Hospitals’ success in a new bundled payment model for joint replacements will “hinge” on their ability to partner with high-quality post-acute care providers, according to an analysis from Avalere Health released Wednesday.

Under the Centers for Medicare & Medicaid Services’ Comprehensive Care for Joint Replacement model, which is set to begin Friday, hospitals will be held accountable for all costs associated with hip and knee replacements, as well as spending within 90 days of discharge.  

The Avalere analysis shows that more than 39% of spending in joint replacement episodes is driven by post-discharge care, including skilled nursing facilities and hospital readmissions. Focusing on high-quality post-acute providers could help the roughly 800 hospitals participating in the model reduce their overall costs, according to the analysis.

“The reality is that most hospitals don’t know where their patients go after they are discharged,” wrote Fred Bentley, vice president at Avalere. “Their success under CJR will hinge on being able to track patients and partner with high-performing post-acute care providers.”

The analysis found close to 60% of participating hospitals could be at risk for fines under the model based on their current cost performance.

Skilled nursing facilities have the second highest average Medicare payment per CJR episode, behind the initial hospital stay. The average Medicare payment for a skilled nursing stay following a joint replacement is $5,034, according to the analysis. The average cost of the overall episode of care for a joint replacement is $25,565.

Hospitals’ need to seek out high-quality post-acute partnerships could cause 25% of 1- and 2- star skilled nursing facilities to close over the next five years, some experts say.

“For many of those providers sitting on the sidelines of alternate payment models, this new initiative will be a wake-up call,” said Josh Seidman, senior vice president at Avalere.