Comprehensive Care for Joint Replacement, Part 2

Comprehensive Care for Joint Replacement, Part 2

By Rick Gawenda, PT

Last month, I wrote an article providing a general overview of the Comprehensive Care for Joint Replacement (CJR) model that the Centers for Medicare & Medicaid Services (CMS) implemented on April 1, 2016, in 67 geographic areas impacting approximately 800 hospitals that are paid under the Inpatient Prospective Payment System (IPPS). This month, I discuss more in-depth target pricing, reconciliation payments, repayments to the Medicare program, and how quality scores can impact the target price.

Target Pricing
Every year during the approximate five performance years of this model, CJR hospitals will receive separate episode target prices for Medicare Severity-Diagnosis Related Groups (MS-DRGs) 469 and 470. CMS will also use a simple risk stratification methodology to set different target prices for patients with hip fractures within each MS-DRG. CMS determines the target price based on the hospital’s historical performance (DRG + 90 days postdischarge spend for a rolling three-year period) and the expenditures of other hospitals in the region.

The rolling three-year period for calendar years (CY) 2016-2020 is as follows:

  • CY 2016: January 2012–December 2014
  • CY 2017: January 2012–December 2014
  • CY 2018: January 2014–December 2016
  • CY 2019: January 2014–December 2016
  • CY 2020: January 2016–December 2018

In 2016 and 2017 target pricing will be determined by two-thirds hospital specific and one-third regional.

In 2018 target pricing will be determined by one-third hospital specific and two-thirds regional.

In 2019 and 2020, target pricing will be 100 percent regional.

The CMS is divided into 10 regions. Regional pricing for each individual hospital is determined by what region the hospital is located in and the target price for all hospitals within that region.

For my example, to determine the target price for a hospital, I will pretend we are in CY 2018. This hospital’s expenditures for a total knee replacement (TKR) averaged $22,000 between January 2014 and December 2016, and the hospitals in their region averaged $25,000 in expenditures for a TKR during the same period. In CY 2018, the hospital’s target price will be determined by one-third hospital specific ($22,000) and two-thirds regional ($25,000). This means the hospital’s target price for CY 2018 will be $24,000 for a TKR ($25,000 +$25,000 + $22,000 = $72,000/3 = $24,000).

CMS will then reduce that target price by 3 percent so the hospital’s actual target price for a TKR in 2018 would be $23,280 ($24,000 times 0.03 = $720) ($24,000 – $720 = $23,280).

Quality Measures
The CJR model also requires hospitals to complete two required measures, and hospitals have the option to report voluntary measures. The required measures are

  • The Hospital-Level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty National Quality Form (NQF #1550)
  • The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure (NQF #0166)

Voluntary measures are

  • PROMIS Global (all items) or Veterans Rand 12 (all items) and a condition-specific patient- reported outcome measure
  • Knee injury and Osteoarthritis Outcome Score (KOOS) (all items)
  • Hip disability and Osteoarthritis Outcome Score (HOOS) (all items)

The Hospital-Level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty is worth 10 points, HCAHPS is worth 8 points, and the voluntary measures are worth 2 points for a total of 20 possible points. If the hospital scores well on the quality measures, this can reduce their 3 percent reduction from their target price, thereby increasing their target price and perhaps obtaining a bigger bonus payment or reducing the amount they have to pay back to CMS.

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In 2016, there is no penalty for hospitals that go over their target prices for DRG’s 469 and 470.

Stop-Loss and Stop-Gain Policy
CMS will limit how much a hospital can gain (in reconciliation payments from Medicare) or lose (in repayments back to Medicare) based on its actual episode payments relative to the target prices. These are termed stop-gain and stop-loss limits, respectively.

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Share the Reward and Risk
The CJR model will allow participant hospitals to enter into financial arrangements with certain types of providers and suppliers (skilled nursing facilities [SNFs], long-term care hospitals, home health agencies [HHAs], inpatient rehabilitation facilities, physician and nonphysician practitioners, and outpatient therapy providers). Those arrangements will allow participant hospitals to share, subject to the limitations outlined in the rule, with these third-party providers and entities (called Collaborators) the following: reconciliation payments, internal cost savings, and the responsibility for repayment to Medicare.

