Competition policy for procedures

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.

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.

54 replies
  1. 1
    Wag says:

    Very interesting. I am sure our current administration will claim credit for this much needed initiative, but I suspect the gears have been rolling for over a year to put this in place. Yet another Obama initiative that Trump will claim credit for.

  2. 2
    Another Scott says:

    I was with a group of people on Thursday and one was a mid-60s-ish guy who had a strange gait and had trouble keeping up with the rest of us as we walked to where we were going. The guide was very personable and she apologized for walking too fast, saying sometimes she regrets having a sports car and her body lets her know sometimes as she gets out of it that she’s not as young as she used to be. The topic quickly changed to joint replacements and he said he’s had one hip replacement already. She mentioned that she knows that knees can be done on an outpatient basis now.

    I was flabbergasted!

    I mean, I know it’s the natural progression as they get better at these things, but it’s still pretty major surgery.

    I assume we’ll start seeing ubiquitous TV ads for Dr. Bob’s Discount Human Frame Repair “next to the CVS at the strip mall” shortly…



  3. 3
    Tokyokie says:

    And I’m curious as to how somebody who just got a knee replaced is supposed to walk on the newly replaced knee without having received any physical therapy as to how to do so.

  4. 4
    p.a. says:

    By the time (age) knee replacement is needed, what % are truly ‘easy’ cases? If they are easy i.e. patient is in good overall health, are there cheaper, less invasive alternatives: p.t. etc? I guess I’m asking if knee replacement is overprescribed (see bypass, etc)?

  5. 5
    Yarrow says:

    I had to click through to the article to find out what CMS stood for. In case someone else didn’t know:

    Centers for Medicare & Medicaid Services (CMS)

    From David’s post:

    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’d expect that too. That’s probably a good thing, really. As medicine advances, a lot of treatments and procedures are available that weren’t available 50 or 100 years ago. Knee and hip replacements are some of those. They’re fairly routine now and moving routine things to another location and saving the hospital for more difficult and complicated cases makes sense. From the hospital perspective, though, I’d guess it isn’t popular.

  6. 6
    Viva BrisVegas says:

    @Another Scott:

    but it’s still pretty major surgery

    It sounds like arthroscopic (keyhole) knee surgery. In and out.

    Although I think that research has shown it’s not effective with degenerative knee damage.

  7. 7
    MomSense says:

    Holy shit. If I live to 65 I’m totally screwed. I spent a week in the hospital after a colonoscopy and five days after knee surgery. The five day stay was considered a yuuge success since I didn’t develop any complications – also called bleeding to death. I also had the coolest compression contraption that was originally used on race horses to help reduce swelling.

  8. 8
    Gian says:

    @p.a.: @p.a.:

    My mother in law had knee replacement this year. She was in a bad car accident about 40 years ago, and the knee damage had gotten to where it would literally lock up on her.
    surgery was done outpatient, and was followed up with physical therapy. She’s in her early 60s

  9. 9
    StringOnAStick says:

    Knee replacements are major surgery with a long incision, not an in and out scope through small incisions. I know of a surgeon who does partial knee replacements on an out patient basis but only for people with good health and low potential for complications. He’s also the guy who told a room full of Medicare-aged people that Medicare needs to die because of the costs coming as Boomers need joint replacements before he launched into his presentation about treatments for knee pain. No one batted an eye bug I was shocked; who does he think can pay for his services if Medicare is gone?

    I joined a clinical trial for an artificial meniscus last year and the arthritis burn is gone in the knee that qualified for the study. The thing is on track for final approval in the middle of 2018 and I will get in line to do the same for the knee that was too bad to qualify for the clinical trial since it should let me put off replacement for 6-8 years. The better knee should last 10-15. It is only for the inner half of the knee, not the whole meniscus. It isn’t a perfect, go back yo everything you did before solution, but a knee replacement isn’t either.

  10. 10
    Ohio Mom says:

    My mastectomy was done in an outpatient facility, which was across a large parking lot from the main hospital.

