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.

Screen Shot 2016-07-28 at 4.26.20 PM Screen Shot 2016-07-28 at 4.29.57 PM

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.

Screen Shot 2016-07-28 at 4.28.17 PM

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

Copyright © 2018, Private Practice Section of the American Physical Therapy Association. All Rights Reserved.

Are you a PPS Member?
Please sign in to access site.
Enter Site!