A revolution in medical procedure pricing this week could lead to a revolt and difficulty for patients seeking treatment. New Medicare payment rules were implemented this month for popular procedures like knee and hip replacement surgery that emphasize home over hospital care could push many hospitals to re-evaluate their treatment protocols.
The initiative bundles the payments for the two increasingly common procedures as an incentive to keep costs down across the board. This differs from the traditional fee-for-service approach where the hospital, surgeon, anesthesiologist, and other caregivers all billed separately for their part in treating a patient.
Medicare was expected to spend $12.2 billion on hip and knee replacement surgeries, but this initiative should save $343 million, according to the Centers for Medicare and Medicaid Services (CMS). It is the first of what is expected to be many bundled payments to be established for joint-replacement procedures, a practice that has become commonplace in value-based health plans in the private insurance arena.
The problem is that an estimated 800 hospitals, representing three out of five in major markets, typically charge more than the $25,565 per surgery that Medicare will pay for their share going forward. If they charge more, they are facing penalties.
Hospitals in 67 metropolitan areas, including Los Angeles and New York, must participate in the program. Those facilities conduct one-third of the more than 400,000 knee and hip replacements covered each year by Medicare.
Unlike many bundle programs implemented by private insurers, the joint replacement initiative will not give hospitals a lump sum payment to divide among the caregivers. Medicare will pay surgeons, physical therapists, rehabilitation facilities and others involved separately on a fee-for-service basis for care in hip and knee joint replacements. If the payments for the procedure average less than the target amount that CMS set for a particular hospital, and quality standards are met, CMS will pay the hospital the difference. If the payments, on average, exceed the target price, the hospital will owe Medicare the difference. There is a 90-day limit on post-operative issue, so cost for someone who has complications later on does not count.
To ensure they stay below the threshold, hospitals must push patients to go home after being discharged. However, half of all joint replacement patients get transferred to other facilities for physical therapy, skilled, nursing homes or other post-care after surgery. Post acute care uses an estimated one-third of the money Medicare spends on the hip and knee replacements. That means that hospitals lose control over that portion of the procedure bundled costs. If a patient is sent to another facility, a hospital has no ability to keep dollars in check. That is why experts say hospitals need to minimize the need for postoperative care. Their discharge teams need to encourage patients to go home to recover so the hospital is could potentially earn bonuses instead of facing potential penalties.
There are clearly ethical concerns if hospitals push patients home after hip and knee replacements rather than post-surgery care because of the new Medicare payment rules. The CMS is reportedly monitoring signs that patients are not receiving appropriate follow-up care, but it will be some time before the dust settles and an accurate picture of the new policy’s implications will be known.
Written and Edited by Dyanne Weiss
CMS.gov: Comprehensive Care for Joint Replacement Model
Wall Street Journal: Hospitals Brace for New Medicare Payment Rules
Forbes: Medicare’s Bundled Fees Hit Knee, Hip Replacements
UPI: New Medicare model may improve care, cost for knee, hip surgeries
Photo courtesy of Scott Thieman’s Flickr Page – Creative Commons license