CMS Downsizes Bundled Payment Program for Joint Replacements

Home health agencies already partnered with hospitals may soon benefit after the Centers for Medicare & Medicaid Services (CMS) finalized a rule to incentivize hospitals to work with other post-acute providers for knee and hip replacement procedures.

Bundled payments will go into effect for 67 hospital locations for patients who undergo knee and hip replacement surgeries, CMS ruled Monday. This is fewer than the 80 originally floated. All post-acute care will be included in the episode of care, according to the rule.

For home health agencies, the ruling incentivizes coordinated care, as hospitals are responsible for an entire episode of care, including the following 90 days after a discharge. Hospitals can benefit in the form of incentive payments once the episode of care is over if the cost of care is below a benchmark price. However, hospitals participating in the bundle payment models will have to pay a reconciliation fee should the amount exceed Medicare’s benchmark.


The replacement surgeries are the most common inpatient surgery type for Medicare beneficiaries with sometimes lengthy recovery and rehabilitation periods. Hospitalizations from hip and knee replacements reached $7 billion in 2014, according to the agency.

The new CMS model is a a way for the agency to test a significant shift toward new payment methods, though hospitals and post-acute providers will still utilize fee-for-service.

Bundled payments hold organizations financial accountable for an episode of care, according to CMS, and push the health care system toward a more coordinated delivery of care model between hospitals and home health agencies.


The new regulations will take effect January 15, 2016 and will become appiclable April 1, 2015, when the first model performance period begins, CMS stated.

Written by Amy Baxter

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