A big change is soon ahead for Nashville-area hospitals as part of a move by Medicare to move to a reimbursement system based on the value of care rather than the volume of patients.
The Nashville metro area is one of 67 regions that are being required to participate in a bundled payment system for lower extremity joint replacement procedures. The program gives hospitals responsibility for the total price of in-patient care for the procedure and a 90-day post-discharge period.
Each hospital will have a unique target price, which will be set by a combination of a hospital’s blended, regional, and historical episode spending data. The price will then be discounted by 3 percent. After care is rendered, if a hospital’s actual costs for joint replacement are under the target price then the hospital will get a bonus payment from Centers for Medicare and Medicaid Services (CMS). If the costs are higher, the hospital will owe CMS money.
The joint replacement program is part of a CMS-announced goal to convert 30 percent of traditional fee-for-service Medicare payments to alternative payment models by the end of 2016 and 50 percent of payments to these models by 2018. The joint replacement program goes into effect April 1, 2016, and hospitals will be responsible for downside risk starting Jan. 1, 2017.
Conversion to bundled payments for joint replacement will require considerable operational changes for hospitals. Hospital operators will want to consider co-management agreements with physicians prior to entering this new era of Medicare reimbursement. This will allow the parties responsible for patient outcomes to share reimbursement for high-cost procedures like joint replacement.
Since other providers typically are involved in care for this procedure, both pre-admission and during the 90-day post-discharge period, hospitals need to be strategizing now on how to cooperate clinically and financially with those other parties. Patient education and relationships will be critical.
To have control over this process, hospitals will need to address the collection and interpretation of financial and quality data, patient surveys, and reporting to ensure the best outcome for patients and appropriate Medicare reimbursement. This may require considerable changes in processes and IT.
While this program affects a limited number of patients in limited parts of the U.S., CMS intends to expand both the types of procedures involved and the geography covered. So all hospitals will be well-advised to prepare, even if the joint replacement program does not immediately affect them.
Doug Wolfe is a senior manager in the Healthcare Services practice at LBMC, a premiere professional services firm headquartered in Tennessee. Contact Doug at dwolfe@lbmc.com or 615-309-2584.