Medicare unveils new pay model for some surgeries

The Obama administration on Monday finalized a new way for Medicare to pay for hip and knee replacements that is part of a broader push to reward quality over quantity in healthcare. 

{mosads}Under the rule announced by the Centers for Medicare and Medicaid Services (CMS), hospitals will receive a financial reward if they perform well enough on quality and cost measures around the procedures, or on the flip side will have to pay some money back to the government if they don’t perform well enough. 

The idea is to move away from what is viewed as an inefficient system of paying individually for each service a hospital provides, and instead reward coordination and quality. 

The new system could save money by incentivizing hospitals to reduce the number of avoidable complications from the surgeries. 

“By focusing on episodes of care, rather than a piecemeal system, we provide hospitals and physicians an incentive to work together to deliver the best care possible to patients,” Health and Human Services Secretary Sylvia Burwell said in a statement. 

In January, Burwell announced the goal of basing 30 percent of Medicare payments off new systems rewarding quality and value by 2016, and 50 percent by 2018. 

Hip and knee replacements are the most common surgery for Medicare patients admitted to hospitals, with over 400,000 procedures costing over $7 billion last year, CMS says. 

The average cost to Medicare varies widely under the current system, from $16,500 to $33,000 in different geographic areas. 

The new model applies to 67 geographic areas across the country. 

CMS says it incorporated some feedback in order to give hospitals more time to adjust to the new system, including limits on how much hospitals could have to pay the government back in the early years of the program.