CMS places a limit on how much financial risk a CJR hospital is allowed to share with Collaborators. A CJR hospital must retain at least 50 percent of its total risk, meaning that if the hospital owes CMS a repayment, it cannot share more than 50 percent of that repayment responsibility with Collaborators. Additionally, a hospital cannot share more than 25 percent of its responsibility with any single CJR Collaborator.

Case Example
For a case example, I will use Medicare beneficiaries who had a TKR (MS-DRG 470) performed in calendar year 2019 at Hospital ABC, which is in the CJR model. Hospital ABC has entered into financial arrangements with a home health agency known as RST HHA and a physical therapy private practice known as Kinetix (Collaborators), and each Collaborator has 25 percent risk. The target price for Hospital ABC for MS-DRG 470 is $24,000 and after the automatic 3 percent reduction is $23,280.

Hospital ABC performed 100 TKRs in calendar year 2018 that were ultimately discharged under MS-DRG 470. All 100 cases also had home health services provided by RST and outpatient physical therapy services provided by Kinetix postdischarge. Hospital ABC’s target price for the 100 cases is $2,328,000.00 ($23,280 times 100 cases). The total expenditures for the 100 TKR cases were $2,025,000.00. This is $303,000.00 less than the target price ($2,328,000.00 – $2,025,000.00).

In addition, Hospital ABC’s quality score for calendar year 2018 was 14.4. Referring to Table 2, a quality score of 14.4 would reduce Hospital ABC’s reduction from 3 percent to 1.5 percent off of their target price. Prior to the automatic 3 percent reduction, the target price was $24,000. Due to their quality score, their target price will be reduced by 1.5 percent and not 3 percent, so Hospital ABC’s new target price is $23,640 ($24,000 times 0.15 = $360) ($24,000 − $360 = $23,640).

We now need to multiply the new target price ($23,640) by the number of cases (100) to come up with the new target price of $2,364,000.00. We now take this new dollar amount and subtract the actual expenditures ($2,364,000.00 − $2,025,000.00), and we see that Hospital ABC came in at $339,000.00 less than its target price. Since Hospital ABC had an excellent quality score, Hospital ABC and their Collaborators are eligible for a reconciliation payment.

Referring to Table 3, the Stop-Gain limit for CY 2019 is 20 percent. We need to multiple $339,000 by 0.2, and this equals $67,800 that CMS will pay to the hospital for coming in under their target price and having an excellent quality score. Since Hospital ABC has a financial arrangement with RST, HHA, and Kinetix, and each Collaborator assumed 25 percent risk, Hospital ABC would pay both Collaborators $16,950 and Hospital ABC would keep $33,900.


1. Centers for Medicare & Medicaid Services, Comprehensive Care for Joint Replacement Model. Accessed May 4, 2016.

2. Federal Register, Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services, November 24, 2015. Accessed April 2, 2016.

3. CMS Regional Offices, Regional Map. Accessed April 26, 2016.

4. American Physical Therapy Association, Comprehensive Care for Joint Replacement Model (CJR). Accessed May 4, 2016.

Rick Gawenda, PT, is a PPS member and President of Gawenda Seminars & Consulting (, which provides education and consulting for private practices in the areas of billing, coding, compliance, documentation, and practice management. He can be reached at

Study Sheds Light on Insurance Companies’ Policies

A recent Marquette University study assessed payer policies of the three largest health care payers in each state.

By Jim Hall, CPA

Those who know me well know that I am a huge proponent of federalization of insurance laws. Now, before you stop reading, let me make it clear that I am not referring to a single payer system but a system where one set of laws are applied in all 50 states (just like interstate banking and commerce laws). In the April 2011 issue of Impact magazine, I wrote an article outlining my reasons why I feel it is necessary.

It is easy to relate anecdotal stories of why federalization of insurance laws is necessary, but without data most legislators can only sympathize. The stories are fascinating, but how big an issue could this really be? And if you are like me, who has time to sit down and gather the information necessary and put it into a meaningful document?

