Implications of Medicare Payment Changes for Hip, Knee Surgery

by | Published on Feb 1, 2016 | Healthcare News

Knee Surgery
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Hip and knee replacements are considered to be the most common surgeries among Medicare beneficiaries and hence very significant in orthopedic medical billing. Even though there are some incentives for hospitals to avoid post-surgery complications that result in pain and readmissions to the hospital or protracted rehabilitative care, the quality and cost of care for such surgeries vary significantly among providers. In order to ensure better quality and more predictable costs, Medicare introduced a major payment shift for hip and knee replacements, effective from April 1, 2016.

According to the Obama administration, the new payment model turns away from a piecemeal approach to care, irrespective of results. To be more specific, Medicare will no longer pay hospitals for the number of services they provide. Instead, it will pay for high-quality episodes of care rendered at the lowest possible cost. Hospitals can receive additional financial incentives when they meet certain targets for quality and overall costs. If they are not able to meet the targets, eventually they will be financially liable. Medicare beneficiaries will be still able to choose their doctors and hospitals for their surgeries. Overall, the new system encourages the hospitals to improve the quality of care when it comes to knee or hip replacement surgery so as to avoid situations that may increase costs such as unnecessary procedures, complications, hospital readmissions and extended care in costly “post-acute” settings (for example, rehabilitation centers).

How the New Reforms Will Affect Healthcare Providers

Overall, if hospitals are put at financial risk for the cost of care, things may be put right. Hospitals can also reward physicians and other care providers with incentives to enhance quality and cut costs. However, the new reforms are actually complex and challenging for healthcare providers, especially the smaller ones who run entirely on their own. In the fee-for-service model, hospitals billed separately for every service they provided in connection with replacement surgeries to receive Medicare payments. For example, if a patient had to be treated for a hospital-acquired infection or needed a longer duration of stay, that additional care was billed separately for Medicare payment. If the patient had to receive extended care in a rehabilitation center or a skilled nursing facility, Medicare paid separately for that too.

Medicare’s new bundled payment model for replacement surgeries raise the following concerns among providers.

  • The new reforms are hospital centric. The episode starts when the patient is admitted for replacement surgery (excludes any costs incurred before the procedure) and only the hospitals would be provided with incentives or penalized depending upon the outcomes of the procedures. Physicians, post-acute care providers and others may not get as much relevance as before and this may create potential conflicts instead of collaboration.
  • This will significantly reduce the predominant use of outpatient or other suitable sites of care for knee/hip replacement surgeries. Focusing on hospitals alone can lead to more consolidation and fewer choices for healthcare services.
  • Though hospitals will receive financial incentives to avoid post-surgery complications, the payments to the hospitals won’t vary according to the severity of the patient’s condition.
  • The extensively broad diagnosis related groups (DRGs) include procedures that are not related to replacing hip or knee, which may result in higher total cost of care and unjust penalization for hospitals in connection with those unrelated procedures.

Thus, each team will have to rethink the entire continuum of care, from pre-operative preparation to the surgery procedure, medical billing strategies, relationships with inpatient and outpatient extended care centers and patient outreach to avoid loss of revenue.

Medicare had actually introduced the payment shift proposal this summer and planned the starting date as January 1, 2016. As the starting date has now been postponed to April in the final policy, hospitals will get more time to prepare for this change.

The other changes from the earlier proposal are reducing the number of metro areas from 75 to 67 (from Akron, Ohio, to Wichita, Kansas), and giving more time for hospitals to repay money for falling short of targets.

Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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