The Health Care Financing Administration (HCFA) is proceeding with plans to conduct a demonstration project for bundling Medicare Part A and B payments for hip and knee replacement procedures. HCFA plans to send preliminary applications to hospitals across the country sometime this month. The application, solicitation, and bidding process will continue into spring 1996, with the project underway by the fall. HCFA's decision to proceed with the joint replacement demonstration project is due to the success of a similar project involving coronary artery bypass (CABG) procedures. Armen Thoumaian, PhD, project director with the HCFA Office of Research and Demonstrations, told the Academy's Committee on Health Care Financing that preliminary results show that the CABG project, conducted at seven hospitals, has improved efficiency and achieved a 12 percent cost savings without affecting the quality of care. HCFA has no plans to expand the CABG project to involve exclusive contracting for these procedures. For the joint replacement project, HCFA will select 15 to 30 hospitals with a high volume of hip and knee replacement procedures that are located in areas with other high volume and low volume hospitals. Dr. Thoumaian stressed that participation in the project is strictly voluntary, and that participating hospitals are not given a "center of excellence" designation by the government. The committee was satisfied that the project does not endanger the current practice of joint replacements in the orthopaedic community. The Academy will continue to monitor the impact of this demonstration project.