Managing the Transition to Transformation: Implementing a CJR Collaborator Agreement - McDermott Will & Emery

Managing the Transition to Transformation: Implementing a CJR Collaborator Agreement

| |


McDermott’s Managing the Transition to Transformation series is designed to help health systems and other health care industry leaders address the many challenges presented by the transformation in payment and care delivery models. The goal of this series is to help organizations prepare so that they are not only competitive, but can also thrive under alternative payment models (APMs) and quality-based reimbursement models (QBRs). This article discusses issues to consider in implementing collaborator agreements under the Comprehensive Care for Joint Replacement Model.

In Depth


The Comprehensive Care for Joint Replacement Model (CJR Model or Model) is a five-year mandatory bundled payment program for certain lower extremity joint replacement (LEJR) services provided to traditional Medicare beneficiaries. The Centers for Medicare & Medicaid Services (CMS) issued its CJR final rule on November 24, 2015, and the CJR Model went into effect on April 1, 2016. Under the Model, CMS holds approximately 800 hospitals located in 67 designated metropolitan service areas (MSAs) financially accountable for the quality and cost of LEJR episodes of care. The Model is mandatory for every hospital paid under the inpatient prospective payment system in the selected MSAs unless the hospital qualifies for one of the limited exceptions. The MSAs were selected through stratified sampling that took into account a number of factors, including the number of LEJRs performed in the MSA. A more complete description of the CJR Model can be found here.

Unlike the Bundled Payment for Care Improvement (BPCI) Program, hospitals are the only entities directly responsible to CMS for the quality and cost of a CJR bundle. However, in an effort to incentivize coordination amongst providers who participate in the CJR episodes, the Model allows hospitals to develop financial arrangements with eligible “collaborators” to share upside savings and/or downside losses generated during such episodes.

A hospital’s ability to succeed under the CJR Model will depend on its ability to coordinate care amongst the range of providers providing care during a CJR episode. Collaborator agreements can be a powerful tool in aligning these providers’ incentives with the hospitals under the CJR Model, but there are a number of operational and documentation standards imposed under the Model requirements. Hospitals therefore need to develop a game plan to both identify key providers for CJR episodes and implement collaborator agreements that appropriately incentivize such providers while adhering to CMS’s requirements.

Selecting Collaborators

Only the following provider types may be collaborators: Medicare-enrolled skilled nursing facilities, home health agencies, long-term care hospitals, inpatient rehabilitation facilities, physicians, non-physician practitioners, providers/suppliers of outpatient therapy services and physician group practices (PGPs). This list is exhaustive; for example, medical devices companies or non-provider entities such as data analytics companies may not act as collaborators. The latter exclusion is particularly noteworthy as a number of data analytics companies have participated as conveners in the BPCI Program and have been willing to assume downside risk from providers. An entity that is precluded from being a collaborator could still provide services to hospitals for CJR patients, but compensation to such a third-party could not be through a gainsharing relationship. If this limits the interest of experienced data analytics companies in assisting hospitals under the CJR program, this may hinder hospitals’ ability to achieve savings.

Before selecting collaborators, hospitals must adopt a written set of policies establishing quality of care criteria that potential collaborators must meet. Hospitals are not bound by particular guidelines regarding the quality of care selection criteria, which can take into account past performance and/or relate to a collaborator’s agreement to satisfy process or outcome metrics on a prospective basis. CMS has explained that certain hospitals may want to “adopt quality criteria that rely primarily on satisfaction of forward-looking requirements that the participant hospital expects to lead to improved quality of episode care, such as attending weekly care coordination meetings, contacting CJR beneficiaries frequently, or following specified clinical care pathways.” CMS has the ability to review these selection criteria and has the authority to issue fines, penalties or require termination of collaborator agreements if hospitals do not adopt quality of care criteria or utilize any forward-looking criteria in conjunction with the collaborator agreements. Accordingly, it is important that these policies are adopted in advance of selecting collaborators and are adhered to during the selection process, and, ultimately, integrated into the collaborator agreements where the selection criteria take into account prospective performance.

Timing Considerations

Once potential collaborators are identified, hospitals must have a written collaborator agreement in place prior to any care being furnished that is considered for purposes of determining any payments to collaborators. CMS believes this is necessary to “discourage gaming.” This means that hospitals must plan ahead and have the required contractual documentation in place prior to bringing a provider into the CJR Model.

