Four Considerations for CJR Payment Reconciliation: Is Your Organization Prepared?


By Deirdre Baggot, PhD, and Todd Godfrey

The first year of the CMS-mandated Comprehensive Care for Joint Replacement (CJR) model is over. In just a few weeks, CMS will release CJR files to the approximately 800 acute care hospitals included as CJR participants. The release of this data will trigger the initial reconciliation process of comparing actual episode spending to quality-adjusted target spending to determine potential reconciliation payments (or repayment in future performance years) for CJR episodes. Here are four important considerations related to this process:

ECG-roadmap1. Only hospitals with lower extremity joint replacement (LEJR) episode spending below the target price and a minimum composite score for the required quality measures will be eligible to earn a reconciliation payment.

CMS will compare the quality-adjusted target price to actual episode spending to determine whether a hospital qualifies for a reconciliation payment or is responsible for paying Medicare. The payment will be equal to the difference between the target price and actual spending, up to a stop-gain limit. Conversely, hospitals will be financially liable for paying a portion of the difference, beginning in year two, if LEJR episode spending exceeds the target price. As a reminder, there is no down-side risk in the first year of the CJR program by design. For organizations that are eligible for reconciliation payments, those funds will be available in July 2017 via electronic funds transfer from CMS to the participating hospital.

2. CMS allows up to 45 days for the reconciliation process.

The main difference from the Bundled Payments for Care Improvement (BPCI) program reconciliation process, which is only 30 days, is that CJR reconciliation is based on an entire year of episodes, while BPCI reconciliation is based on a quarterly period. 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, that they execute the appeals process within the required CMS time frame.

Understanding the CJR reconciliation process and methodology, interpreting the CJR reconciliation report and data files, reviewing files for possible errors, and considering the appeals process are core competencies necessary for success in the CJR program. Because CMS uses a software program to generate reconciliation files, it is important to validate the information in the files that your organization receives, as programming and logic errors in the software program have been reported in the past.

3. The episode benchmark price initially incorporates a blend of hospital-specific historical LEJR spending and spending for LEJR episodes at the regional level.

The CJR model utilizes a retrospective payment methodology. CMS provides CJR hospitals with quality-adjusted target prices prior to each performance year; these prices represent the expected spending based on historical spending data for LEJR episodes (i.e., the episode benchmark price) with a 3% discount applied. The 3% discount serves as Medicare’s portion of the savings and may be adjusted at reconciliation based on a hospital’s composite quality score, so that the discount of 3% (based on a composite quality score that falls in the “acceptable” range) may be raised or lowered to incentivize 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 (each region is based on one of the nine U.S. Census divisions), including BPCI episodes and CJR and non-CJR episodes.

4. You will not be eligible for appeal after the 45-day period.

Time is of the essence, as CJR participants have only 45 days to report their findings and initiate the appeals process if an error is detected.

A CJR reconciliation roadmap outlining the key steps and a timeline for completing the process is presented in this figure.

If you have not already done so, we highly recommend identifying a single person within your organization to take responsibility and accountability for the reconciliation process. In addition to leading and overseeing all aspects of the process, this person should:

  • Ensure reviews are completed in a timely manner and, where necessary, initiate the appeals process.
  • Maintain CJR reconciliation records and reports to internal constituents.
  • Obtain final review and sign-off from the chief financial officer.

This will ensure the appropriate attention is dedicated to a successful CJR reconciliation and help generate a positive return for your organization.

About the Authors:
Deirdre Baggot is one of the healthcare industry’s most respected voices on the subject of bundled payments. The leader of ECG’s Bundled Payments practice, she has been invited to testify before Congress on the efficacy of bundled payments, was appointed expert reviewer by Centers for Medicare & Medicaid Services (CMS) for the Bundled Payments for Care Initiative, and has served as the lead for the Acute Care Episode (ACE) Bundled Payment Demonstration. She is frequently asked to be a keynote speaker on the topic.

Prior to joining ECG, Deirdre spent 6 years at a national consulting firm as Senior Vice President and practice leader for bundled payments. Before that she spent 10 years in academic healthcare, first at Northwestern Memorial Hospital and later at the University of Michigan Health System, serving in key leadership roles. Deirdre has authored more than 20 papers on bundled payments, healthcare reform, and payment transformation and has been a featured expert on National Public Radio’s Morning Edition, All Things Considered, and Planet Money.

Todd Godfrey is an Associate Principal at ECG and has a focused background in MSK services. He regularly advises clients on performance-based incentives between surgeons and health systems, as organizations position their MSK service line to assume risk and manage populations. Todd’s ability to build working, trusted relationships with both senior hospital leadership and physicians is an attribute of his successful facilitation of hospital/physician alignment transactions. He has successfully designed physician compensation methodologies, as well as developed and implemented orthopedic service lines.

Prior to joining ECG, Todd gained experience in orthopedic surgery service lines through his roles at both Boston Medical Center and Brigham and Women’s Hospital. Todd is both a speaker and author on topics related to orthopedic, hospital/physician alignment, and medical group performance improvement.


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