The Centers for Medicare and Medicaid Services has a proposed change in its Medicare fee-for-service payments that would use a bundled payment methodology for hip replacements and knee replacements, called the Comprehensive Care for Joint Replacement Payment Model. According to CMS, Medicare expenditures for surgery, hospitalization, and recovery for such procedures range from $16,500 to $33,000 across geographic areas, with over 400,000 such procedures completed each year. Bundled payments would be determined for the average costs of standardized hip replacements and knee replacements procedures, through 90 days after discharge from a hospital after such a surgery, for each of 75 geographic areas (Metropolitan Statistical Areas). For each of the five years of the proposed model, CMS would calculate actual episodic costs for such hip and knee replacements, compared to the geographic bundled payment rate. If a hospital is able to keep the total costs below the bundled payment rate, it may keep the savings. On the other hand, if the episodic costs are above the bundled payment rate, beginning in Year 2 of the model, the hospital must re-pay the difference to CMS (no re-payments would be required for Year 1). CMS is proposing the change through its Innovation Center as part of its authority from the Affordable Care Act.
These bundled payments only apply to the Medicare fee-for-service program and do not apply to Medicare Advantage, the managed care Medicare programs. The changes would be implemented for five years, after which CMS will further evaluate the bundled payment model. The proposed changes would be effective January 1, 2016, with public comments due September 8, 2015.