Medicare Proposes Mandatory Bundled Payment Model for Joint Replacements

Medicare has proposed a mandatory payment model that would require acute care hospitals to participate. Hospitals would experience either pay cuts or bonuses based on their quality and cost outcomes for joint replacement patients through 90 days post-discharge.


CMS said the proposed five-year Comprehensive Care for Joint Replacement model would generate $153 million in savings.


Not all hospitals would be part of the program. However, “most hospitals” in 75 selected geographic areas would have to participate. (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)


CMS focused this first mandatory payment model on joint replacements because it said the current approach to this care “leads to more post-surgery complications, high readmission rates, and inconsistent costs.”


The new proposed model would address this fragmentation by focusing on coordinated, patient-centered care, thus improving the care experience for the growing numbers of Medicare patients who receive joint replacements.  (Comprehensive Care for Joint Replacement, CMS Fact Sheet, July 9, 2015)


The proposed model will use a retrospective bundled payment, under which CMS will continue to pay all providers involved in an episode of care individually and then reconcile total payments at the end of the year against target prices. Those that exceed the target would owe money back to CMS, while those that beat the target would get bonus payments. (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)


A healthcare analyst noted that the biggest challenges for participating providers will fall on hospitals in their role as the “accountable entity.” If spending exceeds the target, the hospital would have to repay CMS. “So, much like we see in readmission penalties, hospitals are being held accountable for broader system reform.” (“Medicare Proposes First Mandatory Comprehensive Pay Model,” HFMA Weekly, July 17, 2015)


To make this work, hospitals will have to work with their orthopedic surgeons on ways to improve quality in hip and knee replacements. Savings during the inpatient portion of the episode would come from reductions in the cost of medical devices—achieved through aggressive negotiations with vendors.


Once the patient leaves the hospital, there must be close coordination with post-acute providers to reduce spending post-discharge. If the hospital doesn’t own the post-acute provider, it may not have exact figures on post-acute spending for an episode of care.


HFMA noted that, “hospitals also will need to figure out gainsharing arrangements to incentivize increased efficiency among the other providers involved in the episode of care.” The model will waive federal antitrust laws that would normally limit gainsharing arrangements.


Comments are due on the proposed payment model by Sept. 8.



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