Government looks to cut costs of joint surgeries

More than 400,000 joint replacement procedures cost Medicare more than $7 billion nationwide in 2013 - big costs for one of the most common surgeries that pushed federal health officials to propose new rules last week for reducing post-surgery complications and readmissions.

Through a proposed five-year trial period, the Centers for Medicare and Medicaid Services is aiming to hold hospitals more accountable for the costs of the entire episode of care - from surgery through 90 days after discharge - by pushing for greater care coordination and better patient outcomes.

The government agency estimates the average Medicare expenditure for joint surgery, hospitalization, and recovery varies from $16,500 to $33,000.

Though Cedar Rapids is not part of the 75 metropolitan statistical areas initially targeted to participate in the initiative, Dr. Mark Valliere, chief medical officer at Mercy Medical Center, said it's likely all hospitals will eventually implement the changes if the rollout goes well.

'CMS has made it really clear that they want to get away from the traditional fee-for-service model,” he said - and the bundling of payments as the agency proposes is one way of doing that.

Traditionally, Medicare makes separate payments to providers for individual services, such as the radiologist, surgeon, anesthesiologist and pharmacist, Valliere said. But with bundled payments, CMS instead issues one payment to the hospital, which then divvies it up.

CMS hopes this will push hospitals to work with physicians, home health agencies, and nursing facilities to reduce avoidable hospitalizations and complications. Hospitals would also receive spending and utilization data to improve the effectiveness, CMS said.

In this new reimbursement proposal, Valliere said CMS will look at historical costs of a procedure and write the hospital a check for slightly less. As an example of how this will work, Valliere said if a hip replacement procedure typically costs a hospital $30,000, CMS will write a check for $27,000.

'They want hospitals to pay attention and get it right the first time,” he said.

Under this new system, if there are complications or additional services, the hospital must eat the extra costs, he said. But on the other hand, if the hospital performs well and can do the procedure for less, it keeps the difference.

'This is better for the payer and the patients,” he said.

Joint replacements are frequently the highest-volume surgical procedure at hospitals, including UnityPoint Health-St. Luke's Hospital, where the hospital does between 700 to 800 each year, said Peg Pickering, director of surgical services at St. Luke's.

These high numbers lead the hospital to make the surgical and rehabilitation process more efficient several years ago - implementing many of the proposed CMS changes, like setting up interdisciplinary teams, she added.

Because of the repetitive nature of joint replacements, 'we thought we should do it efficiently and have good outcomes and a good patient experience,” Pickering said.

Since beginning the changes, the hospital has improved length of stay, procedure cost has come down, infection, and complications percentages are down and readmission rates are better, Pickering said.

She joked that the hospital was disappointed that Cedar Rapids was not in the initial list of participating metropolitan statistical areas.

'This is something we've worked really hard on for a long time,” she said.