CMMI Remains Bullish Regarding Timeline for CJR and Value-Based Payments (and Rightfully So!)

19 November, 2015

CMMI Remains Bullish Regarding Timeline for CJR and Value-Based Payments (and Rightfully So!)

Despite increased pressures to postpone  the start of the Centers for Medicare & Medicaid Services' ("CMS") first mandatory bundled payment, the Center for Medicare and Medicaid Innovation ("CMMI") announced Monday, November 16, that they would, indeed, proceed with the Comprehensive Care for Joint Replacement ("CJR") program. This decision connotes a new level of accountability and commitment to upending the traditional orthodoxies that have governed U.S. healthcare. With CMS’ track record for delaying the tougher policy decisions, we are pleased to see that there is something more than ambition here. We have an obligation to fix the over-testing and over-treating that is pervasive in fee-for-service. It’s not only about creating new value, it’s also about doing the right thing for the American public, and I applaud the team at CMMI.

Patients historically have resisted price competition in the healthcare industry. This was validated in our work testing bundles with the CMS Acute Care Episode (“ACE”) Bundled Payments Demonstration. Prior to going live with the ACE pilot, we conducted focus groups with patients regarding bundles or fixed pricing strategy. Overwhelmingly, the data revealed in 2009 that patients associated lower prices with less care or lower quality care. A number of factors are contributing to a shift in the way patients view price competition. Digital ubiquity, transparency, and smart technologies have enabled patients to see that they weren’t getting more—they were just paying more.

With major joint replacement procedures being the most commonly performed procedure for Medicare beneficiaries, it makes sense that CMMI would begin with this population. We should expect to see continued movement in areas such as CRM (cardiac rhythm devices), and other high-spend areas for Medicare such as chronic conditions and outpatient procedures.

The following questions and answers provide insight into the CMS decision and what it means for providers as the program launch nears.

Q: Is proceeding with the CJR program a positive step at this time?

Yes. Without a doubt. It is evidence that the “New Deal” in U.S. healthcare is taking hold.

Q: When is the CJR program officially launching?

CMS announced that the program would begin April 1, 2016, instead of the originally proposed date of January 1, 2016.

Q: What about providers who worry that they aren't ready for the move to value-based payments?

If providers are asking for more time, I would suggest that they are asking the wrong question. New, smart technologies, digital ubiquity, and transparency are contributing to the transformation we are seeing right before our eyes. Further protracting the move to value-based payments is not good for consumers and not good for the economy. For providers worried that they aren’t “ready” and need more time, they need to remember that there is zero downside risk in year one.

Additionally, we need let go of this notion of being “ready.” Ready for what? Failure tolerance is what is needed. We don’t need perfect (which is good because the U.S. healthcare system is far from perfect. Think failure tolerance. Think about failure as nothing more than a data point and move on with the business of creating new value. The head in the sand approach will result in someone else raising their hand to do it better, faster, and cheaper. And if the question is really about managing demand destruction, I would recommend leaning in and taking it head-on. Yes, we already know that demand destruction will occur, particularly in areas such as diagnostics and therapeutics, IRF and SNF utilization, any area where one cannot justify the value of the services provided against the relative cost. Market advantage means taking this on NOW. Bundles aren’t the end game; they are a low-entry point on the path to managing total cost of care.

Q: With the CJR program moving forward, what would be the next logical programs to launch?

We should expect to see continued movement in areas such as CRM and outpatient procedures such as colonoscopy. Beyond the Medicare population, we are seeing interest in maternity care bundles across several Medicaid programs and recent movement in pediatric orthopedic bundles as well as oncology among commercial payers. Employers remain focused on high-end cardiology, cardiac surgery, bariatrics, orthopedics and spine. The take-away message? Follow the money.

CJR is aligned with Health and Human Services' commitment to reward providers for providing the highest quality of care in the most cost effective setting as compared with fee-for-service, which can reward over-testing and over-treating.

Q: Are the original 75 metropolitan statistical areas ("MSAs") still intact? 

CMMI announced in the final ruling that the number of metropolitan statistical areas ("MSAs") required to participate had been reduced to 67 markets. The reason for this is that while originally CMS had identified 75 MSAs that would be required to participate in this mandated bundle, after applying the Bundled Payment for Care Improvement ("BPCI") exclusions, a handful of markets no longer qualified. Specifically, when counting the number of CJR episodes in a region, they excluded episodes that were at Model 2 lower extremity joint replacement ("LEJR") hospitals as of October 1, 2015 (previously it was July 1, 2015). Additionally, when counting the number of CJR episodes in a region, they did not count episodes that would be accruing to a BPCI participating physician group practice. These two changes meant that the eight MSAs in question no longer met the MSA eligibility criteria, thus they are no longer subject to the mandate. The table of excluded MSAs can be found below and on page 76 of the final rule.


Q: Where can I find a copy of the final rule?

The final rule may be found here: