Last week the Department of Health and Human Services (HHS) proposed a new method of paying for health care services, using its authority under the Affordable Care Act (ACA) to scale up payment reforms that have been shown to save money while maintaining the quality of care.
In 75 metropolitan areas, Medicare will use “bundled payments” for hip and knee replacements -- meaning that every aspect of an intervention, from the surgeon’s work to the artificial joint to post-surgery rehab, will be covered in a single payment. Ultimately, providers will both share in any cost savings or risk penalties if there are cost overruns or quality falls short.
For the first time these payment changes will be mandatory. This is an important step in furthering the Obama administration’s goal to make most Medicare payments through alternative models (not fee-for-service) by 2018.
Starting with hips and knees for such mandatory changes makes sense because there is a wide cost variation for these procedures, but no evidence linking cost to quality. Furthemore, this...