Compensation Methodology

The CJR Model permits hospitals to make “gainsharing payments,” comprised solely of reconciliation payments from CMS and/or internal cost savings, to collaborators. Collaborators may also agree to make “alignment payments” to the hospital in the event that the hospital must repay CMS. Hospitals have flexibility in developing the specific compensation methodology, but it must include a quality component and must adhere to caps on the total amount of gainsharing or alignment payments. To receive any gainsharing, the collaborator must meet the hospital’s quality of care criteria as integrated into the collaborator agreement for the applicable calendar year; this quality assessment must relate directly to CJR episodes of care (rather than the collaborator’s performance generally).

Total gainsharing payments from a hospital to all its collaborators are capped at the total amount of savings the hospital receives from CMS during the applicable calendar year. Thus, if a hospital does not generate any savings in the aggregate, then a collaborator would not be eligible to receive a gainsharing payment even if its episodes were a net positive for the hospital. With respect to individual collaborators, a hospital may not make gainsharing payments for a calendar year that are greater than 50 percent of the Medicare Part B payments for services provided by the collaborator during CJR episodes. This 50 percent cap applies to payments both to individual providers and PGPs. This is a departure from the BPCI Program where the 50 percent cap does not apply to PGPs and could influence their interest in participating in the CJR Model.

In addition, a single collaborator may agree to take on up to 25 percent of the hospital’s total downside risk, provided that in the aggregate, all of a hospital’s collaborators may only assume up to 50 percent of the hospital’s downside risk. No alignment payments may be collected if the hospital does not have to make a repayment to CMS.

Eligibility to Receive Gainsharing Payment

To receive gainsharing payments, collaborators must have directly furnished a billable service to a CJR beneficiary during a CJR episode. For PGPs, one or more of its members must have furnished a billable service to a CJR beneficiary during a CJR episode, and the PGP must also contribute to the hospital’s care redesign and also be clinically involved in the care of CJR beneficiaries. CMS has provided a nonexhaustive list of how a PGP could meet this standard: a PGP could provide care coordination services to CJR beneficiaries, engage with the hospital in care redesign strategies or implement strategies to manage comorbidities of CJR beneficiaries.

In addition, hospitals may not distribute gainsharing payments to any entity “that is subject to any action for noncompliance with this part or the fraud and abuse laws, or for the provision of substandard care in CJR episodes or other integrity problems.” This is a broadly worded restriction that could be read to mean that a hospital could not make a gainsharing payment to a collaborator if any suit or investigation under a fraud and abuse law is pending, even if the alleged violation is not related to the CJR program and without regard to the validity of the claim. According to the final rule preamble, a hospital could only make a payment after a final determination regarding the collaborator’s compliance.

Group Practice Payments to Group Practitioners

PGPs that are collaborators are permitted to distribute all or a portion of any gainsharing payment to the PGP’s individual practitioners. However, in order to receive a “distribution payment,” a practitioner must have furnished the item or service to a CJR beneficiary during a CJR episode. CMS believes that “a PGP’s existing practice compensation methodology is likely to be inapplicable to the determination and payment of distribution payments.” As CMS noted in the final rule, this restriction could require PGPs to amend their bylaws or internal contracts with practitioners regarding revenue distribution amongst group providers. A PGP is also prohibited from placing gainsharing amounts in its general fund and distributing the amounts to a practitioner who did not furnish a service during a CJR episode. The requirements on PGP distribution of gainsharing amounts could create operational challenges for many PGPs and could affect their interest in participation.

In addition, for those group members who are eligible to receive a distribution payment, the total payment from the group may not exceed 50 percent of the Medicare Part B payments for the practitioners service during a CJR episode.

Regulatory Waivers

As seen in other CMS innovation models, Stark Law and federal anti-kickback law waivers are available for collaboration arrangements under the CJR Model as long as the arrangements satisfy certain requirements under the CJR regulations, including those described above.


As CMS’s first mandatory bundled payment program, the CJR Model demonstrates a more forceful step away from traditional fee-for-service toward alternative payment models. If successful, it is very likely that CMS will look to expand the CJR Model both geographically and in terms of the types of services. In fact, CMS just recently proposed a new mandatory bundled payment program for cardiac and hip fracture care. The CJR Model provides an opportunity for hospitals to more closely align the incentives of providers who participate in the bundles, but hospitals will need to be mindful of CMS’s prescriptive requirements.