On November 1, 2017, the Centers for Medicare & Medicaid Services (CMS) announced the removal of total knee arthroplasty (TKA) from the inpatient-only list. The calendar year (CY) 2018 Hospital Outpatient Prospective Payment System (OPPS) final rule marks the early stages of shifting more clinically appropriate procedures to an outpatient setting and will affect providers in a number of key ways:
- Reduced reimbursement of approximately 20 percent from inpatient to outpatient setting. Current Procedural Terminology (CPT) code 27447 will be reported for TKA. The outpatient surgical procedure will group to comprehensive APC 5115 (Level 5 Musculoskeletal Procedures) with status indicator J1. The single payment for a primary service and payment for all adjunctive services reported on the claims will be packaged into payment for the primary service.
- Decreased inpatient volume for a subset of Medicare beneficiaries who meet certain patient selection criteria for outpatient procedures.
- Increased attention to documenting medical necessity for inpatient TKA. CMS will prohibit the Recovery Audit Contractor reviews of patient status for TKA procedures performed in the inpatient setting for a period of two years to allow providers to gain experience.
- The two-midnight rule will remain in effect for inpatient TKA procedures.
- Discharging to skilled post-acute facilities will be problematic for patients who have outpatient procedures, as they’ll fail to satisfy the three-day inpatient stay requirement.
- Patient selection criteria will become a focus area for clinicians evaluating the reasonableness of performing the TKA in an outpatient setting.
- The effect on patient mix may negatively affect payment models such as Bundled Payments for Care Improvement (BPCI) and the Comprehensive Care for Joint Replacement (CJR) initiatives. Removing the healthiest (lowest-cost) patients from a particular Alternative Payment Model population without rebasing target prices will negatively distort reconciliation for providers.
- The change may signal commercial payors to implement new coverage policies before providers are fully prepared.
Hospital leaders should begin preparing for this transition by reviewing historical TKA volumes and the effect of reduced reimbursement for procedures performed in an outpatient setting. It will be crucial to engage orthopedic surgeons in strategic discussions and action plans. Alignment with physicians will be needed to capture outpatient TKA volumes and help lessen disruptions in the delivery and reimbursement models for the future of orthopedics.
Clinical documentation improvement specialists should closely monitor physician documentation to support medical necessity on admissions that are considered short stays (one day).
For more detailed information regarding the CY 2018 OPPS final rule and the financial effect it may have on your health system, please contact Eric Rogers or your local BKD advisor for guidance.