Hip and knee replacements are among the most common operations performed in the United States. In 2013, there were over 400k performed, and the inpatient stays alone cost Medicare $7 billion. The Medicare payout for each procedure – including surgery, hospital stay, and recovery (rehab) – ranges from $16,500 to $33,000, largely dependent on where in the country the procedure is performed. That obviously adds up to a lot of dollars and says nothing about how well the patient does post-operatively.
Well, Medicare wants to change that. On Thursday, officials at CMS proposed paying for hip and knee replacements as bundled payments – holding hospitals accountable for the full episode of care from surgery until 90 days post operation. The idea? Having hospitals work with physicians, home health agencies, rehabs, and nursing facilities to coordinate the patient’s care and avoid unnecessary readmissions and complications. The upside? Hospitals would be rewarded with extra payments if patients do well. Hospitals with higher complications would have to partly repay the government.
The thought process behind the proposed changes is moving the nation’s health care system from a fee for service basis – in this case paying providers for each operation – to a pay for performance – rewarding quality of care rather than quantity of care. Medicare has been testing different payment methods to improve quality and reduce costs, a concept that was solidified with the passage of the Affordable Care Act.
Officials chose hip and knee replacements because they are so commonly performed, but also because the number of procedures is projected to increase as the nation’s population ages. Additionally, cost and quality vary widely across the country, where complications like implant failures and infections can be three times higher at some hospitals.
Of course, there are downsides and hidden incentives in any payment structure. Ideally, the new payment rules would force hospitals to look at their processes, standardize treatment, and invest in care coordination and quality control. Hospitals may begin to look at their own data and try to identify providers that have poor outcomes. Unfortunately, under performing hospitals will be hit hard with penalties, greatly affecting their bottom line. This may incentivize some of them to select less-high risk patients or cease performing the operations all together. As in physics, every action has an equal and opposite reaction. Only time will tell what happens with this latest proposal (public comments are open until early September), but if this proposal can work on such a large scale, it won’t be long before the same concept trickles down to other operations as well.