Medicare’s new plan to start paying hospitals fixed rates for hip and knee replacements, rather than let providers bill individually for each surgical and recovery service, could cut deeply into revenues for what have been some hospitals’ most lucrative services.
It’s another step by the Obama administration to curb costs of procedures whose list prices can vary by ridiculous amounts between hospitals and whose frequency can only increase with the flood of aging Baby Boomers.
This is a “bundled payments” approach, in which providers are paid one rate for the entire process of caring for a patient from surgery until after discharge. This, it is hoped, will improve care coordination. It may even discourage physicians who see less revenues coming in for these joint replacements to instead urge other treatments, such as exercise.
The Centers for Medicare and Medicaid Services paid for 400,000 inpatient joint-replacement procedures in 2013, with a total bill of more than $7 billion for hospitalization. The average expenditure varied from $16,500 to $33,000 across different regions. And CMS noted that providers’ ability to avoid post-surgery complications has varied widely.
The Wall Street Journal reported that the Feds plan “a five-year initiative in which healthcare providers in 75 different parts of the country are paid using the new method. Most providers in those areas would be required to participate. Providers that performed well would get bonuses, and providers that did not would be required to repay Medicare a portion of the costs.”
Determination of who “performed well” would be based on data on complications and readmissions; patients’ reports would also be part of the measurements used.