For most hospitals in Florida, Medicare is changing the way it pays for hip- and knee-replacement operations to ensure that patients get the right care at the right time at the right price for taxpayers.
On Friday, hospitals in most metro areas of the state were forced to take on financial risk for all spending related to their Medicare joint-replacement patients that occur within 90 days after they leave.
If during that period Medicare spending on a hospital’s joint patients is higher than average for their geographic area, it can expect penalties. Hospitals linked to lower spending can earn bonuses.
“It is a completely new way for hospitals to be paid,” said Fred Bentley, a vice president for the consulting company Avalere. The company’s analysis of the new payment system estimates that more than half of participating hospitals will face penalties.
“It’s going to require them to think about not only the care they’re delivering in the hospital, but what’s happening to (patients) when they get discharged,” Bentley said.
The Avalere analysis shows that on average, Medicare spending nationwide for knee or hip replacement totals $25,565. The hospital payment accounts for only a little over half of that.
According to information provided by Florida's Agency for Health Care Administration, average per-patient charges at hospitals in the state varied from just under $30,000 to almost $214,000 in 2014.
Not counting doctor bills, 39 percent of Medicare’s spending on joint replacement patients occurs after they leave the hospital. The largest part of that goes to nursing homes, followed by home health agencies, inpatient rehabilitation facilities, and hospitals for re-admissions.
“The reality is that most hospitals don’t know where their patients go after they are discharged,” Fred Bentley, a vice president at Avalere, said in the report.
The joint-replacement project will require participation by 800 hospitals nationwide in 67 metro areas. Of those, eight metro areas are in Florida, covering 19 counties:
· Gainesville area (Alachua, Gilchrist counties)
· South Florida, from Miami to West Palm Beach (Broward, Miami-Dade, Palm Beach Counties
· Naples area (Collier County)
· Greater Orlando area (Lake, Orange, Osceola, Seminole Counties)
· Pensacola area (Escambia, Santa Rosa Counties)
· Port St. Lucie area (Martin, St. Lucie Counties)
· Sebastian and Vero Beach (Indian River County)
· Tampa Bay area (Hernando, Hillsborough, Pasco, and Pinellas Counties)
See a detailed list of the participating hospitals here.
Central and South Florida have been targeted in this experiment for two reasons, Bentley said. One is obvious: there are millions of Medicare patients in these regions of the state. The other is that Florida has historically had a much higher than average level of spending per patient.
Hip and knee replacements are the most common inpatient procedure for Medicare beneficiaries, and they require a long period of recovery. According to the federal website that describes the project there were more than 400,000 such joint operations in 2014, at a cost to Medicare of more than $7 billion just for the hospital treatment.
Researchers have shown that high per-patient spending levels often reflect an intensive, high-tech system of medical treatment even when it is too late, in the final months of life. Such spending levels have also been linked to fraud and abuse.
In health-care lingo, hospitals will receive “bundled payments” that cover an “episode of care,” from the patient’s check-in through 90 days after discharge. The change should not be visible to patients; it will show up only in money transfers between government contractors and hospitals. Independent physicians, home-health companies and others will still get their own Medicare payments.
In an interview with Health News Florida, Bentley said that in the first year of the project, participating hospitals will have to account for spending only in comparison to their own past performance. But in the second year, he said, hospital scores will be affected by the performance of others in the region.
It’s very exciting,” Bentley said. “It’s a new way of managing and delivering care.”
For the first time, he said, the federal health-payment agency – the Centers for Medicare and Medicaid Services – “is requiring hospitals to actually coordinate care much more effectively with physicians and with nursing homes and with home-health providers.”
The Comprehensive Care for Joint Replacement Model, the official name for the payment project, is being sponsored by the Center for Medicare and Medicaid Innovation. The center was created under the Affordable Care Act.
U.S. Health and Human Services Secretary Sylvia Burwell said in November that the focus on episodes of care rather than a piecemeal system should reduce confusion, duplication, and re-hospitalizations because of complications. The model will factor in quality measures as well as cost.
No repayment will be expected for the first year, Burwell said, but they will be in the second year. To reduce the downside risk, HHS agreed to limit the loss to a maximum of 5 percent for the second year, 10 percent for the third year, and 20 percent after that, with special protections built in for rural or Medicare-dependent hospitals.
One of the goals of the administration of President Barack Obama was to have 30 percent of Medicare fee-for-service payments shifted to value-based models by the end of this year.