Published 1/1/2017
Kent Jason Lowry, MD; Peggy L. Naas, MD, MBA

Orthopaedic Opportunities and Hospital Value-Based Payments

With the shift in health care from volume to value, orthopaedic surgeons have opportunities to improve patient care and leverage aligned financial incentives among providers. The care that orthopaedic surgeons provide directly affects how Medicare payments are allocated to hospitals. It is important, therefore, to understand how hospitals are incentivized. This understanding can lead to clinical improvement projects, metrics for co-management of patient care, and techniques for risk sharing.

The Centers for Medicare & Medicaid Services (CMS) began paying and rewarding hospitals based on the quality of care provided even before value-based physician reimbursement models such as the Medicare Access and CHIP Reauthorization Act (MACRA), Comprehensive Care for Joint Replacement Model (CJR), and Bundled Payments for Care Improvement (BPCI) initiative came on the scene. CMS uses the following quality reporting programs for determining hospital payments:

  • Hospital Value-Based Purchasing Program (VBP)
  • Hospital Readmissions Reduction Program (HRRP)
  • Hospital Acquired-Condition Reduction Program (HACRP)

All hospitals except children's hospitals, critical access hospitals, and Veterans Administration hospitals are paid through these quality and value-based programs. This article provides an overview of these CMS quality-reporting programs. But first, it is important to understand two orthopaedic quality measures used, or being considered for use, in select programs.

CMS/NQF Measure #1550: Hospital-level risk standardized complication rate
National Quality Forum (NQF) measure #1550 estimates a hospital-level risk-standardized complication rate associated with elective primary total hip arthroplasty (THA) and total knee arthroplasty (TKA) in patients aged 65 years and older. The measure uses Medicare claims data to identify complications occurring from index admission up to 90 days later. The defined patient population for this measure (the denominator) includes admissions for patients at least 65 years of age undergoing elective primary THA and/or TKA procedures. Excluded patients are those who were discharged against medical advice or who had more than two THA/TKA procedure codes during the index hospitalization. It is important to note that if a patient has two qualifying THA/TKA procedures in the same year, the measure randomly selects one index admission per patient per year for inclusion in the cohort.

From this defined patient population, NQF #1550 seeks to measure any complication occurring during the index admission (not coded present on arrival) to 90 days after that admission (Table 1). The complication outcome is dichotomous (yes/no). If a patient experiences one or more of these complications during the applicable 90 days, the complication outcome for that patient is counted in the measure as a "yes."

Under 2016 Measure updates: THA/TKA complication, definitions of acute myocardial infarction, sepsis/septicemia, pulmonary embolism, and death are self-explanatory. However, other definitions are worth highlighting. Pneumonia, for example, includes bacterial, viral, fungal (defined as other specified organism), influenza, pneumonitis due to inhalation of food/vomitus, or post-procedural aspiration. Surgical site bleeding is defined as hemarthrosis, hemorrhage, hematoma, or seroma, combined with a procedure code for "control of hemorrhage, NOS [not otherwise specified]" or incision with drainage.

As expected, mechanical complications include loosening, dislocation, and other mechanical complication of other internal orthopaedic device, implant, and graft. It is worth noting that this category defines a periprosthetic fracture as a mechanical complication. The infection category includes any revision or component replacement procedure that occurs in combination with an infection/inflammatory reaction due to an implant, wound disruption, infected seroma, fistula, or nonhealing surgical wound.

CMS/NQF Measure #1551:  Hospital-level risk standardized readmission rate
Unlike a conventional process measure, NQF #1551 does not report a traditional numerator/denominator ratio. Instead it calculates a ratio of the "number of 'predicted' to the number of 'expected' readmissions, multiplied by the national unadjusted readmission rate." To clarify, NQF #1551 notes that "it conceptually allows for a comparison of a particular hospital's performance given its case-mix to an average hospital's performance with the same case-mix. Thus a lower ratio indicates lower-than-expected readmission or better quality and a higher ratio indicates higher-than-expected readmission or worse quality."

The outcome (traditionally the numerator) captured by this measure is a readmission following primary TKA or THA to any acute care hospital for any reason occurring within 30 days of the discharge date of the index hospitalization. Planned (elective) readmissions, such as performing a second primary total joint arthroplasty (TJA) within the 30-day window are not counted as a readmission. The target population for this measure, the denominator, is similar to NQF #1550 and includes all patients older than age 65 undergoing primary THA or TKA.