Enter American Physical Therapy Association Private Practice Section (APTA PPS) Payment Policy Committee members Bridget Morehouse and Mary Daulong, along with assistance from Marquette University doctoral students Stephanie Fiore, Sabrina Weng, A.J. Butts, Nico Olson-Studler, Sarah Iglar, and Danny Coppin. Under the direction of Mary Daulong, these students were tasked with the project of researching the top three insurance payers’ websites in every state. The purpose of this study was to design a document that would assist private practitioners in researching information that would be required in order to appeal claims denials or find authorization forms. However, this purpose was overshadowed by the “bigger picture.”

Their task was to locate on each payer’s website items such as Physical Therapy Medical Policy and Medical Necessity, among other things. They were then asked to use a 1 to 5 grading scale to score how easy (1) or difficult/problematic (5) it was to find the document(s) identified. The results of this exercise were exactly what all of us would have anticipated; the students were shocked at the lack of consistency from insurance company to insurance company. They anticipated Blue Cross Blue Shield would have a consistent medical policy from state to state, however that was not the case.

This document is the first step toward illustrating the problems providers experience in trying to understand what an insurer needs from them in order to get paid. By the way, the students prepared a 17-page PowerPoint presentation and 180+ pages of insurance website information along with the grading scale described. The document will eventually be made available to PPS members, and I am hopeful that a second round of this study will provide additions, which would include how long it takes to navigate the website to determine this information, as well as downloading Medical Policies, Medical Necessity information, and Pre-Authorization forms. When this is done, I anticipate adding these documents as an addendum to the original study, and this document should grow from 180 pages to thousands of pages. That document will also illustrate how easy it is to treat a patient, but how difficult and time consuming it is to appeal a $50-$150 visit when an insurer arbitrarily decides to deny coverage and tell you all you have to do is go to their website and find the policy, forms, etc., and fill them out to complete an appeal (after waiting on hold for 30 minutes to speak with someone for direction).

If you are still not convinced this is an issue, the study encompassed the top 3 payers in all 50 states. I went out to the Trizetto Clearinghouse website and downloaded their professional payer list (Institutional/Hospital payers were excluded from the list). That list does not include payers that only accept paper claims. Want to hazard a guess as to how many payers there were? There are slightly more than 6,400 payers listed. While your practice may not file claims to more than 50 payers consistently, at some point you are going to run across new payers. This new payer experience may be a messy one, and the cleanup is going to take a while.

All that said, not only will these documents help you in that process, they will also become an effective tool to carry to legislators everywhere to ask for one cohesive set of federal insurance laws that all insurers would use to compete for business. And if that’s not a large enough task, maybe state insurance commissioners could be confronted by not only state association members lobbying for insurance reform, but other health care practitioners as well. I believe that we all owe the individuals involved in this study a collective “thank you.” We will work to share this document with other medical specialties to form a unified position.

Jim Hall, CPA, is the general manager of Rehab Management Services and a member of the PPS Payment Policy Committee. Jim can be reached at

The Payment Process

PPS Strategically Targets Payment at a Local Level

By Paul Gaspar, PT, DPT, CCS

Payment is quite possibly the number one concern of physical therapists in private practice. Many insurance companies have cut payment by 25 to 40 percent during the last five years. Others have chosen to hire “middleman” discount networks to effectively lower payment and curb the utilization of physical therapists’ services. To top it off, some have used “all contracts” clauses and questionable pricing and product rollout schemes to lower their costs—and this is at a time when several insurance companies have been posting dramatically higher profits and stock prices, as well as record CEO compensation. Is that fair or legal? Most physical therapists would argue it is not fair, but whether it is legal is a much more difficult question. The legality of specific payment contracts and conditions has to be determined on a case-by-case basis and largely depends on state laws and regulations for most payers. That is one of the main reasons the Private Practice Section (PPS) started a legal fund to support their PPS members at the local level. And it seems to be paying off in a big way.

