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Value-Based Reimbursement Demonstration Project

In response to section 726 of the National Defense Authorization Act (NDAA) for fiscal year 2016, the Defense Health Agency (DHA) is implementing a demonstration project to use value-based reimbursement as an incentive to improve health care provided under TRICARE. 

The three-year demonstration began on May 23, 2016 and will continue through 2019.

Pilot Projects of this Demonstration

We are planning to conduct multiple pilot projects to see if aligning reimbursement with outcomes will result in:

  • Improved quality of care, patient experience and overall health of our beneficiaries, and
  • A reduction in the rate of increase in health care spending

We’ll add details about new pilot projects as they are implemented. Please check back for updates.

Bundled Payments for Lower Extremity Joint Replacement or Reattachment (LEJR) Surgeries

Participation Requirements

Network and non-network hospitals in the Tampa-St. Petersburg area are required to participate if they had at least 20 TRICARE admissions for LEJR surgeries without major complications or co-morbidities (Diagnosis Related Group (DRG) 470) over the 3 years of FY 2013, FY 2014, and FY 2015 (excluding beneficiaries with other health insurance, active duty service members, and Medicare-TRICARE dual-eligible beneficiaries).  

Once selected for participation, hospitals will remain in the demonstration throughout the duration of this demonstration project, regardless of actual TRICARE utilization, unless the Government directs otherwise.  

How it Works

  • Before each demonstration year, the DHA will establish target episode (or bundled) prices for LEJR surgeries and all post-operative care within 90 days.
  • During each demonstration year, all claims will be paid under the existing TRICARE prospective-payment-system or fee-for-service reimbursement methodologies.
  • At the end of each demonstration year, the total costs for all episodes will be compared to the aggregate target amount for each participating hospital.

To qualify for incentive payments, hospitals must demonstrate a cost savings and achieve and maintain favorable CJR composite quality scores. We’ll use Hospital Compare as the source for hospital quality project data. Ongoing analysis will help us determine whether value-based incentives can reduce the overall rate of increase in health care spending and lead to improvements in health care quality and patient experience of care.

DHA Address: 7700 Arlington Boulevard | Suite 5101 | Falls Church, VA | 22042-5101

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