Perhaps you know someone who has had a hip or knee replaced, or you may have gone through a major leg procedure yourself. When these surgeries go well, you can restore mobility and independence. However, experts say that too many of these procedures result in unnecessary complications. Medicare would like to change that and save money in the process.
New Medicare payment rules that started in April 1 of last year could affect you as a patient. Medicare’s new bundled-payment initiative for hip and knee replacements and other lower-extremity-joint-replacement surgeries affects close to 800 hospitals in 67 randomly chosen US cities.
It is called the Comprehensive Care for Joint Replacement (CJR) model, and its goal is to minimize complications and hospital readmissions after these surgeries, which are the most common inpatient surgeries Medicare beneficiaries receive. This model will give hospitals a financial incentive to coordinate patients’ care among their physicians and other healthcare providers that may be involved in the procedures and post-operative care, such as skilled nursing facilities and home health agencies.
What Are Bundled Payments?
Under a bundled-payment system, insurers reimburse providers a fixed sum for an episode of care, which begins on the date the patient has surgery and ends 90 days after the hospital discharges him or her. By contrast, fee-for-service payments reimburse providers piecemeal for each service patients receive. The concern is that the fee-for-service system rewards the number of services provided, regardless of how effective they are. It creates incentives to increase healthcare spending.
Medicare has used bundled payments for certain procedures for decades, but only now will it use this system for lower-extremity-joint replacements, and only in select hospitals, as part of the Bundled Payments for Care Improvement (BPCI) initiative.
How the Financial Incentives Will Work
Medicare will still pay providers on a fee-for-service basis as procedures are performed, but it will now look at how much hospitals claim, in total, for all the lower-extremity-joint-replacement surgeries they perform during the year. Hospitals that exceed quality and performance measures based on how their average cost per procedure compares with Medicare’s target price per procedure will receive additional payments from Medicare; if they fall short, they will owe Medicare money. Each hospital’s spending target is different, depending on its historical and regional outlays for hip and knee replacements. The new rules shift the risk for post-surgery complications to hospitals; this is called a “pay-for-performance model.”
Risks and Benefits for Patients
If you have a hip- or knee-replacement surgery, you could have complications, such as an infection or an implant failure. You could need additional surgery to correct unusual pain or joint instability. Patients certainly want to avoid the pain, health risks, hassles and additional costs associated with such complications.
The new program’s financial penalties give hospitals an incentive to send patients home as soon as possible after having hip- or knee-replacement surgery. They also give hospitals an incentive to provide high-quality care that minimizes the risk of patients having problems after surgery. The limits on both penalties and rewards are meant to discourage hospitals from taking shortcuts or providing inadequate care.