Saying it's overpaying for inpatient hip and knee replacements, CMS is proposing a 5-year bundled-payment initiative that would put the onus on hospitals in 75 geographic areas to contain costs for lower-extremity joint-replacement.

Medicare paid more than $7 billion for more than 400,000 hip and knee replacements in 2013, according to CMS, with the average cost across geographic areas ranging from $16,500 to $33,000. In some areas, it says, complications such as infections and implant failures were more than 3 times as common.

Under the proposed 5-year payment model, hospitals "would be held accountable for the quality and costs of care … from the time of the surgery through 90 days after discharge," says CMS. This, it says, would provide "an incentive to work with physicians, home health agencies, and nursing facilities to make sure beneficiaries get the coordinated care they need."

The plan would go into effect on January 1, 2016, and cover hospitals in 75 locations, including areas as geographically and demographically diverse as New York; Los Angeles; Lubbock, Texas; and Fort Collins, Colo. Hospitals in these locations may qualify for an additional payment or be forced to reimburse Medicare for a portion of the costs, depending on the facility's quality and cost performance. Healthcare providers would continue to be reimbursed under the current Medicare model, according to the release.

The full list of targeted areas appears on Pages 58 and 59 of the proposed rule.

The proposed rule will be published in the Federal Register on July 14 and the comment period runs until Sept. 8.

"We are committed to changing our health care system to pay for quality over quantity, so that we spend our dollars more wisely and improve care for patients," says HHS Secretary Sylvia M. Burwell in a press release. "Today, we are taking another important step to improve the quality of care for the hundreds of thousands of Americans who have hip and knee replacements through Medicare every year."

Jim Burger