The Major Hitter: The 340B Drug Reimbursement Scramble

By: Susan Gatehouse, Axea Solutions CEO

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Another year, another raft of changes from CMS. A major hitter this year is the change in 340B drug reimbursement.

Remember 340B’s history? Signed into law by President George H.W. Bush in 1992, the 340B program was part of the Veteran Affairs Act. It required pharmaceutical companies that participate in Medicaid to provide discounts on certain drugs to facilities that meet specific requirements, primarily that they provide care to medically underserved populations.  

Fast forward to 2016. The Medicare Payment Advisory Committee (MedPAC) started looking into the average payments hospitals were receiving through 340B. The conclusion? Hospitals were making too much money from the program, and reimbursements needed to be decreased.

In late 2017, CMS finalized a proposal to pay hospitals the average sales price (ASP) minus 22.5% for those drugs acquired through the 340B program (except pass-through drugs and vaccines). This is a 28.5% payment difference from 2017 to 2018.

There are exceptions. The payment rate of ASP + 6% will continue for sole community hospitals in rural areas, children’s hospitals, and PPS-exempt cancer hospitals.

Clearly, this new ruling packs a powerful financial punch. However, the savings from this new iteration of 340B are earmarked to meet other facility costs. CMS is implementing this policy in a budget neutral manner by offsetting the estimated $1.65 billion in reductions in drug payments by redistributing that amount to other non-drug services within the OPPS.

A consortium of entities, including the American Hospital Association, Association of American Medical Colleges, America's Essential Hospitals, and three hospitals, sued the Department of Health and Human Services in November 2017, shortly after CMS issued the final ruling on the new reimbursement structure for 340B.

U.S. District Judge Rudolph Contreras dismissed the lawsuit because the proposed cuts had not gone into effect at the time of filing. He did not rule on the merits of the case. The lawsuit is expected to be refiled.

From intensive inventory analysis to programming and assigning the correct modifiers to 340B drug codes, the revisions to this program provide lots of “learning opportunities.” Even facilities that are exempted from these changes are required to use a voluntary modifier to delineate which drugs would fall under the 340B guidelines.

As you grapple with the procedural headaches, uncertain financial impact, and compliance risk that the new version of 340B has wrought, remember that education and training help alleviate at least some of these stressors.


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CDI: Not Just for Inpatient Any More

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By Susan Gatehouse, Axea Solutions CEO

Once considered a luxury of well-endowed major medical facilities, clinical documentation improvement (CDI) specialists have made their way to the mainstream. The majority of facilities nationwide now provide some CDI oversight. The requirement for microscopic review of patient safety indicators, severity, and risk of mortality, along with the complexity of both patient care services and procedures, have made CDI specialists a staple of inpatient hospital coding departments.

The same cannot be said for outpatient areas. It is not a given that outpatient documentation will receive the same attention that is found in the inpatient setting. This may be because "outpatient" and "hospital" are two entities that have not historically been linked. However, healthcare is shifting to more interdependence between the outpatient and inpatient settings. This more holistic approach to patient care carries with it some logistical and reimbursement challenges.

The hospital is not the only place to get services.

Shifting ideals of healthcare and wellness, in addition to changing reimbursement structures, have prompted hospitals to add outpatient services, either on-campus or remotely, to their retinues. Outpatient services offered close to home are attractive to a population that can get a sports physical at a pharmacy, or a flu shot at a big box store. Additionally, the move toward reimbursement linked to total population care may be a factor behind the increase in hospital-affiliated outpatient services.

Outpatient coding continues to have a significant role in the hospital itself, particularly with patients coming into the emergency department. Ambulatory surgery provided in the hospital may lead to observation stays that will be coded as outpatient.

But outpatient coding is so much simpler…

Inpatient coders typically have a greater depth of knowledge because of the more complex patient records that they code. But outpatient coding should not be relegated to second-class status. While inpatients may be sicker and more complex to code, with more outpatient services offered, outpatient coding will become significantly more demanding in terms of volume. That volume equates to a greater piece of overall revenue. The importance of CDI in the outpatient setting becomes evident when the number of records is considered.

