I thought OP knees were approved by Medicare, why aren’t they in BPCI Advanced?


As of January 1, 2018, Total Knee Arthroplasty (TKA) is no longer on Medicare’s inpatient only (IPO) list. Many hospitals are working furiously to shift asmany total knees to the Hospital Based Outpatient Department (HOPD) as possible, even though physicians and their teams have not yet determined which of their patients are appropriate from a clinical perspective to receive OP TKA nor will Medicare perform Recovery Audit Contractor (RAC) audits for “appropriate” site of service for almost two years.

So, it came as a surprise that when the new Bundled Payment for Care Improvement Advanced (BPCI Advanced) was announced with three outpatient episodes of care, including some cardiac and spine episodes, total knee replacement was not an option. What’s going on here?  

The most obvious answer is that Medicare had just removed TKAs from the IPO list and does not yet understand what types of patients and how many of them will receive care in an HOPD. In fact, the BPCI Advanced rule states that “at this time, we expect that a significant number of Medicare beneficiaries will continue to receive treatment as an inpatient for TKA procedures.” As a result, Medicare really does not know the volume, mix and perhaps most significantly, the cost of patients receiving a TKA episode of care in an HOPD setting. Secondly, while total knees were removed from the IPO list, total hips, which makes up a sizable portion of DRG 470, remain on the IPO list.  

While there is not (yet) a TKA outpatient bundle, the fact that TKA was taken off the IPO list could have a significant negative impact on total joint replacement bundles if CMS does not act to mitigate that impact. Allowing low complexity (and presumably lower cost) TKA procedures to be performed in an outpatient setting removes lower cost cases, leaving only the more complex, higher-cost cases for the inpatient setting and included in the bundles. But the Target Price you must beat to generate financial savings (and avoid financial losses) is based on historical claims data that includes the lower cost TKA cases, potentially making it difficult to beat that Target Price.  

We saw a similar situation back in the early days of the original BPCI “classic” program with the Congestive Heart Failure (CHF) episode of care. Many hospital providers opted to participate in CHF bundles because they had a variety of initiatives to improve the care of those patients, particularly around readmission. Once Medicare began enforcing the two-midnight rule however, many CHF patients were held in observation status rather than immediately being admitted and triggering a bundle. As you might expect, the patients who were ultimately admitted (triggering bundles) were the most complex and expensive cases. Yet, the target prices for those bundles were based on a different population mix, including lower severity and lower cost patients. As a result, many, many participants dropped out of their CHF bundles once they realized that their patient mix would make it nearly impossible to reduce costs below the target price and realize savings. The same could be true for total joint replacement episodes in BPCI Advanced. CMS has stated that the case mix adjustment in the Target Price methodology will ensure that the patient risk profile present in the performance period is appropriately reflected in the Target Price. Given that risk score algorithms are not perfect, there is good reason to believe that the Target Price, based on historical claims and adjusted for current patient case mix, will not fully align with the episode severity and cost of the current patient population.  This is something we will be watching closely and we will advocate for appropriate changes to the target price calculation methodology as needed.

Bottom line, many orthopedic surgeons are beginning to treat some of their TKA patients in the outpatient setting, and this is a trend we can expect to see grow as Medicare looks to remove total hip replacements from the IPO list and potentially include physician owned ambulatory surgery centers as approved sites of service for both knee and hip procedures. Some believe this opens new opportunities for physicians to exert even greater influence in the care of their patients and in improving the total knee and hip replacement procedures. While this may ultimately prove to be true, it is important that we recognize the potential impact of this shift in settings to the BPCI Advanced program and advocate for Medicare to adjust for these changes quickly and appropriately.