We will be performing site maintenance on AAOS.org on March 25th from 7:00 PM – 10:00 PM CST which may cause sitewide downtime. We apologize for the inconvenience.


Published 8/1/2019
Jeffery D. Angel, MD, MFin

Issues Loom Over Recent CMS Decision

Removing TKA from CMS’ inpatient-only list has unintended consequences

Total knee arthroplasty (TKA) was removed from the Centers for Medicare & Medicaid Services’ (CMS) inpatient-only (IPO) list on Jan. 1, 2018. Medicare now permits a hospital to bill for a TKA as either an inpatient (IP) or outpatient (OP) procedure and is proposing to permit the procedure to be performed and reimbursed in an ambulatory surgical center in the recently released 2020 Outpatient Prospective Payment System (OPPS) proposed rule.

What is the financial impact of billing a procedure as IP versus OP for stakeholders?

  • Patients: Out-of-pocket expenses will be greater most of the time for Medicare outpatient TKA. When the procedure is billed as OP, the patient is responsible for paying a potentially greater number of copays. OP medications can be a problem if the hospital pharmacy is not in network for the patient’s Part D plan. Patients are not eligible for skilled nursing facility stay payments following OP surgery. Table 1 summarizes the financial impact on patients.
  • Surgeons: There is a cost associated with increased administrative and documentation time required to certify admission status to a hospital. The work of a surgeon and his or her staff is greater with rapid discharge and surgery in the OP setting. Surgeons involved in CMS bundled payment programs are affected because healthy OP patients are not included in the Bundled Payments for Care Improvement (BPCI) Advanced or Comprehensive Care for Joint Replacement (CCJR) programs. (Update: Starting in January 2020, BPCI Advanced will include outpatient TKA episodes.) The exclusion of younger and healthier patients negatively affects both quality and cost data, which are net negative for surgeons in those programs. Table 2 shows the impact on surgeons.
  • Hospitals: The average reimbursement for hospitals will be less for an OP procedure—an estimated $2,000 less (up to $4,000 depending on the geographic area of the hospital and teaching status). This cut is despite most patients receiving the same care in the same places. Hospitals with high Medicare volumes will be subject to disproportionally more negative margins. Specific base payment rates for hospitals are shown in Table 3.Unexpected and/or unanticipated consequencesMany Medicare Advantage payers default admission status to OP, as reported by AAOS fellows. It was expected that there would be no more documentation burden for surgeons. However, in a 2018 survey by Yates et al., 59.9 percent of American Association of Hip and Knee Surgeons (AAHKS) member respondents stated their hospitals had instructed them to default all TKA surgeries to OP status. Hospitals have had increased denials with additional administrative workload.

OP total joint procedures are excluded in CCJR and BPCI Advanced programs. (Update: Starting in January 2020, BPCI Advanced will include outpatient TKA episodes.) This excludes younger and healthier patients who qualify for OP surgery from the panel of patients for both quality calculations and cost data. Some surgeon members on the Board of Councilors think that CMS and payers will see movement of the procedure off the IPO list as a simplification of the procedure. This, in turn, could trigger reevaluation of the work value for surgeons performing TKA.

This payment policy change affects local hospital profitability if there is a substantial Medicare population of patients having TKA. Gainsharing arrangements in comanagement models between physicians and hospitals could be reduced in some cases because of reductions in hospital reimbursement. This decrease in reimbursement occurs in conjunction with increasing costs to surgeons for pre-procedure optimization and post-discharge care coordination. Margins at rural, urban, and smaller hospitals may be impacted negatively enough to affect viability.

Medicare update and clarification

On Jan. 24, after consultation with AAOS, CMS rereleased a special MLN Matters article, “TKA Removal from the Medicare IPO List and Application of the 2-Midnight Rule.” The article stated that Medicare does not dictate a patient’s hospital admission status and has no default.