In addition, recent OPPS changes for 340B drugs further drive home the point that outpatient services are no longer considered easier to manage and code, and are not necessarily more likely to be accurately reimbursed. 

Why CDI is ALWAYS important

The primary goal of CDI is making the patient record as accurate as possible to ensure that the most correct, most granular picture of the patient is captured. Thorough documentation in any setting can make a huge difference in the outcome for every patient. For outpatient care, physicians need to have and provide excellent documentation in order to treat a patient with whom they may have only a brief encounter, but a potentially life-changing one. Goal one is always the patient's wellbeing.

It is also true that without documentation, the care might be outstanding, but the hospital will not be reimbursed for it. The hospital needs to keep its doors open, whether they be the doors at the main campus or those in an imaging center in the distant suburbs. Outpatient care may offer another stream of revenue for a hospital. It is one that deserves top-notch CDI, just as inpatient does.

Axea Solutions has proven success in assisting outpatient coding departments with the implementation of CDI, coder training, and charge reconciliation procedures. We realize that every dollar counts, and outpatient procedures and services require the same level of detailed attention that inpatient receives.

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Attributes of the Exceptional Healthcare Coder

Whether they're providing preventive care or rushing a patient into emergency surgery, healthcare providers are focused on one thing: ensuring the best possible outcome for each patient.

Healthcare administrators share that goal. Administrators also know that the bottom line needs the best possible outcome as well.

One of the most effective means of keeping the bottom line in great shape is ensuring that the revenue cycle moves smoothly through its rotations. Provide the service, bill the payor, receive reimbursement. Repeat.

The demand for exceptional healthcare coders is growing exponentially. The field is expected to grow by 21 percent between now and 2020.* Coders are essential to patient safety, a healthy revenue cycle, and efficient operations.

We may be biased, but we fully believe that coders are among the most vital players in maintaining that revenue cycle in effective motion. Submitting detailed, accurate, and complete reimbursement requests saves time and money, not to mention headaches.

How do you know you have the best people in the coding role? Axea Solutions recently completed a small survey of uber coders - they were all identified as truly outstanding in their field. Let's look at some of the insights we gained.

Coder Survey Insights

The coders we surveyed had varying educational backgrounds. One had simply a certificate, while others had associate's and bachelor's degrees. They were unanimous, however, in their ongoing pursuit of knowledge. Journal reading was a daily requirement, and watching webinars, professional networking, and taking advantage of continuing education opportunities were frequent activities.

Interestingly, most of the respondents mentioned science and math as their favorite high school subjects. And many specifically indicated that the medical knowledge they gained on the job was both rewarding and interesting. A predisposition to enjoying medical- and health-related topics may lead to more tenacity in getting to the right code, as well as to greater job satisfaction for these super coders.

Key Coder Attributes

When asked to rank the relative significance of several attributes useful in coding, every single person indicated "attention to detail" as being the most important. Runners-up were "sound decision-making" and "ability to communicate effectively." Less important were "speed" and "good memory."

Those answers ring true to us. Coding is based on attention to detail. The level of detail required for this task is truly demanding. And coding always requires decision-making. "Which code is most appropriate, most exact, in this scenario? " is a question coders ask multiple times a day. Relying on data analysis skills is important, as coders must follow medical diagnoses and convert that information into the proper codes for medical records.  

Effective communication involves the ability to communicate both verbally and in writing, and the coders we surveyed indicated they use both methods, with email being the most prevalent form of communication employed. Almost every coder mentioned a go-to person or group who provided assistance and feedback for coding challenges. Most of these relationships were initiated informally.

As for those attributes deemed less useful, again, we agree. Speed is not always the friend of accuracy, as our grandparents knew. (Remember, "Measure twice, cut once"?) And a good memory, while helpful, is not what the best coders rely on when making decisions. Regulations change with startling frequency. Research, not a good memory, is what serves coders, and the bottom line, best.