    They did dozens and dozens of surgeries there that day (my husband the math guy entertained himself in the waiting room by cracking the codes on the screens where patients are identified by number for privacy’s sake).

    I was the only one to stay the night, the last other patient was discharged about nine pm. I had two lovely nurses all to myself. Talk about fast service!

    There were certainly some inconviences. I had to go to radiology in the main hospital first, to have a radioactive tracer injected (this is to identify which lymph node needs to be removed). People who are having lumpectomies go to radiology to have the tumors marked with a large pin sticking out of them, sonthat the surgeon knows immediately where to cut.

    Then my husband drove me across the parking lot in the frigid January weather.

    The other inconvience was waiting for dinner and breakfast. The kitchen is in the main hospital and took quite a while to get to my room.

  11. 11
    Ohio Mom says:

    My other out-patient surgery story is about my cataract surgery. The opthamologist uses an outpatient facility that does a lot of joint replacements.

    He had to get permission from UHC to do my surgery in an out-patient facility rather than a full-service hospital. That didn’t make any sense to me. My root canal was a lot more involved and I wasn’t anywhere a hospital for that.

    Well, as long as my family and I remain covered, I’m good with whatever.

  12. 12
    Schlemazel says:

    @Another Scott:
    Exactly! While the old days doctors were probably over-reliant on hospital stays now it has gotten ridiculous the other way. When I fractured my pelvis & had the surgery to repair it (11 screws some 4″ long and 2 plates) I was allowed to stay 3 days after the operation. What that meant in reality was that my wife was the primary nursing staff and my children had to be pressed into service because I was unable to walk at all for another week and then only to the bathroom (second floor) and the wheelchair. Had anything gone wrong I would have been in a lot of trouble but damn did the insurance company get by for less

  13. 13
    Yarrow says:

    @MomSense: Yours would be a case with complications so yours would be done in the hospital, if you need one. That’s what David’s take on it is.

  14. 14
    smintheus says:

    I wonder whether the rates of secondary infections are higher or lower with outpatient knee replacements, and whether infection is a greater problem than other complications like blood clots? Decades ago I had a colleague die from a blood clot after knee surgery.

  15. 15
    OzarkHillbilly says:

    I’m not looking forward to shoulder replacement surgery this winter.

    @p.a.: I’ve already been thru PT for it with limited success (it was 6-7 yrs ago). Can’t imagine an insurer approving the surgery w/o pt first.

  16. 16
    Sister Rail Gun of Warm Humanitarianism says:

    @smintheus: IIRC, fear of secondary infections is behind a lot of the push to get people out of the hospital as quickly as possible.

  17. 17
    Mike Toreno says:

    Wait wait wait, how can somebody that needs a total knee replacement be ambulatory?

  18. 18
    OzarkHillbilly says:

    @Ohio Mom: My inconvenience from surgery in an outpatient facility was a near death experience and 3 days in a hospital after they sent me home with aspiration pneumonia. No, I’m not going back to that one.

  19. 19
    tobie says:

    From my limited exposure to people recovering from knee replacement surgery, I think it should be done in a hospital with at least one overnight stay, if not two. I nursed my mother through this who had the good sense to go from her overnight stay in the hospital to a ten-day residential rehab clinic. She could not survived at home after the surgery.

    I agree that we do need to do something about the excessive cost of hospital stays. Kicking vulnerable people out of hospitals is not the way. In Germany you stay in the hospital for everything. If they can keep hospital costs down, there obviously is a way to do it. (Germany does not by the way have a “single payer” health system.)

  20. 20
    Ohio Mom says:

    @Sister Rail Gun of Warm Humanitarianism: I certainly get that — secondary infections are very, very bad. But it isn’t that they send you home so quickly, it’s that they send you home without enough/any supports.

    @Schlemazel: is one example, I am another. The drain from my mastectomy went kablooey over the first weekend I was home, inbetween visiting nurses visits, and the result was I now have (a thankfully mild so far) case of chronic lymphedema from the damage the backed-up fluid caused.

