Hospitals may lose total joint replacements to ambulatory providers. Here's what they're doing about it.

Hospitals are weighing how to respond to growing interest in hip and knee replacement procedures delivered in outpatient settings, with some seeking a greater piece of the ambulatory surgical centers (ASC) market, while others wait and see exactly how CMS plans to approach the outpatient procedures, Harris Meyer reports for Modern Healthcare.

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A shift toward outpatient

Today, more than 200 ASCs provide outpatient joint replacements, according to Steve Miller, COO of the Ambulatory Surgery Center Association. Only about 25 ASCs offered such procedures just three years ago. 

Miller said an estimated one-quarter to one-half of total joint replacements could be done in outpatient settings, depending on the patient's health, weight, and home support. Further, he noted that "volumes are doubling year over."

While most U.S. knee replacement procedures are still done in inpatient settings, that could change if CMS moves forward with a July proposal for Medicare to reimburse total knee arthroplasty in hospital outpatient departments for 2018. CMS is seeking comments on the proposal until Sept. 11. The proposal came almost a year after a CMS advisory panel advised removing knee procedures from the inpatient-only list.

For hospital leaders, the shift brings financial concerns, as it could cost them "substantial inpatient revenue," Meyer reports. 

Hospitals weigh their options

Some hospitals are responding to what Meyer calls "the looming financial threat" by acquiring or forming joint ventures with ASCs. For instance, UnityPoint Health, which operates hospitals and clinics in Illinois, Iowa, and Wisconsin, in 2015 entered a three-way partnership with surgeons and Surgical Care Affiliates, which operates ASCs. Through the agreement, orthopedists perform hundreds of total joint replacements annually at the ASCs.

Elsewhere, for-profit systems such as Tenet Healthcare and HCA have acquired or developed ASCs of their own, Meyer reports. For instance, Tenet in 2015 acquired United Surgical Partners International, which is refining clinical processes at the three physician-owned hospitals it manages that participate in Medicaid's mandatory bundled-payment program for joints, USPI Chief Strategy Officer Marian Lowe said. "We have worked with patients, physicians and home-care agencies to have protocols in place to help patients recover effectively at home," she said.

But not every hospital is ready to make the shift—or convinced it's the right move for them, Meyers reports.

The American Hospital Association (AHA) has opposed outpatient joint replacement payment measures in the past but has yet to respond to the latest proposal. Joanna Hiatt Kim, the AHA's vice president for payment policy, said the association is "still in the early stages of talking to our members." She cited concerns around the prevalence of chronic conditions, limitations on daily living activities among seniors, and challenges managing pain.

Another concern for industry is how the outpatient shift would affect bundled payments. Hospitals participating in Medicare's mandatory and voluntary bundled payment pilots for total joint replacement are unsure whether CMS would adjust the payments to account for a higher proportion of sicker, higher-cost patients remaining in inpatient units while healthier individuals move to outpatient settings.

Kim said, "You'd be moving the easiest cases out of inpatient, and then your average expenses will look a lot higher." She added, "CMS needs to take action to make sure hospitals aren't penalized. We're troubled they didn't saying anything about that."

According to Meyer, CMS declined an interview request.

How many joint replacement cases might shift to the ambulatory setting?

Eric Fontana, who oversees Advisory Board’s Financial Leadership Council, told the Daily Briefing, "At the end of the day, we'll have to see if joint replacements are indeed removed from the inpatient only (IPO) list and how the market would react. When partial knee replacement was removed from the IPO list back in the early 2000s, the outpatient migration occurred fairly slowly, but it's a different time." 

Fontana added, "Our analysis of Medicare fee-for-service claims indicates that 48 percent of the nearly 275,000 total knee replacement cases without major complications performed in 2016 were for patients younger than 80 years of age, with no history of falls, cognitive impairment, or obesity, and without additional complications such as respiratory, heart, kidney, or liver failure. Theoretically, these types of patients could be candidates for an ambulatory procedure, but it's always a case-by-case proposition that would be left to the discretion of the medical team."

CMS has proposed $12,381 for inpatient uncomplicated total knee cases for 2018 and $9,913 for outpatient cases (Meyer [1], Modern Healthcare, 8/5; Meyer [2]; Modern Healthcare, 8/5).

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