The absolute need for ongoing education and the imperative nature of attention to detail were strikingly unanimous responses. However, coders show a lot of variability in how they describe themselves, and how they imagine others might describe them. "A leader," "goofy," "tenacious," and "giving" were some of the responses we saw here. And let’s not forget the importance of honesty and professionalism at all times. These coders prove they can do the job and have a lot of personality!

In Their Own Words

We finished the survey with this question: What advice would you give to someone entering your field?  Here are some of our favorite answers:

  • "You will need to have a passion for research and dissecting documentation and looking at the overall picture."
  • "The details can be taught…the actual desire to know, learn, and do cannot be taught."
  • "Study, study, study. Understand that you will never know everything. Understand that coding is not black and white, there is always gray. And . . . understand that 3M doesn’t take you to a code, you take 3M to a code."

Axea Solutions extends our heartfelt thanks to all the participants in our survey. Your efforts as coders support the ultimate goal of healthcare - the best possible outcome for every patient. You drive the revenue cycle that enables our organizations to have the best possible outcomes for our bottom lines as well. 

What have you found are the key attributes that result in “Attributes of the Exceptional Healthcare Coder”? We’d love to hear your thoughts.

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*Source: The U.S. Bureau of Labor and Statistics’ Occupational Outlook Handbook.

The Context of Coding and Bundled Payment

Bundled payment (also known as episode-based payment, episode-of-care payment, and global bundled payment) is likely to be a feature of the American medical landscape. Although similar to MS-DRG related reimbursement, bundled payment goes further in its all-encompassing nature. The full episode of care across providers and facilities is bundled into one reimbursement. Add to this mix the transition to ICD-10, and it's no wonder that the tracking and reimbursement of bundled care services prove to be a challenge.

If your health care organization participates in a bundled payment initiative, it is crucial that your coders be familiar with the codes that are part of the bundled payment protocol. Given its prevalence, expense and the breadth of care required, a joint replacement procedure identifies as an ideal model for bundled payment.

The Centers for Medicare and Medicaid Services (CMS) initiated the Comprehensive Care for Joint Replacement Model (CJR) in November 2016. The appropriate use of MS-DRGs 469 and 470 served as key indicators in the identification of patient participants in this model. Clearly coding matters at this initial entry point as different target prices are determined by which MS-DRG is specified.

How does a coder navigate the complexity and context required within the bundled payment initiative? Here are some suggestions.

1.  Develop expertise in the bundled care initiatives already within the ICD-10 CM/PCS arena. A solid understanding of the nuances of diagnostic and procedural codes provides a firmer foundation in coding for episode-of-care.

2.  Establish good communication with contacts at outpatient provider offices. Bundled payment encompasses continuity of care. Relationship building serves as a key component, as a patient receives treatment modalities in varying settings.   

3.  Do not underestimate the importance of post-acute care. Rehabilitative services remain a reality for many patients with a diagnosis that will be reimbursed under bundled payment. It is particularly helpful to have good relationships with personnel at these facilities.

4.  Make clinical documentation improvement (CDI) a priority. This area consistently provides ongoing growth opportunity. With the implementation of ICD-10, further provider education should focus on the various code selections included in the bundled payment initiatives to ensure that the complete clinical picture is documented. It is also imperative to help the provider understand the importance of communicating in a timely and informative manner with the coding staff. The essence of CDI is translating a clinical diagnosis into a numerical code. Both skill sets prove invaluable in creating an accurate depiction of the severity of a patient’s condition, along with all aspects of their treatment.

5.  Education and training are well worth the investment, time and effort to increase productivity. Coding accurately and efficiently on a daily basis is a demanding job. Throw in the vicissitudes of health care regulation, reimbursement and reform, and it’s obvious that seeking professional training is a smart move.

As with every other change that has arisen in health care administration, bundled payment affects the overall revenue cycle. Learn how to meet the challenge in this unchartered territory and to not only survive, but thrive.

