Clarifying CMS’ intent


Published 3/1/2019
Shreyasi Deb, PhD, MBA

New Guidance Attempts to Resolve Confusion Regarding the Removal of TKA from IPO List

On Jan. 8, in a major win for AAOS’ advocacy efforts, the Centers for Medicare & Medicaid Services (CMS) issued unprecedented guidance to help resolve confusion regarding the removal of total knee arthroplasty (TKA) from the Medicare inpatient-only (IPO) list.

The 2018 Medicare Outpatient Prospective Payment System (OPPS) Final Rule included a policy change allowing for payment of TKA procedures in either the hospital inpatient or outpatient setting. Unfortunately, the policy change precipitated considerable confusion and differences in interpretation among various stakeholders. The new guidance, prompted by ongoing communication between CMS and the AAOS Office of Government Relations (OGR), aims to clarify CMS’ intent.

Unintended consequence

TKA was removed from the IPO list effective Jan. 1, 2018. CMS was explicit in stating, “Removal of the TKA procedure from the IPO list does not require the procedure to be performed only on an outpatient basis. Removal of the TKA procedure from the IPO list allows for payment of the procedure in either the inpatient setting or the outpatient setting.” Moreover, CMS was clear in its decision to delay allowing TKA to be performed in an ambulatory surgery center (ASC) by stating, “[W]hile we are finalizing our proposal to remove Current Procedural Terminology (CPT) code 27447 from the OPPS IPO list for [calendar year (CY)] 2018, we are not adding the procedures to the ASC covered surgical procedures list for CY 2018.” CMS also clarified that TKAs are still subject to Medicare’s two-midnight rule, but they will not be audited by the Medicare Recovery Audit Program until 2021.

In clear contradiction to CMS’ intent, many have overruled operating surgeons’ discretion in directing site-of-service decisions. In addition to hospital and payer influence, a lack of clarity regarding acceptable justifications for inpatient admissions spanning fewer than two midnights and the added paperwork to justify inpatient admissions have pressured many surgeons to make outpatient the default setting for all TKAs. For patients, changes to setting of care have also led to confusion over cost-sharing obligations.

TKA cases are increasingly pushed to the outpatient setting. Only medically complex and high-comorbidity patients are admitted. This change in patient mix has significant implications in pricing and patient attribution in the Bundled Payments for Care Improvement (BPCI) Advanced and Comprehensive Care for Joint Replacement (CJR) payment models.

AAOS response

Since the rule was introduced, AAOS leadership and OGR staff have hosted numerous phone calls and in-person meetings with CMS, the White House Office of Management and Budget, and the CMS’ Center for Clinical Standards and Quality. We asked them to issue additional guidance as an educational resource for Medicare providers and stakeholders. We were told that the new guidance is a direct result of our requests. In addition, we requested that CMS direct Medicare’s Beneficiary and Family-centered Care Quality Improvement Organizations (BFCC-QIOs) to consider our guidance regarding patient selection and socioeconomic risk factors in their hospital billing reviews to protect beneficiaries from unnecessary risk.

We also have asked that CMS exempt TKAs from Medicare’s two-midnight rule, and we believe that the agency supports the appropriateness of inpatient stay. As noted in its 2016 OPPS/ASC Final Rule, the two-midnight benchmark offers reviewers guidance on appropriate inpatient coverage, whereas the two-midnight presumption instructs medical reviewers on which claims to review. By giving TKAs the same exception status as prolonged mechanical ventilation, under the “rare and unusual” policy, we will avoid QIO review issues until more information is gathered. This ultimately will allow surgeons more flexibility and ensure patient safety.

Additionally, we continue to ask for necessary changes in Medicare fee-for-service payment models—especially as more medically complex, high-comorbidity patients are likely to receive inpatient care. This change in patient mix has significant implications for target pricing and attribution in BPCI Advanced and CJR models, wherein an episode is triggered solely by an inpatient admission.

We have presented several recommendations/policy options for CMS to resolve this issue. One is to allow a CPT code to trigger an outpatient BPCI Advanced episode, given that physicians may be financially penalized for making site-of-care decisions in the spirit of the new policy. Otherwise, CMS can exclude BPCI Advanced TKAs from the new policy until clear and vetted evidence-based patient selection criteria for the outpatient setting are established. Another option would be to release BPCI Advanced physician group participants from all downside risk for lower extremity joint replacements. However, in the absence of these changes, and to ensure establishment of accurate pricing in BPCI Advanced, TKAs should be removed from baseline pricing in BPCI Advanced.

The new guidance clarifies that CMS has been using Medicare’s BFCC-QIOs for initial medical reviews of short-stay inpatient
admissions since October 2015. The agency notes that it does “NOT target condition or disease-specific claims, such as TKA procedures, for BFCC-QIO review.” However, BFCC-QIOs conduct regular analyses of hospital billing and target hospitals with high numbers of short inpatient stays, which are potentially inappropriate under the two-midnight policy.

Furthermore, the guidance discusses several clinical case studies of TKA patients with multiple comorbidities and what documentation BFCC-QIOs may expect in such scenarios. It reiterates that the decision to admit a patient as an inpatient is a complex medical decision based on the physician’s clinical expectations and that CMS does not dictate the setting of care. The guidance also includes a number of clinical case studies that demonstrate how CMS’ QIOs apply the two-midnight benchmark, presumption, and case-by-case presumption.

Nevertheless, AAOS believes that clinical risk factors, sociodemographic risk factors, and the financial situation of respective patients are huge factors in “reasonable” determination of inpatient stay. CMS should provide a clear list of requirements to reduce confusion on the part of all affected parties, and BFCC-QIOs should consider these additional risk factors in their review. Again, the onus for additional documentation should not be on surgeons.

The CMS guidance can be found at

Shreyasi Deb, PhD, MBA, is a senior manager in the AAOS OGR.