The Financial Implications of the Removal of Total Knee Arthroplasty From the Medicare Inpatient-Only List

Abstract

Background: Centers for Medicare and Medicaid Services removed total knee arthroplasties (TKAs) from the Inpatient-Only list on January 1, 2018, which meant TKAs could be performed on a hospital outpatient basis. We sought to understand (1) what the financial implications have been for hospitals, (2) to what extent financial incentives have influenced the adoption of outpatient TKAs across hospitals, (3) whether adoption of outpatient TKAs has impacted the success of hospitals with managing post-acute care (PAC) spend, and (4) the financial implications to Medicare of the adoption of outpatient TKAs.

Methods: We used national patient-level Medicare fee-for-service Part A claims data (100% sample) from January 2018 through June 2019 to calculate the inpatient and outpatient TKA payment rate for each hospital, and the distribution in these payments across the country. We then ran case-level regressions to understand the factors associated with adoption of outpatient TKAs, and the drivers of PAC spend. Finally, we quantified the savings to Medicare.

Results: Hospitals on average received $3682 (30%) lower payment from Medicare for outpatient TKA cases, but this varied widely across hospitals. The difference in payment rates across hospitals was not statistically significantly related to their adoption rate of outpatient TKAs. PAC spend was higher for same-day discharges, but lower for cases that stayed at least 1 night. Based on the adoption rate of outpatient TKAs in Q2 2019, Medicare saved $355M on a run rate basis.

Conclusion: Hospitals have adopted outpatient TKAs independent of the financial impact. Medicare has benefited from lower PAC spend and lower payments to hospitals.

Keywords: inpatient-only list; medicare; outpatient; payment; post-acute care (PAC); total knee arthroplasty (TKA).