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Ingredients for Improving Patient Safety Indicators

Business Challenge

A 900+-bed acute care hospital operating within a major academic medical system was identified in Vizient's annual Quality & Accountability Study* as having poor performance measures in mortality and composite patient safety indicators (PSI). The percentage of hospital-acquired conditions at this facility was significantly higher than that at other institutions in the study. Clearly the situation required immediate remediation to improve patient outcomes and to stop the reduction in payment, which resulted from underperformance.

* Vizient is an alliance of the nation’s leading academic medical centers (AMCs). Its annual Quality & Accountability Study ranks AMCs on measures of mortality, effectiveness, safety, equity, patient centeredness, and efficiency.

The Solution

The facility administrators sought counsel on quality improvement from Axea Solutions. Together, the hospital and Axea Solutions implemented an enhanced process of clinical documentation improvement (CDI), addressing documentation matters related to PSI. The use of Axea’s PSI/HAC database allowed the client to track and to trend the occurrences of hospital-acquired conditions, the physicians treating these conditions, and ultimately, the number of occurrences overturned after following the process described here. Most importantly, this tracking was used for education of coders, quality improvement analysts and physicians.

Process for PSI Quality Improvement

1.     If a record is coded with a condition known as a PSI, the record is reviewed by a coding supervisor. If the supervisor agrees with the code assignment, the record is forwarded to a performance improvement analyst for review.

2.     If a disagreement presents at that juncture, the case is discussed by both the coder and the analyst.

3.     Further input is solicited from the physician advocate of the service line under review or from the chief quality officer at the hospital.

4.     At that point, the case is discussed with the senior coder and analyst and a final determination is made.


This was an intensive process and required complete commitment and participation from both teams. With Axea’s support implementing the new review process, the facility improved its ranking from the bottom 50% to the top 25% in the subsequent Quality & Accountability Study's observed-to-expected (O:E) mortality index.

The composite score of patient safety indicators improved significantly – the facility’s ranking increased from 75 out of 113 to 13 out of 116 hospitals in a composite score of patient safety indicators. The facility was awarded four stars by Vizient and received the designation of "Rising Star" for its ascent in the annual rankings by more than 20 spots in a 12-month period.

The work that began years ago has delivered lasting change within the facility, improving accountability across clinical and nonclinical teams for improved patient safety and quality of care. Upon receiving the 2016 inaugural Innovation Excellence Award from Vizient, the accepting representative acknowledged, ”we are constantly looking for new, effective ways to help patients, and the best way to measure that is by keeping an eye on our quality data."

Key Learnings

Susan Gatehouse, CEO, Axea Solutions, offers these takeaway lessons.

•      Buy-in is everything. Most people and institutions are not comfortable with change. It's human nature. However, when human lives are on the line, people react differently. This facility's administration and staff made the decision to do whatever it took to improve outcomes for their patients and to advance their ability to provide quality care.

•      Hard numbers help. Without the results of the analysis provided by Vizient, it would likely have taken longer for this facility to address the areas of weakness identified. Good data is important for initiating change.

•      Change is possible. Even when the hard data is not what you want to see and the task of turning it around is daunting, systems can be repaired. It is important to realistically assess what is not working, identify where improvement is necessary, and begin the process.

•      Relationship-building is crucial. Fostering an atmosphere of open communication and respect during times of transition is paramount. Axea's knowledge of the challenges that coders, quality assurance analysts, and clinicians encounter on a daily basis allows us to build bridges and to eliminate divisiveness.

•      Get help. Administrators can often become overburdened and time-crunched. Seeking outside counsel from experts in process improvement provides that critical stepping-back view, and allows for change to unfold.

•      Know that you're not alone. Even if your institution is not a medical center nor exposed to the public scrutiny of a study like the one described here, it will begin being benchmarked to the same measures. This era of health care reimbursement reform affects all of us. Let's work together to maximize effectiveness, safety, patient centeredness, and efficiency for our bottom lines and our patients' wellbeing.

