR are that the patient died, there was overlap with Bundled Payments for Care Improvement (BPCI) program participation, and the patient received managed care. Organizations subject to CJR should be prepared with the following knowledge.
Eligibility for Reconciliation Payment
As a reminder, there is no downside risk in the first year of the CJR program by design. Reconciliation payments will be available to qualifying organizations in July 2017 via electronic funds transfer from CMS to the participating hospital. In calculating eligibility for reconciliation payments, CMS will compare the quality-adjusted target price in PY1 with actual episode spending to determine whether a hospital qualifies for a reconciliation payment. Hospitals with lower extremity joint replacement (LEJR) episode spending exceeding the target price should be aware that, beginning in PY2, they will be financially liable for under-performance.
Episode Validation and Error Reporting
The exhibit below outlines the key steps and timeline for completing the CJR reconciliation process. The BPCI program reconciliation process remains at 30 days, but the CJR reconciliation process is slightly longer at 45 days. Due to the time-sensitive nature of the CJR reconciliation process, it is critical that CJR participants have a strategy for achieving timely and accurate validation of reconciliation files, and, where necessary, execute the appeals process by submitting an error report within the required CMS time frame.
CJR Reconciliation Roadmap
To be able to succeed in the CJR program, participants must understand the reconciliation process and methodology, interpret the reconciliation report and data files, adjudicate files for possible errors, and consider the appeals process. Because CMS uses a software program to generate reconciliation files, and there have been programming and logic errors in the past, it is important to validate the information in the files an organization receives.
The CJR model uses a retrospective payment methodology. Prior to each performance year, CMS provides CJR hospitals with quality-adjusted target prices, which represent expected spending based on historical spending data for LEJR episodes (i.e., the episode benchmark price) with a 3 percent discount applied. The episode benchmark price initially incorporates a blend of both hospital-specific historical LEJR spending and spending for LEJR episodes at the regional level. The discount, which serves as Medicare’s portion of the savings, may be adjusted at reconciliation based on a hospital’s composite quality score, meaning the discount of 3 percent (based on a composite quality score that falls in the “acceptable” range) may be lowered to incentivize improved quality. CJR participants should keep in mind that the regional component of quality-adjusted target prices includes all LEJR episodes at acute care hospitals located in a given region (i.e., the U.S. Census Division) including BPCI episodes and both CJR and non-CJR episodes.
A CJR participant that believes CMS has made an error in this process has only 45 days to report its findings and initiate the appeals process, starting on the date CMS distributes the reconciliation files. Participants that find errors after that 45-day period will not be eligible for appeal.
Although hospitals are not required to make reconciliation payments to CMS in PY1, a hospital would be well advised to identify a single person within an organization who will have sole responsibility and accountability for the CJR reconciliation process. This individual will lead and have oversight for all aspects of the process, including ensuring reviews are completed in a timely manner and, where necessary, initiating the appeals process. Additionally, this person will be responsible for maintaining CJR reconciliation records and reporting to internal constituents, as well as receiving a final review and sign-off from the CFO. These steps will ensure the necessary focus for successful CJR reconciliation.
Deirdre Baggot, PhD, is a former expert reviewer, CMS’s Bundled Payments for Care Improvement Initiative; a former leader for CMS’s Acute Care Episode Bundled Payments Demonstrations, principal and practice leader for bundled payments, ECG Management Consultants, Washington, D.C. and a member of HFMA’s Southern California Chapter.