Regulatory Affairs: CMS Adds Total Hips to ASC-approved List

Early this year, one of the first total hip replacements paid for by Medicare was performed on a woman in her late 80s at our outpatient surgery center. This was only possible because the Centers for Medicare & Medicaid Services (CMS) moved outpatient total hips to the ASC-approved procedure list for 2021. She was healthy but, because of her age, we made sure we got her in early in the day in case she needed more recovery time before we could safely send her home. The operation was a success and she's now living a more active and pain-free life.

We expect CMS's policy shift to let our surgeons replace the hips of about 200 other patients this year, about the same number of Medicare-funded total knees we did in 2020 when CMS added that procedure to the ASC-approved list. The migration of these procedures from inpatient hospitals to the outpatient arena benefits a segment of the population in our community who are in pain, a population our physicians are committed to serving. Surgery centers need to grow in order to sustain themselves long-term, so access to a new group of patients has been a welcome development.

We've proceeded with caution, knowing that more volume does not automatically equate to more profitability. Certainly, the influx of Medicare patients does not mean a windfall for total joints programs. Medicare's reimbursement for the procedure is lower than those of private payers, between $8,300 and $8,900 for total hips. With implant costs, supplies and other fixed costs, profit margins can decrease quickly if you don't manage your spend wisely. Yet, with good patient selection, efficient staffing and solid relationships with implant vendors, you can expect margins of about $2,500 to $3,500 per procedure. That's enough to turn a consistent profit and, with the right mix of private payer cases, grow your joints program.

Remember, the fundamental rules of running a reputable facility don't change. Not all Medicare beneficiaries will be healthy enough to have a total hip performed in a surgery center, as we generally discharge these patients about four hours after they leave the OR. Patient selection is more important than ever now that you'll assess for candidates for surgery with comorbidities that will disqualify them.

We're fortunate in that our surgeons have been performing total joints since 2014, including partial knee replacements that Medicare has covered for some time. This gave us a good background on how to run an efficient and cost-effective total joints program, one that was set up nicely to handle Medicare-funded cases. We also knew about the basic building blocks for clinical success: selecting the right patients, managing their expectations and effectively managing their post-op pain.

As we started to add Medicare total knee patients last year, and knowing that total hips were likely coming this year, our relationships with our vendors were vital to our success. We worked closely with them and got the assurances we needed that we'd see some reductions in implant prices and supply costs.

Our two joint implant vendors have been very good partners. They knew we had to get our costs down, so we secured lower costs at a capitated price for the implants we use in our Medicare and non-Medicare patients, implants that our doctors are confident putting into patients that are also affordable enough for us to sustain our business.

More volume does not always equate to more profitability.

One benefit of the influx of Medicare patients is the growth potential it provides. Our biggest issue has been not having enough space to take on more total joints cases. We're now in the middle of an $8 million expansion that should allow us to grow our capacity to 15 total joints procedures per day, up from our current daily cap of 10. We're adding 7,500 square feet of new space, much of which will be taken up by our increased sterile processing needs.

Our surgeons performed 587 total knees last year, and 176 of them — nearly a third — were new Medicare cases. That number would have been more than 200 had it not been for the eight weeks our facility shut down during the pandemic. We expect the same breakdown of total hip cases and predict half of our total joints caseload will be comprised of Medicare patients in a few years.

Cherry-picking private-payer cases won't help a surgery center that needs to keep growing its business. On the other hand, no center also wants to race to the bottom by taking too many lower-paying Medicare cases. We're part of the community, as are our surgeons who like practicing here and serving their patients. Our most important decision is making sure the patients we're treating are appropriate candidates to have their hips replaced in an ASC.

You can be successful with a mix of private and Medicare cases. You just have to be careful about patient selection and super-efficient. It all boils down to how good you are at managing your resources. OSM