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Axea Solutions Milestone Awards 2016

We celebrate our professionals’ pursuit of exceptional outcomes by presenting them with milestone awards at our bi-annual Axea meetings. These meetings focus on our valued teamwork, having fun and taking the time to be recognized, encouraged and rewarded. Axea’s strong emphasis on relationship building and internal support provide our clients with noticeably enhanced experiences.

The Coding Evolution: Impact of Value-Based Purchasing (VBP)

By : Susan Gatehouse

With the development of ICD-10 CM/PCS, the realm of coding continues to expand to support evolving government payment systems and data requirements.  As the payment landscape evolves towards patient-centered care and value-based reimbursement models, inpatient care is experiencing disruption within coding, clinical documentation, clinical workflows and care delivery. Although adoption has been slow, established Value-Based Purchasing (VBP) models attribute their success to advance-care or pre-admit plans, physician alignment, and synchronized clinical Value-Based Care (VBC) methodologies. The near-term impact of VBP and VBC varies widely throughout the industry however one point most stand unanimous on is the momentum (and disruption) is here to stay.

A Brief Overview

According to CMS, "The Hospital VBP Program rewards acute care hospitals with incentive payments for the quality of care they give to people with Medicare."

   Goals: improve health, increase quality of care, and lower costs. 

   Relevance: inpatient stays in over 3,500 hospitals nationwide account for the largest share of Medicare spending[1].

   Financial Impact: direct link between patient outcomes, HACs, readmissions, and hospital payments or penalties.

   Future Outlook: movement towards mandatory participation in bundles & VBP or VBC.

The outcome of changes today will impact the way payments are made in the future. Hospitals that are proactive in improving performance and quality of care, particularly in the area of hospital-acquired conditions (HACs), will be set up for success as VBP program participation becomes less elective and increasingly mandatory.

New in 2016: CAUTI & HAC Reduction

For FY2016, the added measures include IMM-2 Influenza Immunization, Catheter-Associated Urinary Tract Infection (CAUTI), and SSI -Surgical Site Infection Colon Surgery & Abdominal Hysterectomy. Given the direct link between HACs and quality scores, (and impact on the hospital’s financial health due to VBP), let’s take a closer look at CAUTI.  The CMS scoring methods for FY2016 will include CAUTI (together with SSI and CLABSI) in the total HAC score, as part of the HAC Reduction Program.

   UTIs are the most common type of healthcare-associated infection reported to the National Healthcare Safety Network (NHSN)[2]

   Approximately 75% of hospital-acquired UTIs are associated with a urinary catheter.

   Between 15-25% of hospitalized patients receive urinary catheters during their hospital stay.

Including CAUTI in the new scoring method supports the activity we're seeing in the Orthopedic and Cardiology space as CMS continues to introduce new mandatory value-based programs in each. Associating the payment model with patient outcomes intends to effect real micro and macro change—starting with clinical workflows and care delivery and reaching as wide as population and community health.

How Can CDI Help?

Clinical documentation improvement is always appropriate, but with VBP, the case for making CDI a priority has become even stronger.  Accurately identifying and coding HACs and Present on Admission (POA) conditions is imperative for accurate reimbursement. 

For payment purposes, for each condition, two questions are key to assessing the accuracy of coding: [3]

1.     Is there documented clinical evidence that the condition was present during the hospitalization?

2.     If yes, was the condition POA?

Refresher Points

    The Deficit Reduction Act of 2005 required all acute-care facilities reimbursed under MS-DRGs to identify and report POA conditions. 

   It’s imperative that POA indicators be assigned with ICD-10 CM/PCS codes if applicable. 

   Without a POA indicator a condition can be misconstrued as a HAC, the TPS score damaged, and reimbursement adversely impacted.

   Remember to instruct Providers on the importance of documenting POA conditions so Coders can query Providers on case specifics.

   HACs must be reported—over-reporting can be prevented with regular clinical documentation training and review. 

In closing, bear in mind that it's essential documentation capture the complete picture of the patient. The more granular the documentation, the better the outcome—for both your patient and your hospital's bottom line. 

