Level of Reconciliation Payments by Safety-Net Hospital Status Under the First Year of the Comprehensive Care for Joint Replacement Program

In April 2016, Medicare introduced the Comprehensive Care for Joint Replacement (CJR) program, its first mandatory bundled payment program, for patients undergoing hip or knee replacements. Approximately 800 hospitals in 67 metropolitan statistical areas were mandated to participate. The CJR holds hospitals accountable for the cost and quality of care of the entire episode of care that starts with the hospital admission and continues until 90 days after hospital discharge. If total episode spending is below the target rate and quality thresholds are met, hospitals receive reconciliation payments proportional to the difference between total episode spending and target rate. Starting in 2017, hospitals were required to repay Medicare if spending exceeded the target.

The target rate in the first 3 years of the CJR program is a weighted mean of each hospital’s historical per-episode payment rates and regional per-episode payment rates. Therefore, hospitals that had historical rates above regional rates had to decrease per-episode spending more to receive reconciliation payments than did hospitals that had rates below regional means. This payment structure might penalize hospitals caring for patients of low socioeconomic status (ie, safety-net hospitals [SNHs]). Episode spending for these patients tends to be high because they have higher complication rates and are more likely to use institutional postacute care for recovery.^1–3 Therefore, we assessed the level of reconciliation payments by SNH status in the first year of the program. We also examined reconciliation payment levels by hospital size and teaching hospital status to understand different hospitals’ performance under the CJR program.