TKA TKO: How 2018 OPPS Changes May Impact Your Hospital

2018 will prove to be a trying year for providers nationwide, as the planned Medicare reimbursement structure could drastically undercut hospital profitability. Although Medicare estimates that proposed total payments to OPPS providers will “be approximately $70 billion, an increase of approximately $5.7 billion compared to estimated CY 2017 OPPS payments,”[1] notably, these changes will alter reimbursement for total knee arthroplasty (TKA) by removing it from the Inpatient Only List (IPO) beginning on January 1st.

TKA and other joint procedures are vital sources of revenue for hospitals. For example, 431,199 TKA procedures were performed on traditional Medicare patients in 2015, and Medicare spent over $7 billion on joint replacements in 2014. With the removal from the IPO list, reimbursement for this procedure may be significantly reduced, with the impact felt hardest for academic medical centers, which currently benefit from DRG payments that include allocations for medical students/residents and are fully adjusted by the wage index. With the proposed changes, the outpatient ambulatory payment system (APC), which solely adjusts at 60% of the wage index, applies and could cut reimbursement by up to half. Not only does the move place the surgery under the regulatory guidance of the two-midnight rule, providers fear that these changes will expedite a future decision by CMS to pay for total joint replacements in ambulatory settings, potentially pushing these procedures out of the hospital into Ambulatory Surgery Centers.   

Further muddying the waters around this change, Medicare expects providers to develop evidence-based patient selection criteria that would stratify patients into one of two groups (hospital level of care expected to cross zero to one midnight vs hospital level of care expected to cross two or more midnights) based on such factors as age, comorbidities, functional status, access to assistance at home, pain control and risk of post-operative complications.  This is no small task and currently a greatly debated topic within the medical and utilization review community. While recovery audit contractor (RAC) review is prohibited during the first two years of the changes to allow hospitals to create compliant work flow protocols, the foundation of evidence and decision-making created during this period will be crucial in preventing denials and minimizing the risk of future audits. 

The decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and on general coverage rules. XSOLIS supports this decision-making process by scoring each individual case on both medical necessity and a Medicare-specific rules engine that lays the framework for evidence-based identification and selection of appropriate status for each individual case.

To learn more about how XSOLIS can support your organization through this transition, schedule a free consultation with our team.