Cost and Quality For Total Joint Replacement

On July 10, 2016 CMS proposed a major initiative for hip and knee replacements.

The new Bundled Payment Model further solidifies the transition from Volume to Value-based Care.

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Hip and knee replacements are some of the most common surgeries that Medicare beneficiaries receive. In 2013, there were more than 400,000 inpatient primary procedures, costing more than $7 billion for hospitalization alone. While some incentives exist for hospitals to avoid post-surgery complications that can result in pain, readmissions to the hospital, or protracted rehabilitative care, the quality and cost of care for these hip and knee replacement surgeries still vary greatly among providers.

For instance, the rate of complications like infections or implant failures after surgery can be more than three times higher at some facilities than others, increasing the chances that the patient may be readmitted to the hospital. And, the average Medicare expenditure for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 across geographic areas.

The Comprehensive Care for Joint Replacement (CJR) payment model CMS announced proposes to hold hospitals accountable for the quality of care they deliver to Medicare fee-for-service beneficiaries for hip and knee replacements from surgery through recovery. This proposal furthers the administration’s commitment to transform our health system to deliver better quality care and spend our health care dollars in a smarter way.

“We are committed to changing our health care system to pay for quality over quantity, so that we spend our dollars more wisely and improve care for patients,” said Health and Human Services Secretary Sylvia M. Burwell. “Today, we are taking another important step to improve the quality of care for the hundreds of thousands of Americans who have hip and knee replacements through Medicare every year. By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care. This model will incentivize providing patients with the right care the first time and finding better ways to help them recover successfully. It will reward providers and doctors for helping patients get and stay healthy.  And it’s what we hear that many doctors and providers want – to be able to give the best care possible to their patients.”

Through the proposed five-year payment model, health care providers in 75 geographic areas would continue to be paid under existing Medicare payment systems. However, the hospital where the hip or knee replacement takes place would be held accountable for the quality and costs of care for the entire episode of care – from the time of the surgery through 90 days after discharge.

Depending on the hospital’s quality and cost performance during the episode, the hospital may receive an additional payment or be required to repay Medicare for a portion of the episode costs. As a result, hospitals would have an incentive to work with physicians, home health agencies, and nursing facilities to make sure beneficiaries get the coordinated care they need, with the goal of reducing avoidable hospitalizations and complications. Hospitals would receive tools – such as spending and utilization data and sharing of best practices – to improve the effectiveness of care coordination.

These bundled payments for joint replacement surgeries would build upon successful demonstration programs already underway in Medicare. This model is also consistent with the private sector, where major employers and leading providers and care systems are moving towards bundled payments for orthopedic services.