Feds want to penalize hospitals with too many hip, knee surgery problems

WASHINGTON — Federal health care regulators on Thursday proposed cutting Medicare payments to hospitals with high rates of complications for hip or knee replacements.

The proposed rule, announced by the Centers for Medicare and Medicaid Services, will affect more than 800 hospitals in both large and small cities, including New York City, Los Angeles, Flint, Mich., and Lubbock, Texas.

Hospitals could get more money for keeping costs and complications low or may need to pay Medicare back some money, Department of Health and Human Services Secretary Sylvia Burwell said on a call with reporters.

Medicare patients have more than 400,000 hip and knee replacements a year; about 25% of those will be affected by the proposed rule.

The proposal, which would take effect Jan. 1 if it's approved this year, is part of the agency's efforts to focus health care delivery more on the quality, rather than quantity of procedures performed.

"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," Burwell said in a statement.

Tricia Neuman, director of the Kaiser Family Foundation's program on Medicare policy, says Medicare patients "may or may not see cost savings if this is successful, but they'll get better care as a result of this."

After surgery, they will more quickly become "more functional and able to get back to their daily lives," she says.

Some hospitals have complication rates that are three times higher than other hospitals, Burwell said on a call with reporters.

The more than 400,000 inpatient hip and knee replacements in 2013 cost Medicare more than $7 billion for hospitalization alone, CMS said.

The average Medicare expenditure for surgery, hospitalization, and recovery ranges from $16,500 to $33,000 across geographic areas, CMS said.

Under the proposed rule, these joint replacements would be treated as a complete service that includes physical therapy and everything that happens in the 90 days after the operation.

Joint replacements are the most common inpatient surgeries for Medicare patients. They can require long recoveries that may include extensive rehabilitation or other care, CMS said.

Most of the hospitals in 75 geographic areas around the country would be affected by the change. CMS said critical access hospitals — small facilities that do short-term emergency care in rural areas — would be exempted.

In January, CMS announced plans for moving health care from the traditional "fee for service" system in which doctors and hospitals are paid for each procedure they perform to value and quality-based care.

HHS said it wanted to tie 30% of traditional Medicare payments to quality or value through what it calls "alternative payment models" by the end of next year and 50% by the end of 2018. HHS also said it wants 85% of traditional Medicare payments by 2016 to be linked to quality or value though programs such as those that reduce the need for readmissions. by 2018, that goal increases to 90% of Medicare payments.