Are You Prepared for the Shift to Outpatient Total Knee Replacement?

Coauthored by Sg2 Vice President Kristi Crowe.

At Sg2 we’ve been projecting the impending shift of total joint replacement (TJR) to the outpatient setting for many years. In 2014 we identified outpatient TJR as a competitive risk, and we have been working with our members ever since to prepare them for this eventual new standard of care. Throughout this period, we’ve been waiting for indications from CMS that it too would take steps to accelerate this transition.

This past July, we received an important sign when CMS submitted a request for public comment regarding the removal of total knee arthroplasty (TKA) from its inpatient-only (IPO) list. This announcement does not alter projections from the Sg2 Impact of Change® forecast, as shifts in payer policy were factored into our calculations. In fact, this year we projected that over half of all primary knee replacements due to osteoarthritis would be performed in an outpatient setting by 2026. Organizations hoping to maintain their relevance in the total joint replacement market should undertake a rigorous assessment of their current environment and quantify their risk for losing market share and margin in the new orthopedic landscape.

Complications and Length of Stay for TKA Have Decreased
Each year CMS publishes revisions to the Medicare hospital Outpatient Prospective Payment System (OPPS) and the Medicare ambulatory surgical center (ASC) payment system. As mentioned above, this year CMS requested public comment regarding the removal of TKA from the IPO list—a list it has resided on for the last 16 years.

Continued developments in presurgical optimization, perioperative anesthesia, surgical technique and postoperative patient care have led to a significantly reduced length of stay and reduced complications for TKA patients. In its solicitation for comment, CMS noted that the average length of stay for “an uncomplicated TKA procedure” had dropped from 4.6 days in 2000 to only 2.8 days in 2016.  The factors contributing to the reduced LOS have also played a part in the increase in non-Medicare patients receiving their TKA procedures in a hospital outpatient department (HOPD) or ASC setting.

CMS Addresses Criteria for Inpatient-Only Inclusion
Historically, the primary criteria used to determine assignment of a procedure to the IPO list included: 1) the invasive nature of the procedure; 2) the need for at least 24 hours of postoperative care; and 3) the underlying physical condition of the surgical patient.

In 2013, CMS initially proposed removing TKA from the IPO list, but never finalized the recommendation after a majority of commenters declared that doing so would be unsafe for Medicare beneficiaries.

In its latest solicitation for comment, CMS addressed each of these criteria.

  1. Regarding the “invasive nature of the procedure” they noted that TKA differs from other procedures that “invade the brain, heart or abdomen” indicating that a more apt comparison may be the unicompartmental knee replacement procedure, which was removed from the IPO list in 2002.
  2. With regards to the need for at least 24 hours of post-op care prior to discharge, CMS pointed out that services furnished to patients requiring 24 hours of recovery time may be billable as either outpatient or inpatient services, depending on the patient’s condition.
  3. Regarding the physical condition of the patient, CMS stated that TKA candidates “are a varied group” in which length of stay is impacted by individual patient factors affecting appropriateness for outpatient vs inpatient surgery.

The removal of TKA from the IPO list is complicated by both the Comprehensive Care for Joint Replacement (CJR) model and Bundled Payment for Care Improvement (BPCI) initiative. Both of these retrospective bundled payment models from CMS place providers at financial risk for the full episode of care for these procedures as well as total hip arthroplasty (THA). In addition, they both require periodic reconciliation against target prices that are based on the historical costs associated with MS-DRGs 469 and 470. Permitting the healthiest TKA patients to have their procedures in the OP setting will significantly alter the risk profile of the remaining patients receiving an inpatient procedure. CMS is requesting comment to develop a methodology to adjust their BPCI and CJR target prices if the IPO designation is removed.

Sg2 Forecasts Significant OP Shift by 2026
As mentioned above, Sg2 projects that 52% of all primary knee replacements (including unicompartmental knee replacements) due to osteoarthritis will be performed in an outpatient setting in 2026. Initially, the majority of outpatient TKA will likely take place in HOPDs due to a more favorable reimbursement climate and resource and safety concerns. However, unless hospitals come up with effective strategies to retain these volumes, factors such as independent surgeon ownership of ASCs, rising consumer demand for affordable pricing, and pending site-neutral legislation will lead to much of these volumes moving to ASCs.

Prepare for a Shift in Your System of CARE
CMS policy is only one of many variables to consider when assessing your organizational risk related to the OP shift of TKA procedures. The confluence of these factors varies by market, affecting both the intensity and pace of the transition. However, you can start preparing today with the following key steps:

  • Identify the demographic profile of your inpatient TKA population that has been labeled outpatient-eligible in your market. If you lack this information, evaluate similar criteria for TKA patients with lengths of stay of 1 or 2 days.
  • Understand the factors influencing outpatient eligibility, such as age, payer, body mass index and other comorbid conditions, and work with your surgeons to establish patient selection guidelines before authorizing a major shift of cases to the outpatient setting. Or consider pilot programs that include only American Society of Anesthesiologists Class I patients.
  • Evaluate your System of CARE for opportunities to influence presurgery factors to increase the odds of outpatient eligibility. For factors that can’t be influenced, such as age and insurance carrier, target marketing efforts to populations more likely to be eligible for the outpatient setting.
  • Leverage best practices learned in the inpatient setting and in ASCs to improve your surgeons’ experience in your HOPD—offer flexible scheduling and block time utilization, group elective procedures, and foster a predictable OR experience.
  • Solicit input from your surgeons to understand their comfort and interest in transitioning TKA patients to the OP setting.
  • Understand the dynamics of the independent orthopedic surgeons in your market.
    • Evaluate their appetite and capacity for ASC ownership.
    • Calculate the financial risk of losing significant orthopedic business to an independent facility.
    • Determine whether an advanced financial relationship with your surgeons would be an effective way to maintain or grow TKA volumes and market share.
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