CMS launches bundled payment test for joint replacement
Payment model is expected to save Medicare $343 million over the duration of the five-year test.
Hubert H. Humphrey Building, DHHS Headquarters
Starting April 1, the Centers for Medicare and Medicaid Services will pay an estimated 800 hospitals across 67 metro areas bundled payments for inpatient knee and hip surgeries.
The bundled payments for an episode of care from hospital admission to 90 days after discharge is expected to save Medicare $343 million over the duration of the five-year test.
However, hospitals in the program face losing money in penalties if they exceed target payment amounts, or in having to reduce costs for knee and hip surgeries.
The target cost per episode is about $25,565, according to CMS data.
[Also: Truven Health finds $10,000 regional difference in bundled spending for joint replacement]
Hip and knee replacements are the most common inpatient surgery for Medicare beneficiaries. In 2014, there were more than 400,000 procedures, costing more than $7 billion, according to CMS.
In five markets, CMS said hospitals must trim costs or lose money because data shows spending on joint replacement in these metro areas exceed the regional average.
The five areas are Miami-Fort Lauderdale-West Palm Beach, Florida; Beaumont-Port Arthur, Texas; Tampa-St. Petersburg-Clearwater, Florida; Tuscaloosa, Alabama; and the New York-New Jersey area.
In those metro markets, the average cost was in the low-$30s while the regional average amount being paid by Medicare was in the mid-$20s.
At the beginning of each year, the hospitals will receive target prices for joint replacement episodes. If the spending is less than the target, the hospital may receive an additional payment from Medicare. If the spending is above the target, hospitals may be required to repay Medicare for a portion of the difference.
[Also: CMS sets spring launch for knee and hip bundled payment initiative]
The cost of care for hip and knee replacement surgeries varies greatly among providers.
CMS said it believes hospitals can lower spending by eliminating variation in care and having hospitals, physicians, and post-acute care providers work together.
"We expect this incentive to coordinate the services a patient receives before, during, and after surgery will encourage hospitals and clinicians to partner with nursing facilities, home health agencies and other providers of rehabilitation services to provide seamless, high quality care," CMS's Patrick Conway said in an April 1 blog. Conway is the principal deputy administrator and chief medical officer for CMS.
Complications such as infections after surgery can increase costs for hospitals, as well as the chance that the patient will be readmitted or spend additional time in rehab.
[Also: UnitedHealthCare expands bundled payment program for pricey cancer treatments]
Bundled payments have become common among private insurers such as UnitedHealth Group, Aetna, Anthem and Blue Cross, Blue Shield.
The alternative payment model is part of CMS's goal of having 30 percent of all Medicare fee-for-service payments in alternative payment models by 2016, and 50 percent by 2018.
CMS is expected to continue value-based initiatives in future payments for orthopedic and cardiac surgeries.
Twitter: @SusanJMorse