    Leaving people who are doped on on painkillers, and completely naive about what is normal and what is a significant complication in the making, to their own devices is depending a little too much on luck, if you ask me.

    I am sure there are plenty of people who would love jobs as visiting nurses, if we would just find the money.

  21. 21
    OzarkHillbilly says:

    @Ohio Mom: My other out-patient surgery story is very long and involves a malfunctioning surgical table, exploding bulbs and pieces of broken glass falling on me, and a local anesthetic that didn’t work. At least the doctor and the nurses were up to it.

    At one point the nurse assisting looked at me and said, “Are you sure you want to go thru with this today?”
    I said, “Yeah, lets get this over with.”
    Then the Doc made his first cut and I knew I was fucked.

  22. 22
    Ohio Mom says:

    @OzarkHillbilly: And you are a third example!

    I guess someone ran the numbers and decided a few complications like yours is still less expensive than providing adequate follow-up care for everyone.

  23. 23
    Schlemazel says:

    @Ohio Mom:
    If they find the money it sure isn’t going to pay for nurses! The guy who runs (ran?) UnitedHealth Group used it to by an NHL team

    I was lucky that things went well even though I got no useful physical therapy. Sounds like you got a crappy deal. I hope it does not cause you too much trouble

  24. 24
    OzarkHillbilly says:

    @tobie: We can’t do that, that’s “old Europe” and we reject all their failed policies.

  25. 25
    Another Scott says:

    @Mike Toreno: I assume we’ll all have wheels (1:37) soon.


    Seriously, infection in hospitals is a huge problem. 722,000 secondary infections and 75,000 deaths in acute care hospitals in 2011. That doesn’t mean that kicking people out of the hospital before they’re able to function on their own to some baseline extent makes any sense. It just pushes the costs and problems onto someone else – and that’s the main point, of course. :-/


  26. 26
    Schlemazel says:

    Jay-Zeus! That tops a bunch of horror stories I have. That is the stuff of nightmares

  27. 27
    Ohio Mom says:

    I am reminded of several Jewish circumcision stories from my childhood. Assuming the baby boy is healthy, the ceremony is done on the eighth day.

    Various family stories about the boys in my generation (baby boomers), not worth repeating because they are about various relative’s personality quirks, all take place in the hospital — Moms and newborns stayed for TEN days!

    Which might have been excessive but now of course you are lucky to stay over one night.

  28. 28
    OzarkHillbilly says:

    @Ohio Mom:

    Leaving people who are doped on on painkillers, and completely naive about what is normal and what is a significant complication in the making,

    My wife and I were told to expect a little shortness of breath due to the nerve block in my shoulder. I really felt fine until I got home and sat down in the recliner, *kicking the foot rest up and leaning way back*. When I first started having difficulties I thought “This is what they were talking about.” My wife was outside taking care of the chickens and by the time she came in (about 10 mins elapsed time) I knew I was in trouble. We live 15-20 mins from the hospital and if it had been 25 mins I’m not at all sure I would have made it My vitals were all off the charts.

    **I now know this is what kicked it into overdrive

  29. 29
    Another Scott says:

    @Ohio Mom: Your experiences were horrible. I’m sorry. :-(

    Yes, that’s what’s most infuriating about all this stuff. We know how to keep people from getting infections in hospitals. We know how to get people back on their feet as quickly as possible and to have as full a recovery as possible. We know how to improve patients’ quality of life and make nursing less of a debilitating death march for too many of those in the trenches. We don’t have to discover new physics or create some 22nd Century technology. We need to be willing to pay people better and give them time off, have more people employed, and apply science with all the zeal that administrators use now to cut costs.


  30. 30
    tobie says:

    @OzarkHillbilly: Sigh. Funny that the country that was the birthplace of Protestantism doesn’t have this perverse faith in the value of suffering for making you stronger. That’s truly the American conservative credo, with the caveat that it’s always those shiftless lazy others who need to suffer, not the CPAC attendees.

  31. 31
    Ohio Mom says:

    @Schlemazel: My lymphedema is very manageable (knock on wood, so far). One catch is, the compression sleeves and gloves — about $150 a set, and they only last six months — aren’t available from any in-network providers.

