CMS to transform hip and knee replacement payment model

Medicare will now pay providers who perform hip and knee replacement surgeries based on their ability to deliver high-quality, low-cost care under a five-year initiative announced Thursday by the federal government. 

The Comprehensive Care of Joint Replacement payment model will target Medicare fee-for-service beneficiaries as they transition from surgery through recovery, said the Centers for Medicare & Medicaid Services (CMS).

The need for a new payment model for such procedures stems from the huge variation in medical costs. For instance, the price for knee and hip replacements--which are the two fastest-growing medical treatments in the country--differ by more than $20,000 from one place to another.

Through the initiative's five-year proposed payment method, providers in 75 geographic areas will continue to be paid under the current Medicare payment system. However, hospitals that administer hip or knee replacements will be held accountable for the quality and costs of care for the entire episode of care, notes a CMS announcement. Providers could receive an additional payment based on performance or end up having to repay Medicare for a portion of the cost of care.

"By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care," according to the announcement. "This model will incentivize providing patients with the right care the first time and finding better ways to help them recover successfully."

This new payment model is very different from recently proposed Medicare plans, Rob Lazerow, the Advisory Board's expert on payment reform, tells the Daily Briefing. "It's the first time that Medicare is proposing to make bundled payments mandatory for hospitals, doctors and other providers."

CMS's recent announcement, as Lazerow points out, may indicate that Medicare is more willing to use mandatory programs to speed up the transition to alternative payment models.

At the beginning of this year, the Department of Health and Human Services announced plans to tie 30 percent of all fee-for-service payments to providers to quality initiatives through alternative payment models--particularly accountable care organizations and bundled payments--by 2016. It will rise to 50 percent by 2018.

The proposal can be viewed starting July 14; the deadline to submit comments is Sept. 8. 

For more:
- here's the CMS announcement 
- read the Daily Briefing article
- check out the proposal (.pdf)