Denominator exclusions for this patient population are more specifically defined than they are for NQF #1550. Patients with the following are excluded: hip fractures, revision procedures, partial hip arthroplasty procedures, resurfacing procedures, and mechanical complications included in the principal diagnosis. In addition, patients transferred to the index hospital, and those who are admitted for the index procedure and subsequently transferred to another acute care facility, leave against medical advice, have three or more THA/TKA procedure codes during the index hospitalization, or die during the index procedure are also excluded.

Under the Hospital VBP Program, CMS calculates a VBP incentive payment percentage for a hospital based on its total performance score for a specific performance period. The total amount available for value-based incentive payments for a fiscal year (FY) is equal to the total amount of the payment reductions for all participating hospitals. For example, in FY 2017, the available funding pool for value-based incentive payments is 2 percent. For each payment year, CMS specifies a VBP measure set as well as a baseline and performance period for each measure.

Payment adjustments beginning for patient discharges after Oct. 1, 2018 (based on discharge data currently being collected) are projected to include THA and TKA patients as a specific outcomes category within the clinical care domain—specifically, the measure Hospital-level risk-standardized complication rate following elective primary total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550).

Other VBP measures that reflect the care of the orthopaedic patient include catheter-associated urinary tract infections and other healthcare-associated infections.

Impact of VBP on TJA
CMS is moving forward with including TJA patients in its quality and pay for performance programs. In addition to programs such as CJR and inclusion of TJA complication and readmission measures into CMS's "hospital compare" website, VBP has begun its entry into joint replacement measurement. Recent updates for the hospital-based VBP program include TJA in FY 2019. As a result, the VBP program is actively collecting data related to hospital-based TJA care performed between July 1, 2015 and June 30, 2017. Although financial penalties are more than 3 years away, data collection for these parameters is currently underway and performance goals are yet to be determined. To achieve success with this measure, it is imperative that frontline treating providers understand the details of the measure.

For FY 2019, VBP will include the hospital-level risk-standardized complication rate (NQF measure #1550) following elective THA and TKA. This measure was developed by CMS and is currently being implemented with the CJR program. It was submitted to, and approved by, NQF on Jan. 31, 2012, and underwent annual updates in 2013 and 2014. According to the NQF website, it is currently in an open public comment period.

Effective in FY 2013, the HRRP reduces payments to applicable hospitals with readmissions exceeding an expected level. The payment reductions are based on a formula that compares each hospital's payments for actual readmissions to payments based on an estimate of that hospital's expected readmissions. For orthopaedic surgeons, this means that postacute treatment outcomes of TJA patients directly influence hospital payment for every diagnosis-related group. Excess readmission rates of patients who have undergone total knee and hip replacements have been added to readmission rates of patients diagnosed with acute myocardial infarction, heart failure, pneumonia, and chronic obstructive pulmonary disease.

Effective in FY 2015, the HACRP requires CMS to reduce hospital payments by 1 percent for hospitals that rank among the lowest performing 25 percent with regard to hospital-acquired conditions. The payment adjustment results in the applicable hospitals receiving 99 percent of the payment that would otherwise apply. All the measures overlap with VBP, but with a different scoring method. In HACRP, each hospital is directly compared and performance-ranked to others in this group. This is another opportunity for shared improvement and aligned incentives for orthopaedists and their hospitals.

Looking to the future
As healthcare reform continues to evolve, CMS is further scrutinizing, through its value-based payment programs, the care orthopaedic surgeons provide. This increased scrutiny represents opportunities for orthopaedic surgeons to leverage these data points and performance measures not only to improve patient care but also to align with their hospitals in co-management or risk-sharing relationships. 

However, to be successful with these performance measures, orthopaedic surgeons need to understand how outcomes affect the measures as well as the effects of patient-reported experiences of care within these programs. In addition, surgeons who participate in the initial data collection period for a newly implemented measure may proactively improve the care provided to patients, rather than waiting for the data to be reported and financial penalties to be applied.

Kent Jason Lowry, MD, is a member of the AAOS Performance Measures Committee. Peggy L. Naas, MD, MBA, is a member of the AAOS Performance Measures Committee and the AAOS Committee on Evidence-Based Quality and Value.