E&A: CMS' Bundled Payment CJR Initiative

Updated: Nov 5, 2018

Starting April 1, 2016, the Centers for Medicare & Medicaid Services’ (CMS) novel bundled payment program, the Comprehensive Care for Joint Replacement (CJR) model is set to begin. The CJR model will hold hospitals accountable for the quality of care they deliver to Medicare beneficiaries for hip & knee replacements.

Under this model, CMS will enact bundled payments for hip & knee surgeries for 75 geographical areas. For these selected areas, hospitals would be accountable for the costs and quality of care from the time of the surgery through 90 days after the patient is discharged.

For these hospitals and others considering a bundled payment model, E&A suggests using a Time-Driven Activity Based Costing (TDABC) methodology to prepare for and succeed in bundled payments.

TDABC creates an elegant framework of time equations and cost drivers, requiring only two sets of estimates that can easily and objectively be obtained:

1. The quantity of time required by each personnel in providing service to a patient.

2. The price incurred by the organization for each resource (labor, supply, equipment cost, etc.) involved in the patient process.

For example, hospital leadership staff using TDABC can discover the cost outliers and variations in the average cost of supplies used by different surgeons (Graph 1). A deep dive into TDABC data can lead to answers in asking: - What factors are responsible for higher and lower costs for the same procedure?

View our publication for more information and insight.

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