California physical therapists have been frequent recipients of PPS legal grants, several of which have been used to win the legal status of the Physician-Owned Physical Therapist Services (POPTS) two years in a row. In cases where California physical therapists were no longer able to achieve their goals in the POPTS battle, they returned the remaining legal funds back to PPS so that they could be used where the outcome would be more satisfying to PPS members.

Since direct access and POPTS issues have been largely decided in California, fair payment has been the advocacy focus. California physical therapists continue to be crushed by predatory pricing, middleman networks, and questionable payer tactics. PPS has been relying on its physical therapist members in California to keep them informed about physical therapists’ rights or contracts being infringed. Recently, PPS funded a legal action against a payer’s alleged retribution against PPS members for their fair payment advocacy. The legal action resulted in a positive financial settlement for the PPS members.

PPS remains in close contact with their members in California because many consider it ground zero for payment reform. California’s PPS members are among the most proactive PPS members in the country, often pushing back forcefully if they feel they have been wronged by payers. Many in California are identifying potential actions regarding allegedly illegal contract offers, breaches of contracts, and unfair pricing schemes.

If your goal is to get paid more fairly by insurance companies, don’t sit back and expect others to do the work for you. PPS cannot be in all places at all times. If you think you are being treated unfairly, relay your concerns to your local colleagues, your local private practice group, your attorney, and/or PPS. It would not be a bad idea to consider contacting a PPS member in California either, because if there is a payer problem it is likely that California physical therapists have experienced it, or are doing so currently. After doing so, if it is clear that there may be a viable legal concern, please consider contacting the PPS Board and applying for a legal aid grant. We hope physical therapists in other states will take advantage of this unique opportunity offered only to PPS members.

Paul D. Gaspar, PT, DPT, CCS, is a Private Practice Section (PPS) member and owner of Gaspar Physical Therapy since 1994. He has served on the board of the California Physical Therapy Association, three terms as a PT PAC Trustee, and currently serves as President of the Independent Physical Therapists of California.

Marketing Field Trip

By Lynn Steffes, PT, DPT

Summer is a great time for your practice to take a field trip. How about taking a marketing field trip in your community? So often we limit our external marketing reach to traditional medical referral sources and ignore opportunities for business-to-business (B2B) marketing. Small businesses in your community that serve similar demographic targets may be a great place to take your marketing message!

8 Steps in Planning Your Marketing Field Trip

Step 1: Begin the process by identifying your primary patient target market for expansion.

Step 2: Define the geographic range that patients typically travel from to your practice. It will vary greatly depending on if your practice is urban, suburban, or rural. Your practice management software may be a great place to run a patient zip code report to assist in setting your geographical parameters.

Step 3: Divide your practice up into teams that will do a field trip in a certain area around your practice location. Perhaps you will have two to four teams of individuals who will actually agree to drive through the neighborhoods surrounding your business and identify small businesses that serve your primary patient marketing targets. Businesses that are related to health, wellness, fitness, and sport are often great targets, but don’t forget a local coffee shop, salon, or shoe store.

Step 4: Each team should identify at least five possible targets and rank them by location (closer is better), affinity for your practice (to serve women’s health), and familiarity to the practice (someone in your practice patronizes the business).

Step 5: Each team member then selects a business or two to research via website and visit.

Step 6: Team members outline a strategy to approach the business and connect on similarities, identify a co-marketing or mutual referral system, and plan their B2B call.

Step 7: Once a successful B2B connection is made, create a specific plan to cultivate cross-referrals, cohost events, create social media exchanges, and share advertising opportunities.

Step 8: Track your results and remember to express gratitude to your team and to the small businesses you visit and build on each other’s successes!

Steffes-Lynn-2016 Lynn Steffes, PT, DPT, is president and consultant of Steffes & Associates, a national rehabilitation consulting group focused on marketing and program development for private practices nationwide. She is an instructor in five physical therapy programs and has actively presented, consulted, and taught in 40 states. She can be reached at

What I Believe

By Sam Brown, PT, DPT, CSCS

The following is adapted from a talk Sam Brown, PT, DPT, CSCS, gave at the Graham Sessions in 2015.

