Demystifying Comprehensive Care for Joint Replacement: Gainsharing and Risk

CMS’s new joint replacement mandate includes gainsharing policies that present both opportunities and limits for collaborators.

June 27, 2016

6 Min Read
Demystifying Comprehensive Care for Joint Replacement: Gainsharing and Risk

CMS's new joint replacement mandate includes gainsharing policies that present both opportunities and limits for collaborators.

Ben Torres

While the Comprehensive Care for Joint Replacement rule holds the hospital directly accountable for the lower extremity joint replacement (LEJR) patient episode, Medicare has implemented certain Stark Law and Anti-Kickback statute waivers in order to permit hospitals to enter into written financial arrangements with CJR collaborators. These CJR collaborators include the following:

  • Physicians or non-physician practitioners (NPP).

  • Physician group practices (PGP).

  • Inpatient rehab facilities (IRF).

  • Long-term care hospitals (LTCH).

  • Skilled nursing facilities (SNF).

  • Home health agencies (HHA).

  • Provider/supplier of outpatient therapy services.

Financial Arrangements

Under the rule, CJR hospitals have authority to enter into financial arrangements with CJR collaborators for the purpose of implementing care redesign processes and achieving financial alignment under the Medicare mandate. A CJR hospital--through sharing arrangements and execution of written collaborator agreements--may make gainsharing payments to collaborators. As such, healthcare providers have an opportunity to receive additional CJR payments from the hospital.

These payments may consist of a portion of the CJR reconciliation amount and internal cost savings achieved during the patient episode that result from care redesign efforts and are tied to the CJR rule.

Sharing Requirements

Prior to engaging in any financial agreement, a participating hospital must establish its written criteria for selecting collaborators. As required by the CJR rule, the criteria must be related to the quality of care being delivered to beneficiaries and not be based--either directly or indirectly--on the volume or value of business generated by the collaborators or participant hospital. Additionally, the criteria must not encourage providers to jeopardize the quality of care being delivered to beneficiaries by reducing or limiting services that are medically necessary for the patient.

In order to be considered a CJR collaborator, healthcare providers must either have met or agree to meet with the participant hospital's quality selection criteria. Additionally, collaborators should also take into account that the governing body of the participant hospital, as required by the CJR rule, will be responsible for overseeing the hospital's participation  and its relationship with collaborators under the model.

Conditions for Gainsharing

The CJR rule has imposed certain conditions that must be met in order for CJR collaborators to receive gainsharing payments. The following requirements must be included in a collaborator agreement:

  • All quality criteria set by the participant hospital is adhered to by the collaborator and is related to overall quality measures as defined in a CJR episode of care.

  • The financial agreement must not be based on the volume or value of business generated amongst the participant hospital and/or CJR collaborators.

  • In order to receive a gainsharing payment a collaborator must have furnished billable services directly to the CJR beneficiary within the CJR patient episode.

  • The collaborator must contribute to care redesign efforts of the participant hospital under CJR and play a clinical role in the treatment of CJR beneficiaries.

  • Gainsharing agreements are made only once per calendar year and must be made via EFT.

  • The agreement must include detailed financial terms of the gainsharing agreement and contain a specific methodology that will be used to verify internal cost savings.

  • The gainsharing payment must come from either internal cost savings or the CJR reconciliation payment or a combination of both.

  • The agreement must also include defined measurements of success.

  • Meet CJR documentation and retention requirements.

In the event a PGP is a CJR collaborator and wishes to gainshare with its own members, such as physicians or NPP's, a distribution agreement must be made between the PGP and its members--termed "practice collaboration agents"--who will treat CJR patients and must comply with all other CJR conditions. Similar to the requirements of a collaboration agreement, "distribution payments"--as used to reference payments made to a practice collaboration agent--may only be made to those who furnish billable services directly to CJR patients during an episode of care.

Limits on Gainsharing and Risk

Medicare has stipulated that the total gainsharing paid (includes reconciliation and internal costs savings) to a physician or PGP must not exceed a 50% cap of the sum of the total Medicare approved amounts under the MPFS.

For example, if a physician furnishes services during a CJR patient episode in the amount of $4000, the cap would be $2000.

The final rule also allows for risk sharing in the form of "alignment payments," which are paid from a CJR collaborator to a hospital for the purpose of sharing the hospital's responsibility for repayment to Medicare, should one be needed. However, the CJR rule has placed restrictions on risk, declaring that the hospital retain at least 50% of its risk and repayment for any amount owed to Medicare. Additionally, a single CJR collaborator may not make a payment to a hospital that exceeds 25% of the hospitals repayment obligation. For example, if a repayment is owed from the hospital to Medicare in the amount of $1000 following a CJR episode, a single CJR collaborator at most may contribute $250 to the repayment.

Collaborators should also keep in mind the limits placed on the reconciliation payment amounts set by Medicare, which places stop-gains and stop-limits on how much a hospital can lose or gain based upon their target price. In performance year one for example, Medicare will not penalize hospitals for incurred costs that exceed the target price but will limit the max reconciliation amount to 5% of the target price. Both stop-gain and stop-loss limits will gradually increase to 20% by years four and five. (See Table 1.)


Stop- Gain Limit

Stop-Loss Limit

PY1 -April-December 2016



PY2 - 2017



PY3- 2018



PY4- 2019



PY5- 2020



Table 1. CJR places limits on the reconciliation payment amounts set by Medicare.

Example: A hospital treats 30 TKA patient episodes in performance year three with an episode target price of $20,000 each, for a total of $600,000. Actual spending is $500,000, leaving a difference of $100,000. The stop-gain limit for performance year three is 10% of the target price, which means the reconciliation amount for the 30 episodes would be $60,000.

The full text of the CJR Rule is available in the Federal Register.

Medicare has enabled greater financial flexibility under the CJR model. And gainsharing should play an essential role in properly incentivizing healthcare providers to participate and contribute to care redesign efforts that can improve healthcare delivery while decreasing healthcare costs. But CJR collaborators must also take into careful consideration the requirements and conditions when seeking to enter into collaboration agreements with participant hospitals.

In Part 2 of this series of posts that will demystify CJR, we will dive into the several CJR waivers--telehealth billing, post-discharge home visits, and patient engagement incentives- that allow for greater flexibility in the postacute care setting.

Ben Torres is a senior account manager for Reflexion Health, a digital health solutions company based in San Diego.


Sign up for the QMED & MD+DI Daily newsletter.

You May Also Like