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Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

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Medicare’s latest payment rules for joint replacement surgeries is another step forward on the path toward bundled payments and similar value-based reimbursement models 

By now, most clinical laboratory managers and pathologists know about an ambitious new Medicare program that essentially brings a value-based reimbursement model to joint replacement surgeries. The program has already commenced in a number of regional markets across the United States.

This new program was instituted by the U.S. Department of Health & Human Services (HHS). It is mandatory program and reimburses providers for hip and knee replacements using a reimbursement model that further ties Medicare payments to quality or value metrics. This program was launched in 67 metropolitan areas.

Called the Comprehensive Care for Joint Replacement (CJR) model, it establishes a 90-day episode of care from the date of the replacement procedure. Hospitals remain accountable for all charges related to recovery and rehabilitation within this window.

Hospitals can receive a bonus if:

• patients recover quickly;

• their recovery is primarily home-based; and

• costs remain below a defined average price.

However, starting in the second year of the program, should complications occur or recovery happen slowly, hospitals could find themselves owing the difference to Medicare.

CMS Promotes Whole-Episode Coordinated Care

In a November 2015 press release, Patrick Conway, MD, principal deputy administrator and chief medical officer of CMS, stated, “This model is about improving patient care. Patients want high quality, coordinated care, not just for a day, but for an entire episode of care. Hospitals, physicians, and other providers who work together can be successful and improve care for patients in this model, and CMS will help providers succeed.”

Not everyone, however, agrees with this assessment. For example, Georgia Congressmen Tom Price, MD, and David Scott introduced HR 4848—the Healthy Inpatient Procedures (HIP) Act—seeking to delay enactment of the CJR model until 2018.

Congressman Price is cited in a March 2016 press release as saying the CJR model could lead to “tremendous risk and complexity for patients and health care providers.” Price goes on to say, “At the very least, a delay in implementation is warranted to give all involved time to better assess, review, and weigh the impact and consequences of this proposal and more adequately prepare so patients are protected.”

This concern is particularly relevant to pathologists and medical laboratories, because as reimbursement shifts toward value-based pricing and other bundled arrangements, labs will need to increasingly justify their portion of reimbursement payments to the other providers, including surgeons, physicians, physical therapists, hospitals, and other medical professionals.

Optimizing Value in the Era of Value-Based Care

In 2015, HHS announced a plan to shift up to 90% of traditional, or fee-for-service, payments over to alternative payment models and programs that emphasize quality or value. Such models include Accountable Care Organizations (ACOs), Hospital Value Based Purchasing, and the Hospital Readmissions Reduction Program.

Medicare’s new program for hip and knee replacements has begun to create new collaborations between medical device manufacturers and providers. For example, one way that hospitals are working to ensure that costs remain low during an episode of care is by partnering with medical device manufacturers.

Recently, Forbes highlighted how Stryker (NYSE: SYK), a medical technology company, is partnering with hospitals to customize implementation and improve quality of care, while reducing the overall cost of hip and knee replacements.

As more diseases fall under bundled reimbursement models, laboratories might find similar opportunities in partnering with in vitro diagnostic device manufacturers.

ProMedica orthopedic surgeon Karl Beer, MD, shows X-ray scans to hip surgery patients Jenifer Klostermeyer, (left) and Kathy Hosler (right). (Photo and caption copyright: Toledo Blade.)

ProMedica orthopedic surgeon Karl Beer, MD, shows X-ray scans to hip surgery patients Jenifer Klostermeyer, (left) and Kathy Hosler (right). (Photo and caption copyright: Toledo Blade.)

As increased emphasis is placed on the episode of care, preoperative care—such as fitness training and lifestyle changes—will play an essential role in helping patients achieve quick and complete recoveries. By working with hospitals to help assess health conditions and create treatment and lifestyle options, medical laboratories might find increased opportunities to leverage their services when it comes time to negotiate payments under this new bundled model.

As Medicare continues to refine its reimbursement methods toward bundled payment programs and pay-for-performance schemes, pathologists and clinical laboratories will find it increasingly important to justify their costs while competing with other physicians and medical professionals vying for their portion of the reimbursed funds.

—Jon Stone

Related Information:

Better, Smarter, Healthier: In Historic Announcement, HHS Sets Clear Goals and Timeline for Shifting Medicare Reimbursements from Volume to Value 

Comprehensive Care for Joint Replacement Model 

CMS Finalizes Bundled Payment Initiative for Hip and Knee Replacements 

Hip Replacement Surgery: A New, Cutting-Edge Technique

Medicare’s Bundled Fees Hit Knee, Hip Replacements 

Medicare Alters Payment Plan for Joint Replacement 

Hospitals Brace for New Medicare Payment Rules

New Medicare Payment Rules for Hip, Knee Replacements Take Effect Today

Comprehensive Care for Joint Replacement (CJR) Model Fact Sheet 

Bundled Payments Can Shape the Financial Futures of Pathologists and Clinical Laboratories

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