I believe that Abraham Lincoln was our greatest president.
I believe that Secretariat was the greatest racehorse ever.
I believe that Muhammad Ali was the greatest boxer ever.
I believe that chocolate should be its own food group.
I believe that John Wayne was one of the greatest actors of all time.
I believe that where there is no hope for the future, there is no power in the present.
I believe the properly executed pick & roll is the best play in basketball.
I believe that the Bible is the inspired word of God.
I believe that the new ICD-10 codes are an example of the stupidity of those who govern health care.
I believe that physical therapy is the most underutilized, misunderstood profession with the most untapped potential in all of health care. And that this is our own fault.

And I believe that God created the Earth in 6 days and on the 7th day He rested in Kentucky.

To me none of those are debatable but let’s talk about the next to the last one.

So, let’s break it down a little. Underutilized—when I was in physical therapy school in the early 1970s, we took an administration class and one of the books used was by Robert Hickock. No relation to Wild Bill. It basically said that at any time, and most of this was based on inpatient information, the physical therapist would see at best 10 percent of the patient population. If the hospital had a census of 100, then you would be seeing 10 patients. This philosophy carried over to our mindset and then to the insurance carriers and reimbursement. Then, in the late 1980s and early 1990s, we started trying to help the reimbursement community with rehabilitation guidelines by telling them that a certain diagnosis should only require X number of treatments. We then said, “I can treat that patient in X number of visits.” We cut our own throats. Our outcomes were good, but the foundation of our profession and regulatory decision making was weakened. Today we are paying for those decisions. We have something of value, but we aimed too low.

Misunderstood—I feel we do not know who we are, and if we do not know who we are, how do we expect others to know? For example, this year’s House of Delegates will be defining the physical therapy “professional scope of practice.” Our “scope of practice” should be intuitive. Back in the early 1980s at the House of Delegates in New Orleans, the American Physical Therapy Association (APTA) conducted interviews at some malls. The question presented to the public was “What is physical therapy, and who are the physical therapists?” Some answers were funny (maybe)—overweight, homely, drives a Volkswagen (VW) Beetle—but then they got sad, because the public had no clue as to who we were or are.

You’re looking at the guy who tried several times to get the board to take a “moments like these” film of physical therapy and 4 million dollars and do a Super Bowl ad. Just think, 300 million people would see us in a positive light. Every major network and newspaper, for the couple of weeks following Super Bowl, would be talking about the top commercials. How many of you still remember the VW ad with the little boy as Darth Vader? Or the Mean Joe Green Coke ad, or the three frogs saying “Bud-wei-zer.” Sorry, but saying “move forward” is just not enough. It has no heart, no passion.

Untapped potential—We try to separate ourselves from others (athletic trainers, occupational therapists, chiropractors, etc.), but we avoid actually following through on this. It is not logical that a podiatrist or chiropractor should be an entry point into health care. We are the leaders in rehabilitation. We need to embrace that role and run with it.

Imagine our profession as a football huddle: We make big plans, policies, and procedures, identify problems, and tell each other how wonderful we are. But many times we do not run the plays.

We have to be brave in dealing with other groups and regulatory demands. We have to get out into the communities we serve, not just sponsor a race, but as a business weave ourselves into the fabric of the community so that physical therapy is the first and only thing they think of when the need arises. We not only need to be a part of the community but also a loving partner with the community. Remember, it is all about relationships.

The scriptures I read tell me in several places to be bold in what I do, to be brave in my dealings with others, to love big, not only those I work with but my community as well. This tells me that if you stop learning today, you stop leading tomorrow. We live by what we believe, not just by what we sometimes see.

So the question is: What impact have you had on your patients, your staff, your community, and your profession? We are called to pull the vision of the future into the present.

You are some of the best and the brightest of this profession. My challenge to you today and in the future is to be bold, be brave, love big, and by standing on our history, we will see the opportunities and the light and brightness of our future. And that is what I believe.


Sam Brown, PT, DPT, CSCS, is a PPS member and owner of Monticello Physical Therapy in Monticello, Kentucky. He can be reached at

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