What’s Next?

If you've been following VBP, you've likely noticed there's a plentitude of opinions on where VBP will lead and what real impacts will be experienced across the healthcare industry. I've mostly witnessed a "wait and see” attitude and behavior however the mandatory changes are stimulating slow adoption. What I know to be true is that with each layer of change, coding and documentation improvement will continue to evolve and continue to play a primary role in the financial health of a health system.

Thank you for tuning in—we welcome your feedback and look forward to continuing to provide you with information, expertise and solutions that address how clinical documentation improvement can help your facility meet the demands of VBP.


Susan Gatehouse is the CEO of Axea Solutions, a healthcare services company which partners with healthcare facilities and medical insurance providers to develop cost-effective financial solutions. Susan offers more than 20 years of healthcare information management expertise. Follow her on LinkedIn.





Computer Assisted Coding – Friend or Foe?

Pulse Check:

Raise your hand if you believe that Computer Assisted Coding (CAC) is your friend. Ok, raise your hand if you believe that CAC creates more trouble than it is worth. Now, how many of you believe that it may be a little bit of both? Good. Keep reading.

Whether you are in the friend or foe camp, we can all agree that CAC continues to evolve, integrate with and certainly change the way we operate in the coding business. In an age of electronic health records, ICD-10 coding and operational changes from healthcare reform, it is imperative that we continue to move and change with technology as it re-shapes our careers.

I have seen CAC software referred to as a coder’s “Spell Check” software – which is an accurate depiction  - as a basic rule. However, where spell check just made us a little less reliant on our own individual spelling skills (and don’t even get me started on auto-correct!), CAC has generated a new direction for our careers. We are now editors, data analysis experts, validators and facilitators to ensure that not only are we doing our jobs, but that the technology is accurately doing its job as well.

With this new direction in mind, we must remember that most technology still operates on a garbage-in-garbage-out rule. Therefore, we have summarized our general thoughts on the “Friend or Foe” relationship.


  • Increases productivity for outpatient coding and is evolving in providing this same benefit for inpatient coding.
  • Very helpful for coders new to the field of coding as it provides a good starting point for them in locating codes.
  • Enables CDI staff who may be less familiar with coding to obtain codes to begin their concurrent reviews.
  • Alerts coders to diagnoses and procedures that they may have overlooked due to the amount of data in the records.
  • Extremely helpful in identifying specificity now required in coding with the onset of ICD-10.
  • Alerts coders to diagnoses, which may have otherwise been overlooked.


  • The primary function is to provide a code based on documentation.  The codes do not have the ability to provide quality measure information or qualitative data. In its current state, healthcare organizations have not seen the cost benefit to date.  However, as systems mature this will change.
  • Errors can be detrimental to quality measures, profiling and reimbursement for both patient and provider.
  • Often, signs and symptoms are coded from written diagnoses and are not removed from the claim prior to claim submission when a definitive diagnosis has been established.
  • Reports from CAC must be analyzed extensively in order to improve system performance. This takes analytical skills that may not be available in the current staffing environment.
  • Coders may rely too much on CAC generated codes and not verify them as thoroughly as required. This is especially true for new coders who are not as familiar with coding guidelines.

Where do we go from here?

When implementing an effective CAC system, the integration, testing and timing must be approached with careful execution. As with any system implementation, a good relationship with the IT department is critical.  System interfaces must work correctly in order for the CAC to function properly. Be sure to approach outpatient CAC and inpatient CAC with the understanding of coding guidelines.  The correct CAC system set-up is based on the differences in coding these patient types.

What it all comes down to is balance. CAC is not a stand-alone solution. It is a tool that, when implemented and leveraged effectively can improve and even ease elements of the coding process. As this tool evolves gets more sophisticated, so will the role and requirements of the coding profession. So, buckle up and get ready for whatever may come next!

Life Amidst the Comprehensive Joint Replacement Model

It sounds amazing!

