Op-ed: Hospitals Can Succeed With Episode-Based Bundled Payments


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By Tom Graf, M.D., Melissa McCain and Stephanie Hines

The Centers for Medicare and Medicaid Services recently published its final ruling for the Comprehensive Care for Joint Replacement Model, designed to test bundled payment and quality measurement for hip and knee replacements in approximately 800 hospitals across 67 metropolitan service areas. Beginning April 1, these hospitals will be accountable for the quality and cost of the entire joint replacement care episode, including patient recovery up to 90 days following surgery.

The clinical, operational and financial implications of this model will be significant for the majority of the initial 800 hospitals. Even if your organization is not part of this first wave of providers, this ruling should not be dismissed lightly. CMS’ decision to move forward with the CJR mandatory bundles initiative, prior to the completion of the Bundled Payments for Care Improvement Initiative, indicates it views episodic bundling as a major lever in its transition to value-based care, and one likely to impact virtually all U.S. hospitals in the near future.

Under pressure to meet the upcoming April 1 deadline, many organizations run the risk of focusing only on the near-term needs of the CJR extended episode – addressing it as an individual project, isolated from other value-based and clinical performance improvement initiatives. As the need to address additional episodes of care and patient segments expands over time, an isolated approach will become taxing on the organization and can jeopardize overall results. Instead, we recommend addressing the CJR bundle directly while thoughtfully connecting your efforts with the development of broader organizational capabilities that will support a comprehensive and scalable program in the long term.

The benefits of a programmatic approach are wide reaching, including:

  • Ensures a comprehensive view of initiatives across the organization, allowing for prioritization of resources
  • Allows for a unified voice from leadership on the importance of each effort and how each fits into a broader vision for value-based care
  • Facilitates a consistent approach to physician engagement
  • Creates economies of scale and expertise

Even though April 1 is fast approaching, there is still time to address the requirement while keeping the big picture in perspective. The CMS rule involves no repayment requirements in year one and limited downside risk in year two. This gives participants the time needed to design and execute on a more effective, sustainable and scalable solution. For providers outside the scope of the CJR, the focus now should be on proactive development of programmatic competencies to prepare for future value-based pursuits.
By taking a structured, purposeful approach, organizations can use the CJR to build the foundation for a large-scale program. Below are six recommendations for getting started:


Near-Term Requirements

Long-Term Capabilities

Activate organizational leadership


Bring together clinical and administrative leaders from across the organization to collaborate on the development of essential clinical, operational and financial capabilities.

  • Leadership alignment
  • Organizational accountability

Understand your populations and drivers of performance


Examine the differences in financial, quality and service performance across patient cohorts (e.g., medical risk, elective versus emergent and knee versus hip) to inform the performance improvement work. As new care processes and protocols are designed, incorporate real-time feedback mechanisms to monitor adherence and quickly identify when drivers of performance are slipping.

  • Quality, satisfaction and utilization reporting
  • Claims data management
  • Ongoing performance management and data sharing

Engage your physicians 


Broaden the types of physicians involved in improvement efforts beyond the specialist. Engage and align hospitalists and primary care physicians to address the fungible costs embedded in the episode that reside outside of the procedure itself.


Advance your care models


Use the development of new care pathways and protocols for a specific episodic bundle like the CJR as an opportunity to build the competencies for a consistent approach that can be applied across other, similar efforts. This entails managing the common medical complications for this population and optimizing care processes to mitigate their risk prior to surgery. At the same time, explore solutions to aggressively manage the variation of costs within your direct control.

  • Clinical protocol and care pathway development
  • Care management and discharge planning
  • Patient engagement
  • Cost and quality variation management

Engage your community partners


Assemble a high-performing post-acute provider network, understand variation in costs across providers and develop relationships to collaborate with these organizations in the clinical protocol and care pathway redesign efforts.

  • Post-acute provider network development and management
  • Independent provider collaboration

Align economic incentives


Develop economic incentive distribution models to ensure all accountable parties are invested in the success of the program. The resulting model should be simple to understand and adjudicate, incorporate a quality-gating functionality and be developed with the understanding that precedents set now will impact future programs.

  • Internal funds’ flow development
  • Physician gainsharing

Tom Graf is national director of population health, Melissa McCain is director of clinical transformation and Stephanie Hines is clinical transformation practice manager at The Chartis Group.


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