    The out-of-network deductible is I forget, one or two thousand. I’ll never meet it so I pay no attention. I sometimes wonder how many insurance company staff work to make sure no one is in-network.

    The same thing is mainly true of foobs (breast prothesis), it is hard to find an in-network provider, and those things can run $400. Fortunately, they seem to last forever.

    Meanwhile, surgery to replace a breast with an implant, is completely covered, thanks to a federal law. One type of surgery uses tissues from your belly/and or hips and can run a quarter of a million! It requires a stay in the ICU.

    The new breast had no sensation (that is, provides no sexual pleasure) and needless to say, no milk-producing capabilities. But you can wear low-cut shirts, which you can’t with a foob.

    What this says about our culture’s value system about women’s bodies I leave as an exercise for the reader.

  32. 32
    MattF says:

    @Ohio Mom: I’ve never heard of anyone having cataract surgery done in a hospital. Nor, for that matter, any of a half-dozen modern surgical eye procedures. Not like the old days, where post-surgical ‘immobilization’ after reattaching a retina was a euphemism for ‘nailing your skull to the wall for six weeks’.

  33. 33
    OzarkHillbilly says:

    @Schlemazel: I can laugh about it now. It was at the old City Hospital back from the days when I was desperately poor. I have an even worse story from the time I went to Regional Hospital (City’s replacement) with a collapsed lung. Wrote a darkly comedic story about that one, A Survival Guide to Public Hospitals.:

    “The first thing you want to do when you go to a public hospital is bleed. A lot. Something about the color red gets their attention. If however you have forgotten to disembowel yourself out in the parking lot, you will have to stand in the triage line with all the other non bleeding emergencies: A man with acute abdominal pain (he’s hungry), a woman with advanced upper respiratory infection (she has a cold), a child with uncontrollable shaking (he’s just cold). Finally when you reach the head of the line you will be confronted by a rathe large, hard bitten, black woman who looks like she sees more death and destruction in one year then they saw in all of the Vietnam War (she does).

    “What’s your problem?”
    Say you have a collapsed lung. You tell her.
    She says “Why do you think that?”
    You reply, “Because it feels like I got hit with a baseball bat.”

    She takes your vitals. All normal. “Yeah. Right.”

    She sends you off into the waiting room. It looks, sounds and smells like a Sarajevo market.” (this was during the Bosnian War)

    There was more, plenty more, not at all sure I could remember it all. I should try and reconstruct it, it was pretty good. Did it as a stand up routine for a while, always got a lot of laughs.

  34. 34
    raven says:

    Watch out for the “out of network” bullshit in the surgical centers. My anesthesiologist for my hernia surgery drilled me with his charge.

  35. 35
    Schlemazel says:

    @Ohio Mom:
    Yeah, the parts are a killer. I have to use 5-6 catheters a day and my share was ~$2 each plus extra for lube and antiseptic wipes (neither of which is covered at all by insurance). Two interesting things: it is possible to buy caths online for about $2 each but no insurance company will pay for them, they do claim to pay about $3 each to get them from a supplier that charges $5 each. I changed providers to the Federal employee plan & I am now paying about 50 cents per unit saving me about $400 a month for the same premium.

    Given that it is probably decided by men I can imagine the entire world of female medical decisions are f’ed up beyond hope. So much about breasts particularly is deeply tied to human psychology. I am sure some women would die if they had to wear foobies while others are OK with it. That surgery sounds like a horror show though and from my past experience the reward for that much risk would have to be huge.

  36. 36
    MattF says:

    @raven: Yup. Somehow, anesthesiologists get to send their own bills to patients. They seem to have an unfortunate propensity for double billing, but your insurance company keeps a watchful eye on them.

  37. 37
    OzarkHillbilly says:

    @raven: The surgical center that fucked up so badly my last time demanded full payment of all copays etc. in advance.

