The first rule of thumb for a health insurer trying to minimize claims expenditures is to keep people out of the hospital. Everything in the hospital has a higher contract rate than the exact same service fifty feet down the street at a non-hospital clinic.
Huge from CMS today – CMS proposes to remove total knee arthroplasty from the Medicare inpatient-only (IPO) list – hospitals will flip out.
— Bijan Salehizadeh (@bijans) July 14, 2017
A total knee arthoplasty is a total knee replacement. Until now, it could only be done in the hospital with at least an overnight stay. CMS spends a lot on knee and hip replacements, $7 billion in 2016. Knee replacements run near $25,000 apiece. Knee replacements were already in a bundled payment pilot program.
There have been ambulatory surgical centers that have been willing to do outpatient knee replacements already. Allowing Fee for Service Medicare to pay for knee replacements on an outpatient basis will make achieving bundled cost targets far easier as this gives doctors significant control over the biggest single cost in the value chain, the cost of the hospital. Eliminating the hospital and allowing more competition should help keep prices under reasonable growth rates.
I am curious as to how the mandatory bundles for inpatient knee replacements will be risk adjusted as outpatient knee replacements are not used for people with complex cases or morbid obesity. I would expect the easy cases to quickly migrate to outpatient surgical centers and the complex cases with higher baseline costs to stay in the hospitals. I think the bundles would need to be adjusted as case mix data comes in.