Recent history has proved poorly designed payment reforms have unintended and unwanted consequences. The CMS is on the cusp of making that mistake with its plan to bundle payments for replacing knees and hips.
As now designed, the mandatory “comprehensive care for joint replacement” payment model could encourage many of the program's 800 hospitals (and their affiliated orthopedic surgeons) in 75 metro areas to perform more of the pricey procedures on arthritic seniors, not less. If that happens, it will be a perverse twist on the old saying: What the CMS makes on each bundle will be lost on volume.
While hundreds of comments have poured into the agency from aggrieved providers, none have questioned the underlying assumption. Medicare will save money by bundling the payment for the entire care episode and reducing its payment slightly from the previous year's average. The hospital is at risk if costs are above that price, and it gets to keep any savings if they are below the price.
The CMS estimates the program will reduce payments to hospitals by $153 million over the next five years. That's barely a rounding error for operations priced from $16,500 to $33,000, that cost Medicare over $7 billion in 2014 alone.
The agency needs to focus on how many people are undergoing the procedure. A government survey estimates that there were 719,000 knee replacements in 2010, of which 385,000 involved people over age 65. For hips, seniors accounted for 168,000 of the estimated 332,000 replacements that year.
The totals have risen over the past decade, partly because of an aging America, but also because of the nation's changing health status: Nothing causes knees and hips to wear out faster than carrying 50 to 100 pounds of excess baggage for 20 or 30 years.
But even if the CMS assumes nothing can be done about those factors, new evidence suggests many joint recplacements don't have to take place or can be postponed.
Last week, clinicians in Denmark published the results of the first randomized clinical trial involving people eligible for total knee replacements. Half of the 100 patients received an operation. The other half received non-surgical treatment—education, physical therapy, use of insoles, pain medication and dietary advice.
Patients in both arms of the trial reported remarkably good results when questioned after a year about pain levels, mobility and arthritis symptoms. Those who received new knees scored slightly higher, but had many more side effects. One in 10 who received the operation suffered deep vein thrombosis, which requires anticoagulation therapy, or a deep infection.
The fact that 13 of the patients (26%) in the non-surgery arm underwent knee replacement surgery during the year suggests an alternative strategy, since many people rush into the operation at the suggestion of their orthopedic surgeons, who benefit from conducting more operations, not fewer.
“Since both groups had clinically relevant improvements, clinicians should be cautious and ensure that the patient has had comprehensive non-surgical treatment of sufficient dose and length before considering total knee replacement,” wrote Dr. Søren Thorgaard Skou of the University of Southern Denmark. “Surgery is associated with a greater risk of serious adverse events.”
The CMS' proposed bundled-payment program does nothing to change the pipeline. In fact, it would provide a powerful incentive for hospitals and surgeons who make money on the bundle to do as many as possible. No wonder consultants, physician management firms and medical suppliers are touting their ability to show hospitals how to make money under the bundled-payment program. Many are even willing to share the risk.
There is an alternative. Hospital systems could offer the “watchful waiting” strategy if the CMS would give them a comprehensive payment to cover the patient's condition—in this case, severe arthritis of the knee or hip.
At Modern Healthcare's Building Tomorrow's Delivery Model virtual conference last week, Harold Miller of the Center for Healthcare Quality and Payment Reform showed how a condition-based fee would allow hospitals to invest more in primary care and therapy, and pay more to doctors who perform fewer operations with fewer complications—all while spending less on variable costs such as drugs and implantable devices.
What's not to like in higher pay for surgeons, higher pay for primary-care doctors and therapists, higher margins for hospitals, albeit on lower revenue, and patients with comparable results? Before the CMS launches its mandatory knee-and-hip bundled-payment program, it's worth taking a second look.