The document added, “CMS continues its long-standing recognition that the decision to admit a patient as an IP is a complex medical decision, based on the physician’s clinical expectation of how long hospital care is anticipated to be necessary and should consider the individual beneficiary’s unique clinical circumstances. IP stay can be justified when the patient stays less than two nights if the physician considers complex medical factors, including but not limited to: patient’s history, comorbidities, and current medical needs; severity of signs and/or symptoms; [and] risk of adverse events.”


AAOS and AAHKS were instrumental in helping CMS clarify that admission status for TKA is still controlled by the surgeon. CMS confirmed there is no default admission status and that surgeons are the experts in determining patient admission status. Documentation of comorbidities will help justify admission status when patients are discharged before two nights.

Opportunity exists to create an admission status guideline or tool that can be universally adopted by hospitals and providers to remove the uncertainty surrounding admission status. It behooves surgeons and hospitals to update their documentation standards to include risk assessment, severity assessment, social determinants, and indications for total joint replacement. CMS confirmed that there would be no Recovery Audit Contractor audits through Dec. 31.

There is still concern that the total amount of work performed by a surgeon is greater with OP surgical episodes, despite lower net reimbursement for all providers. There is also the issue of Medicare patients having to pay more out-of-pocket copays, while spending less time in a facility. For younger populations, OP total joint surgery is safe and provides value. However, when considering the removal of more Medicare patient procedures from the IPO list, such as total hip arthroplasty in the 2020 OPPS proposed rule, CMS needs to be influenced and informed by orthopaedic clinicians and AAOS. The monetary policy changes must consider clinical, financial, social, and administrative implications to all stakeholders. All stakeholders should participate and influence any future decisions and implementation regarding removal of Medicare procedures from the IPO list.

Jeffery D. Angel, MD, MFin, is a Board-certified orthopaedic surgeon who practices at White River Orthopaedic and Sports Medicine Clinic in Batesville, Ark., and has extra qualification in sports medicine, as well as a master’s degree in finance. Dr. Angel is an adjunct associate professor in the Department of Orthopaedic Surgery at the University of Arkansas for Medical Sciences. He is an AAOS liaison to the American Society of Anesthesiologists Perioperative Surgical Home.


  1. American Association of Hip and Knee Surgeons: Position Statement: Removal of Total Knee Arthroplasty from the CMS Inpatient Only List. Available at: http://www.aahks.org/position-statements/removal-of-tka-from-ipo-list/. Accessed July 12, 2019.
  2. Centers for Medicare & Medicaid Services: Total Knee Arthroplasty (TKA) Removal from the Medicare Inpatient-Only (IPO) List and Application of the 2-Midnight Rule. Available at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE19002.pdf. Accessed July 12, 2019.
  3. Kee J, Edwards P, Barnes C, Foster C, Mears S: After-hours calls in a joint replacement practice. J Arthroplasty 2019;34:1303-6.
  4. Medicare Interactive: Outpatient Hospital Basics. Available at: https://www.medicareinteractive.org/get-answers/medicare-covered-services/outpatient-hospital-services/outpatient-hospital-basics. Accessed July 15, 2019.
  5. Ravinsky M, Looby S, Zacchigna L: The Shift to Outpatient TKA—What’s the Big Deal? Available at: https://www.veralon.com/wp-content/uploads/2018/07/The-Shift-to-Outpatient-TKA%E2%80%94-What%E2%80%99s-The-Big-Deal_July18-1.pdf. Accessed July 15, 2019.
  6. Shah R, Karas V, Berger R: Rapid discharge and outpatient total joint arthroplasty introduce a burden of care to the surgeon. J Arthroplasty 2019;34:1307-11.
  7. Yates A, Kerr J, Froimsom M, Della Valle C, et al: The unintended impact of the removal of total knee arthroplasty from the Center for Medicare and Medicaid Services inpatient-only list. J Arthroplasty 2018;33:3602-6.