  38. 38
    Sister Rail Gun of Warm Humanitarianism says:

    @Ohio Mom: It wouldn’t be the first good idea* that was royally fucked up by the bean counters.

    I’m anticipating a nice argument this Tuesday when I go to talk about my sleep study results.

    *minimizing hospital stays to minimize the chance that someone contracts MRSA while at the hospital

  39. 39
    Ohio Mom says:

    @MattF: Yes,
    it would be silly to do a routine cataract surgery in a regular hospital. Which is why I was mystified when the opthamologist’s office staff told me they would have to file a special request because the out-patient facility they use isn’t on the list. They told me not to worry, they were sure it would go through, just a formality they had to warn me about.

    Other than the fact I deeply miss having fabulous near-vision in that eye, I rather enjoyed the surgery. Such a great light show.

  40. 40
    Schlemazel says:

    ERs are not much fun and that sounds like a new low in the genre.

  41. 41
    OzarkHillbilly says:

    @raven: @MattF: Oh yeah, and the anesthetist? For some reason< I never even got a bill from him. I wonder why?

  42. 42
    Ohio Mom says:

    @Sister Rail Gun of Warm Humanitarianism: Yeah, my husband hit several minor insurance snags with getting the right apnea machine set-up. Seems that different mask designs work better on different people, and the insurance company didn’t want to pay for trying different ones out.

    But it’s all good now. Being able to get a good night’s sleep improved his mood and outlook on life a lot. He ended up having to hang a hook up over the bed to hang the tube on. It doesn’t do much for the decor but we weren’t going to win any interior design awards anyway.

  43. 43
    OzarkHillbilly says:

    @Schlemazel: It was interesting, The WAC room (remember wac? gave people super human strength and drove them crazy) had the best entertainment. A bunch of us sat outside watching the patients come down from their highs and it got real exciting when the cops brought somebody new in. Bets were made as to how many it would take to strap them down and whether there would be blood or not.

  44. 44
    Ohio Mom says:

    @Schlemazel: Yikes, I had no idea of your daily routine. That’s a lot to take care of. I am humbled because my routines are as complicated as putting shoes on — fast and easy.

    $400 dollars a month is a lot of money — and your new company is still making a tidy profit. Republicans are right when they say no one knows what anything really costs but of course their solutions are anything but.

  45. 45
    grandpa john says:

    @Ohio Mom: When I had my cataract surgery last year it was at an outpatient clinic but the clinic was part of the hospital system. my heart catherizations and balloon angioplasties were done in the their special heart clinic set up for as an individual unit.For these they usually keep you for one night, primarily so they can keep an eye on the plug to make sure it doesn’t come out, you wake up with about 20-25 pounds of sand in a bag laying on your groin

  46. 46
    grandpa john says:

    @Ohio Mom: Yes, been there also, My face is thin,not much meat or flab, so full or partial face mask tended to leak. I finally wound up using a nasal type mask which works much better and amen about the getting a full nights sleep aided with some sleep medication.
    my apnea was so bad that as soon as I want to sleep, I stopped breathing.
    which soon put me in the hospital

  47. 47
    Bonnie says:

    I had a knee replacement about 2009; and, it is one of the things I regret the most in my life. It was so horribly painful. I was in the hospital for five days; then, in a rehabilitation facility for two weeks. I cannot even comprehend how horrible it would be as outpatient. On a scale of one to ten, the pain was about 143. It was quite painful for about a year and a half afterwards. It is still troublesome to this day. Worst decision I ever made. My other need is very painful; but, it is all mine. I plan to go to my grave with at least one of my own knees. No one could ever convince me to go through that again. Never.

  48. 48
    Sister Rail Gun of Warm Humanitarianism says:

    @Ohio Mom: I’m not anticipating any trouble from my insurance. I think this new sleep doc is nuts for wanting me to do a bipap test.

    I’m currently renting an AirSense 10 Elite, and it says my AHI is ~1 every night. He says they couldn’t get my AHI under 5 during the standard test. The data conflict is setting off alarm bells.

