Modeling the Potential Economic Impact of the Medicare Comprehensive Care for Joint Replacement Episode-Based Payment Model

Abstract Background The Medicare program has initiated Comprehensive Care for Joint Replacement (CJR), a bundled payment mandate for lower extremity joint replacements. We sought to determine the degree to which hospitals will invest in care redesign in response to CJR, and to project its economic impacts. Methods We defined 4 potential hospital management strategies to address CJR: no action, light care management, heavy care management, and heavy care management with contracting. For each of 798 hospitals included in CJR, we used hospital-specific volume, cost, and quality data to determine the hospital’s economically dominant strategy. We aggregated data to assess the percentage of hospitals pursuing each strategy; savings to the health care system; and costs and percentages of CJR-derived revenues gained or lost for Medicare, hospitals, and postacute care facilities. Results In the model, 83.1% of hospitals (range, 55.0%-100.0%) were expected to take no action in response to CJR, and 16.1% of hospitals (0.0%-45.0%) were expected to pursue heavy care management with contracting. Overall, CJR is projected to reduce health care expenditures by $14 million ($0-$119 million). Medicare is expected to save 2.2% (2.2%-2.2%), hospitals are projected to lose 3.7% (4.7% loss to 3.8% gain), and postacute care facilities are expected to lose 6.5% (0.0%-12.8%). Hospital administrative costs are projected to increase by $63 million ($0-$148 million). Conclusion CJR is projected to have a negligible impact on total health care expenditures for lower extremity joint replacements. Further research will be required to assess the actual care management strategies adopted by CJR hospitals.