The Growth Channel

3 orthopedic implications from the 2020 HOPPS proposed rule

by Elena Price, Nahiyan Khan, and Sebastian Beckmann

On July 29, 2019, CMS released the CY 2020 HOPPS Proposed Rule, which included payment updates to joint replacements. The rule proposes removing total hip arthroplasty (THA) from the inpatient-only list, making it eligible to be paid by Medicare in hospital outpatient departments (HOPDs). CMS is also considering adding total knee arthroplasty (TKA) to the ambulatory surgical center's (ASC's) covered procedures list, rendering it reimbursable in inpatient, HOPD, and ambulatory surgical center settings.

Learn 6 tactics to build a sustainable outpatient joint replacement program

Orthopedic providers must appropriately prepare for changes if the proposed rule goes into effect. To help, we've outlined three major implications planners should consider.

1. Prepare for operational impact.

The proposal continues a trend of regulatory changes that shift lower extremity joint replacement procedures out of the hospital setting. We responded to a similar challenge last year when CMS decided to remove total knee replacements from the inpatient-only list. Notably, the price differential for TKA was not drastically different across sites of care, with payments for TKA in the inpatient space averaging $12,330 and in the HOPD $11,960.

Rather than preparing for a drastic revenue impact, planners should be prepared for operational changes as a result of THA coming off of the inpatient-only list. While the impact of the potential regulatory change will vary by program depending on case mix, consider the infrastructural or care management investments a way to accommodate THA's shift to the HOPD.

2. Create an ASC strategy.

If TKAs are approved for the ASC setting, hospitals face the risk of losing cases to independent physicians who may decide to take the procedures out of the health system entirely. With 83% of ASCs at least partially owned by physicians and a 908% increase in ASCs offering total join replacements from 2014-2018, independent orthopedists have ample opportunity and incentive to take joint replacements to freestanding sites.

Planners can respond by assessing the appropriateness of building an ASC in order to retain TKA cases in the health system. Indicators of ASC readiness include the following:

  • An independent surgeon body, indicating a high risk of physician leakage;
  • High projected growth in joint replacement volumes, indicating that there would be enough joint replacement cases to break even on new ASC construction (link to MSP); and
  • Resources available to launch a freestanding site, including staff and facility capacity.

If ASC investment does seem to be appropriate, consider a joint venture to avoid the full cost burden of building a new freestanding facility. Not only would the joint venture provide access to additional financial and administrative resources, but it would also reduce competition for referrals from employed hospital groups. Health systems also may be able to retain a portion of the facility fee associated with the procedures performed in the joint venture.

3. Stay on top of planning efforts.

An assumption we've come across while researching the outpatient shift is that once a procedure is removed from CMS' inpatient only list, it will immediately shift to the HOPD, and once a procedure is approved for the ASC setting, it will quickly shift again. Fortunately, we've found that this is not entirely the case. For example, partial knee arthroplasty (PKA) was removed from the inpatient only list in 2002 and approved for the ASC in 2008. Five years after it was approved for the HOPD setting, only 8% of all PKA cases were being performed in the HOPD. Similarly, five years after PKA became ASC-eligible, just 8% of cases shifted to the ASC setting.

We did eventually see a spike in outpatient PKA cases, with an increase of 847% in outpatient Medicare PKA cases from 2005-2017. Inpatient Medicare PKA cases declined -19% during that time.

This shows that while CMS rules do not necessarily trigger immediate shifts in volumes, planners should be prepared for eventual volume impact. Although it may take several years to see a significant change, proactive preparation will help programs stay ahead of the curve.

 

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Our key takeaways form the 2020 HOPPS proposed rule

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In its new Hospital Outpatient Prospective Payment System (HOPPS) proposed rule for 2020, CMS proposed requiring hospitals to disclose the prices they've privately negotiated with insurers.

Here are the key takeaways of the 819-page rule, according to Advisory Board's Eric Fontana, Heather Bell, and Rachel Hollander.

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