After years of dithering over ways to transition from Medicare's "fee-for-service" payment model, the massive federal health program is finally taking a crack at outcome-based payments in a very limited set of circumstances.

Beginning this month, around 800 hospitals will be reimbursed for knee and hip replacements based on what happens to the patient in the three months following the operation.

The new model demands that hospitals keep the costs of a 90-day "episode of care" under $25,565. Hospitals that fail to keep costs below this point will be subject to financial penalties.

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