  49. 49
    Ruckus says:

    Sorry about the bad knee job.
    I worked with a woman who had 2 bad knees and got both of them replaced at the same time. She had been in so much pain and had to walk with canes that almost anything would be an improvement. For her it was a vast improvement. She was in her mid 40s at the time. I’ve known a few people with knees and hips replaced, some also quite young for this, two of them NFL players. My ortho would not replace my left knee because of my age, it was damaged in an accident and I’ve lived 22 more years with the OEM product. It is getting to be worse now that entering geezerdom is behind me and the right one is almost as bad but I”ll live with what I’ve got for as long as I can. Same with the hip, my right one has had a problem for 61 yrs and bothers me a lot some days, a medium amount most days and every once in a while is just annoying for a few days. I’ve got enough other health issues to think about, thank you very much.

  50. 50
    Juice Box says:

    I got a new knee last month. They said that I could go home after 24 hours, but since I was still vomiting from the anesthesia, I chose to stay. Otherwise, they had me up and walking a few hours after the surgery and then I got home PT three times per week for three weeks and then outpatient PT. I could see going home after the surgery just like an appendectomy, if it hadn’t been for the post-anesthesia issue. All told, it was pretty easy, but I chose the factory approach; a surgeon who replaces knees and hips only and a big city hospital with a dedicated joint replacement ward. I was a uniform product being stamped out by a fully automated machine. I thought it was great. They were so persnickety about infection that their rate is half the national rate too.

    The pain was pretty terrible the first couple of weeks even with those dreadful opiates that don’t seem to be making me into an instant addict. The first time that I slept through an entire night was thrilling.

  51. 51
    Ruckus says:

    @Sister Rail Gun of Warm Humanitarianism:
    What if instead of being nuts, your doc is right?
    I’m not saying to blindly trust docs, I had a very, very good friend who passed this year because of a doc making a mistake that I know better than to do. But, and it’s a big, firm, round but, they are trained to not only understand the obvious and not look for zebras (unless you live around zebras all the time) but rather the more common things. But every once in a while what they are looking at is a zebra, not a horse. They have to be open to that as well, just not always anticipating them. Take for example, me. I have essential tremor. I shake a lot unmedicated. There is a medicine that has been prescribed for almost 70 yrs that works fine, except for the horrible hallucinations. These happen in less than 1% of patients. My doc, 60+ yrs old had never seen this and told me I had to get used to it. I told him in no uncertain terms, no. He is no longer my doc. But he couldn’t believe it because it was so out of the ordinary. Sometimes that thing that looks like a horse with stripes, is a zebra.

  52. 52
    Ruckus says:

    @Juice Box:
    If you are in true pain the opiates don’t normally turn you into a junkie. And it is easy to stop taking them when the pain subsides. It’s when you keep taking them because you feel nothing that is a problem. I was on one of the lesser known ones for a couple of months and yes my pain was gone. But so was most of the world. I existed, people didn’t know I was on them and so the world was all fine. No, it really wasn’t. I stopped the drug and a day or two later the gray cloud of nothingness lifted. The pains are back and bothersome, but not nearly as bothersome as the grayness. I don’t have an addictive personality and got out early but many others are not so lucky.

  53. 53
    Sister Rail Gun of Warm Humanitarianism says:

    @Ruckus: He could be right. And I’m open to being convinced.


    I’m basically in the position of having conflicting opinions to decide between.

    I have a long history of doctors not only ignoring the zebra, but flat-out telling me there isn’t even a horse there. And sometimes pushing really, really hard for me to have procedures done at clinics that, it turned out, they had a financial interest in. And private sleep clinics almost always have associated medical equipment storefronts.

    And the cost difference between a CPAP and a BiPAP can be quite high.

    For that kind of money, it’s going to take a lot of convincing. And he’ll have to start with convincing me that the reports from my current CPAP are somehow wrong.

  54. 54
    MattF says:

    @Ruckus: Your first sentence is the accepted wisdom, but there’s considerable evidence now that it ain’t necessarily so. Turns out that the original study that came to that conclusion was not reliable. So, beware.

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