Managing Episodes of Care: Strategies for Orthopaedic Surgeons in the Era of Reform

Abstract

While the demand for hip and knee replacements is on the rise, reimbursement from public payers continues to decline. As Medicare experiments with payment reform strategies, such as the National Pilot Program on Payment Bundling outlined in the Patient Protection and Affordable Care Act (PPACA), orthopaedic surgeons will need to identify ways to cut costs, maintain quality measures, and manage post-acute care to survive in a changing marketplace. This article seeks to demystify the episode-of-care bundled payment methodology, provide a roadmap of what orthopaedic surgeons can do to participate in this demonstration project, and present strategies to mitigate the inherent risks. ### Fiscal Underpinnings In the last twenty years, orthopaedic surgeons have experienced declining Medicare reimbursement, with surgeon payments for total hip and knee replacement decreasing by 69% and 66%, respectively1. Without a permanent fix to the flawed Medicare sustainable growth rate formula, physicians’ reimbursement will continue to decline2. Medicare reimbursement is also a challenge for hospitals. Sixty-three percent of all U.S. hospitals have negative margins on Medicare patients, with one-quarter sustaining inpatient margins of –20% or lower3. As the U.S. population ages, a growing number of patients requiring total hip and total knee replacements will come from the Medicare population. Additionally, an estimated thirty-two million previously uninsured Americans will be insured under plans that reimburse at Medicaid or Medicare-equivalent rates under PPACA coverage expansions by 20144. Orthopaedic surgeons and hospitals will need to find ways to more efficiently treat this population to protect market share and achieve positive margins on Medicare payments. In an attempt to bend the cost curve, Medicare has begun experimenting with innovative payment methodologies that encourage coordinated, high-quality, and efficient care. Such methodologies are being tested as alternatives to the traditional fee-for-service arrangement criticized for rewarding the overuse and duplication …