Innovation Center! Doesn't that sound like a blast? Perhaps it's a think tank with the best and the brightest and an unlimited espresso bar! Or a beautiful light-filled space with all sorts of interesting materials to create art! Or even a place to eat carnival food and get on amusement rides, and have your picture taken with a theme park character. 

Or…maybe it's not quite that fun.

The Innovation Center we're going to look at today is the CMS Innovation Center. And we're going to examine one of its recent innovations - the Comprehensive Care for Joint Replacement model.

History, please. 

The CMS Innovation Center was developed as part of the Affordable Care Act. It's a center with a mission: "…to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries."[1] Laudable goals, to be sure. Specifically, this means there is a stated intention of moving 30 percent of all Medicare fee-for-service payments to alternative payment models by 2016. That number jumps to 50 percent by 2018.

What are these alternative payment models? Let's look at one: the CJR model mentioned above.

The CJR model aims to address and to rectify the disparity in costs associated with joint replacements. Hip and knee replacements are big business. Hospitalizations alone for joint replacements cost over seven billion dollars in 2014. In addition, the rate of post-surgical complications was three times higher at some facilities than others, and average Medicare expenditures for an entire episode of care ranged from a low of $16,500 to a high of $33,000, depending on where the surgery and follow-up care took place. [2]

Medicare wants to change that. It's using retrospective bundled payments as an incentive to help CJR-participant hospitals meet new targets when it comes to providing care for the joint replacement patient. The objectives have to do with cost and quality over the complete episode of care, from surgery to recovery.

The rule for the CJR model was initially floated on July 9, 2015. After a two-month comment period that included a review of almost 400 remarks, the final rule was placed on the Federal Register on November 16, 2015, with a program start date of April 1, 2016. 

Who's participating?

So who is affected by the CJR? Hospitals were randomly selected in 75 (eventually reduced to 67) metropolitan statistical areas (MSAs), and their participation is mandatory. Those facilities already participating in the Model 1, 2, or 4 Bundled Payments for Care Improvement Initiative were excluded. All told, about 800 hospitals are included in the CJR model.

Let's talk money.

The design of the CJR model looked backward at the costs associated with hip and knee replacements to set target costs for entire episodes of care going forward. The CJR model is a five-year program. At the end of each performance year, total expenditures for related services under Medicare Parts A and B will be compared to the target expenditures for each participating hospital. Quality measures will also be evaluated. Hospitals may receive additional payment from Medicare if their spending is in line with the new targets. Or they may be required to repay Medicare for a portion of their spending for joint replacement. Stop-loss and stop-gain limits that will curb how much a hospital can owe or recoup are being transitioned into place over the five years of the plan.

What are some issues faced by hospitals involved in the CJR?

Clearly, there are some challenges associated with participation in the CJR model. Budget planning jumps to mind; how does a financial administrator effectively plan for a potential year-end shortfall - or bonus - when the model dictating the outcome is in its infancy? Does the institution have useful data about its historical performance, especially as it relates to coordination of care with skilled nursing facilities and rehabilitation centers? If a hospital is one of those with more complications or higher costs in general, how does it realign itself to tighter parameters? Who are the possible partners a hospital can bring in to share costs and to increase savings?

How does documentation play into this?

Clinical documentation is a major component in the potential for gains or losses in this scenario. ICD-10 coding feels less like an entirely new world these days, but correctly assigning risk adjustment and complications is critical in the CJR model. Documentation needs to be precise. Coders need to be up to speed. Without accurate MS-DRG assignments, correct root operations, and replacement procedures, the chances of sharing in Medicare's savings is remote, and the potential for owing Medicare is very real.

Are you feeling innovative yet? 

What has your participating facility's experience been in these very early days of the Comprehensive Joint Replacement model? What changes have been made to accommodate the new guidelines and incentives? Who is responsible for overseeing the implementation of this model in your hospital? Have your coders and CDI specialists received any additional training to sharpen specific skills related to the CJR model?

This is a topic that will surely be revisited over the course of the next five years. We'd love to hear from you about your experience with the innovation that is CJR.