Hospitals in more than five dozen metropolitan areas will soon have no choice but to take bundled payments from Medicare for hip and knee replacements. And the skilled-nursing facilities that do business with them face a stark reality of their own.
Medicare will give hundreds of hospitals more flexibility in letting patients recover from such procedures in brief nursing home stays, which are significantly less expensive than hospital care. But only nursing homes that rank average or better on national quality scores will qualify for a waiver. That will exclude 1 out of 3 nursing homes in the 67 chosen areas from getting referrals for services covered in the payment bundles, according to an analysis of the markets, and the latest scores on Medicare's five-star quality ratings. In some areas, as many as 80% of nursing homes will be disqualified.
The payment program will make hospitals financially accountable for the cost and quality of all medical services related to lower-joint replacements during a patient's hospital stay and for 90 days after. Hospitals win by holding costs below what they're paid under the bundle.
The program waives limits on using skilled-nursing facilities—specifically, a patient can be referred to a nursing home without a hospital stay spanning at least three days. But the facility must have at least three stars on the CMS' Nursing Home Compare website.
The CMS has incorporated the strategy in other initiatives, but its use in the new mandatory demonstration is a significant expansion, and underscores the Obama administration's eagerness to tie more Medicare spending to quality. It also may accelerate the consolidation already underway among post-acute providers.
“This is the new reality,” said David Grabowski, a Harvard health policy professor. “You can't play here if you're not a three-star facility.”
The policy highlights the wide variations in quality provided to patients too frail to go home but too healthy for the hospital. Medicare beneficiaries with new hips and knees frequently belong in that category, and lower-joint replacement is the most common surgery for Medicare patients. Medicare spending for skilled nursing varies by as much as 50% from market to market.
The mandatory bundle starts in April for hospitals, but the new skilled-nursing policy takes effect in 2017. Patients will still be free to choose a nursing home outside the hospital's referral network, but those referrals heavily influence patient choices. Plus, Medicare won't pay for skilled nursing at a facility with fewer than three stars unless the patient has been hospitalized for three or more days before being transferred.
