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.
A "value-based" model is aimed at getting hospitals to keep closer tabs on patients post-surgery to make sure they're not back in the hospital due to an infection or another complication. The new model is supposed to get surgeons, physical therapists, primary care physicians, and others to cooperate more closely to ensure that the entire episode of care goes the way it should.
While the Centers for Medicare and Medicaid Services has run a number of pilots based on the same concept in the past, this month is the first time that the value-based model will be imposed on a large number of providers, even if it remains a small minority of the nation's hospitals.
A recent study by Avalere found that the new value-based model would put about 60 percent of the participating hospitals at risk for penalties, based on the average costs of their surgeries.
"Most past CMS initiatives have stimulated activity among early adopters, but the mandatory programs are CMS' attempt to bring the remaining hospitals into a value-based payment world," said Josh Seidman, senior vice president at Avalere Health. "For many of those providers sitting on the sidelines of alternate payment models, this new initiative will be a wake-up call."
Medicare's strategy is nothing new in the world of health care. Insurers have already struck deals with hospitals that tie payment to certain performance measures.
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