CMS Proposes Value-Based Payments for Hip, Knee Replacements

On Thursday, CMS proposed significant changes to Medicare reimbursements for knee and hip replacements, the Washington Post reports.

Background

Hip and knee replacements are the most commonly performed inpatient surgeries for Medicare beneficiaries (Sun, Washington Post, 7/9). According to CMS, there were more than 400,000 inpatient knee and hip replacements covered by Medicare in 2013, accounting for $7 billion in hospitalization costs (Beasley, Reuters, 7/9).

Providers currently are reimbursed for hip and knee replacements under a fee-for-service system. The procedures -- including hospitalization, surgery and recovery -- can cost $16,500 to $33,000, depending on the region. In addition, the quality of the procedures varies significantly, with complication rates that can be more than three times higher at some hospitals than at others.

Proposal Details

The proposed changes would base such reimbursements on quality (Washington Post, 7/9). In general, providers would receive one flat fee for the procedures instead of receiving multiple payments for each individual service they provide related to the replacements (Radnofsky/Armour, Wall Street Journal, 7/9). HHS Secretary Sylvia Mathews Burwell said the proposed changes would "treat these surgeries as one complete service rather than a collection of individual services."

However, the proposal also would require providers to repay part of their reimbursements for the procedures if patients contract infections or other complications that could have been avoided (Washington Post, 7/9). Hospitals would not be required to make the repayments until the second year after the changes take effect (Dickson/Evans, Modern Healthcare, 7/9).

The proposal also would allow Medicare to give providers extra payments for positive patient outcomes. The payments could be determined through various factors, such as:

• Hospital readmissions;
• Implant failures;
• Infections; and
• Patient surveys.

Further, the plan would incentivize hospitals to work with home health agencies, nursing homes and physicians to ensure patients are receiving necessary coordinated care, which could reduce avoidable readmissions and complications.

Next Steps

The proposal will be open for public comment until Sept. 8. If the changes are approved, they would take effect Jan. 1, 2016, in 75 regions of the U.S. According to the Post, the payment changes would affect 800 hospitals and about 100,000 patients annually (Washington Post, 7/9). The new bundled payments would cover about one-quarter of hip and knee replacements covered by Medicare, according to CMS.

About $2.2 billion in Medicare spending would be used in the program in 2016. That amount likely would grow to $2.7 billion in 2020. Federal officials estimate the revisions would save about $153 million over the five-year period (Dickson/Evans, Modern Healthcare, 7/9).

Reaction

Advocates say the changes will help to decrease wasteful spending by prompting physicians and other providers to work more effectively. Ezekiel Emanuel, a former White House adviser on the Affordable Care Act, touted the proposed changes as "the way to go forward," especially since the requirements would be "mandatory." However, he noted he would like to see the requirements expanded to also include ambulatory centers (Wall Street Journal, 7/9).

Meanwhile, Brian Fuller, a vice president at Avalere Health, said the changes show the Obama administration is serious about quickly moving away from the traditional fee-for-service payment model and toward a value-based one. He said, "This is the first really strong signal that this is where the industry is going."

However, Premier Senior Vice President Blair Childs called the mandatory changes "too much, too fast" and instead said they should voluntary. Childs added, "A voluntary, national program would ensure that only providers who are ready to take on this challenge enter the program, avoiding unintended consequences."

Fuller also noted the change could be difficult for some hospitals that do not have the data infrastructure or care coordination needed to comply with the requirements (Dickson/Evans, Modern Healthcare, 7/9).

Medicare To Cover Joint Pap Smear and HPV Testing

In related news, CMS in a final coverage decision released Thursday said Medicare will now cover joint Pap smear and human papillomavirus testing for women every five years, Modern Healthcare reports.

Background

CMS proposed the coverage expansion in April in an effort to screen for cervical cancer. Cervical cancer tends to occur in midlife and most cases are discovered in women under age 50.

Medicare had covered a pelvic examination and Pap test for all female beneficiaries at 12- or 24-month intervals, though it did not cover HPV testing.

Coverage Details

CMS in the coverage notice wrote the agency "determined that the evidence is sufficient to add HPV testing once every five years as an additional preventive service benefit under the Medicare program for asymptomatic beneficiaries aged 30 to 65 years in conjunction with the Pap smear test."

CMS did not indicate whether it performed an analysis of what the expended coverage will cost. According to Modern Healthcare, Pap smears usually cost around $40 per test, while HPV tests usually cost $50 to $100 (Dickson, Modern Healthcare, 7/9).