OPPS Rule: Total Joint Changes Expected to Hit Hospital Finances Hard

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Original story posted on: July 17, 2017

The 2018 Outpatient Prospective Payment System (OPPS) proposed rule arrived Friday from the Centers for Medicare & Medicaid Services (CMS), coming in at 664 pages, which is not very long, based on history. Keep in mind that it is double-spaced, and the first 57 pages consist of the table of contents, the abbreviations used, and a summary of the proposals.

So, what’s in the OPPS proposed rule that we all need to know about? Well, the biggest news is that CMS will be taking total knee replacements off the inpatient-only list. I should say that they are proposing to remove it, since the rule is not finalized, but I think it is a done deal.

How will this affect us and our patients? Well, first of all, reimbursement is going to drastically change. If a total knee replacement is performed as an outpatient procedure, it will be paid under the ambulatory payment system (APC), with CMS assigning it to Comprehensive APC 5115, a level 5 musculoskeletal procedure with a base payment rate of about $9,700 in 2017 (2018 APC rates are not yet available).

But unlike an inpatient-admission, diagnosis-related group (DRG) payment – which includes additional funds added for medical students and resident education, uncompensated care, and the disproportionate share program, and is fully adjusted by the wage index – the outpatient APC amount is only adjusted for the wage index, and only at 60 percent of that sum. For example, New York Presbyterian Hospital gets approximately $23,000 for an inpatient total knee replacement, but if the procedure is performed as outpatient, it will get about $11,500. For many hospitals, joint programs are one of their most significant profit centers, so this is going to hurt.

But let me remind you that just because a surgery is not on the inpatient-only list, that doesn’t mean it can’t be performed as an inpatient procedure. We are going to need to get our orthopedists to start documenting much better if a patient is admitted as an inpatient.

First, since the surgery will no longer be inpatient-only, the two-midnight expectation will apply. That means the surgeon or another treating physician will need to document why the patient is expected to require two or more midnights of hospital care. This will likely be due to patient comorbidities, which will extend the hospital stay, or the surgeon’s need to monitor the patient’s immediate post-operative course more closely than would be possible in a lesser setting.

Then, in order for the patient to gain access to their Part A skilled nursing facility (SNF) benefit (if a SNF stay is warranted), the patient must require a third midnight in the hospital – and the surgeon or other treating physician must document why the patient needs to remain in the hospital for this third midnight.

Those patients who do require inpatient admission yet do not have medical necessity for a third inpatient day will be challenging for the hospital’s discharge planning team. It will be imperative that those hospitals that are not part of the Comprehensive Care for Joint Replacement (CJR) or Bundled Payment for Care Improvement (BPCI) programs to start now to improve their pre-surgery programs for total joint patients. Patients need to be carefully assessed for their anticipated post-surgery needs. If they are anticipated to be unable to return home after surgery, assessment to determine if they meet the requirements for admission and a three-day stay will need to be performed.

Hospitals may want to consider involving their physical medicine and rehabilitation physicians in those pre-operative assessments. They can not only work closely with the therapists to design a custom rehabilitation plan, but they can also assess the patient for eligibility for admission to an inpatient rehabilitation facility (IRF) after surgery. Although total knee replacement is not generally a qualifying condition for an IRF, there are extenuating circumstances that may allow it.

While the removal of total knee replacement from the inpatient-only list is a significant blow to hospitals, the good news for now is that CMS is still not going to allow the surgery to be performed at an ambulatory surgery center (ASC). When that happens, it is going to get really ugly for hospital finances.

But that point is potentially only 18 months away, because CMS also asked for comments on allowing total knee replacements to be added to addendum AA. Addendum AA is the list of surgeries that may be performed at ASCs. Since CMS is just now asking for comments, it cannot propose actually placing this on addendum AA until the 2019 OPPS proposed rule is released, and then it could become effective as of Jan. 1, 2019.

But there is more. Rather than taking two small steps, as it did with total knee replacement, CMS is going all-in with hip replacements. In the Rule, CMS is asking for comments to not only remove total and partial hip replacement from the inpatient-only list, but also to allow them at ASCs. That means there is the potential that by Jan. 1, 2019, the only patients who will be having knee and hip replacements in the hospital will be those who have multiple comorbidities and are going to have long, expensive stays – while the healthy patients will all go off to the ASCs.

Of much less interest but also worth noting is that CMS is proposing to remove radical prostatectomy (CPT code 55866) from the inpatient-only list. This surgery is most commonly done robotically, and the possible revenue drop from $12,000 to $23,000 per procedure as inpatient to about $7,000 as outpatient will be significant. But because the volume of prostatectomies is dropping, both due to the move to watchful waiting and to non-surgical forms of treatment when treatment is indicated, the overall revenue impact on hospitals will be less than that of the changes to the joint replacements.

There is also a much-welcomed two-year extension of the non-enforcement of direct supervision at small hospitals of under 100 beds, and a request for comments on what is known as the “14-day rule” for billing lab tests on patients who had procedures in a hospital.

The rule also asks for comments about allowing cardiac catheterizations and select electrophysiologic procedures to be done in ASCs; what is proposed would constitute a huge cut in reimbursement for medications in the 340B program, and if adopted, it is going to really hurt.

I am sure we will be hearing a lot more about that from others. 

Ronald Hirsch, MD, FACP, CHCQM

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays.

The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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