New Medicare Policy Increases Pressure For Provider Payment Reform

July 10, 2015

With consensus building in the provider, carrier and purchasing communities that current fee for services payment systems incentivize transactions more than efficient cures, HHS's Centers for Medicare & Medicaid Services proposed paying hospitals fixed amounts for hip and knee replacements, two of the most common Medicare procedures, as an alternative to the traditional fee for service model.  Following a 60-day comment period, the proposal, if approved, will be launched January 1, 2016, and will apply to providers in 75 MSA regions across the country, affecting 800 hospitals and an estimated 100,000 patients per year.   Based on outcomes, bonuses would be available to providers that performed well while those that did not would be required to repay Medicare a portion of the costs.  The program would sunset after five years, though employers would hope that, during that period, there would be broader changes in the existing system.