Case Management

Questions about knee and hip bundled payments

Case Management Insider, December 15, 2015

On November 16, CMS released a final rule that bundles acute care payments for knee and hip replacement surgeries, the most common type of inpatient surgery for Medicare beneficiaries.

Doctors performed more than 400,000 procedures on Medicare patients in 2004, which resulted in $7 billion in associated hospital stays. CMS decided to implement the bundled payment to improve the quality of these procedures, which officials say vary greatly from one hospital to another.

The change has prompted many questions, so we reached out to Ronald Hirsch, MD, FACP, CHCQM, vice president, regulations and education group, for AccretivePAS in Chicago for some clarity.

Q: Does this change essentially create an accountable care organization for knee and hip patients? If there is a readmission, is this a situation where CMS will say, “Too bad, you already got your payment”?

Let me start with a big clarification. This rule does not create a situation where the hospital is getting a bundled payment and dividing it all up. Every provider bills and gets paid individually for his or her approved amount. Then at the end of the year, CMS looks at how much was spent compared to how much was expected to be spent and if less was spent then the hospital gets a check and can divide it up among collaborators with whom it has agreements.

Readmissions are handled the same way as always; you get paid the full diagnosis-related group amount and then the readmission can lead to a penalty the next year in the readmission reduction program. A readmission costs are added to the per episode cost for that surgery patient and you lose again.

Q: How would patient choice be honored under this change? It seems the patient already chose the facility when he or she chose the surgeon, unless a hospital has more than one skilled nursing facility (SNF). If a hospital doesn’t have more than one SNF and the patient doesn’t want to go to the one that is available or doesn’t meet that SNF’s criteria, would the hospital need to pay another SNF?

Patients still must be offered choice. You cannot force a patient to go to a SNF with which you have a collaborative agreement. Remember that you get paid for every service as fee for service and there is reconciliation at the end where they compare you to your target price. It is not the hospital having to pay all the bills.

Stay tuned for more questions and answers on this topic in next week’s Case Management Insider. Got additional questions about the rule and what it means for your organization or on any other case management topic? Send them to Kelly Bilodeau at and we’ll have our experts answer them.


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