October 1995 Bulletin

Position Statement - Medicare Demonstration Project for Joint Replacement Surgery

In an effort to reduce Medicare costs, the Health Care Financing Administration (HCFA) initiated a demonstration project to test a new payment method-a negotiated package price combining Part A and Part B payments into a single payment to a hospital for each episode of care. The hospital, in turn, distributes payments to all providers involved in the care, under an arrangement managed by the hospital.

HCFA has developed and conducted this demonstration project for coronary artery bypass graft procedures and cataract surgery, and has announced plans to move next to hip and knee replacement procedures, beginning in mid- to late-1996.

Hospitals involved in the initial project were required to accept a global payment, which was lower than HCFA would otherwise pay under the standard Medicare payment system. These hospitals also were required to meet other criteria related to the volume of procedures performed, utilization review, and quality assurance.

One of the most controversial aspects of the demonstration project has been the use of the term "Centers of Excellence." Some participating hospitals have used this term as a marketing tool to draw patients to them and to attract other payers. Although HCFA has not officially designated these hospitals as Centers of Excellence and has not officially stated that they provide better care than non-selected hospitals, HCFA officials have, nevertheless, been quoted using the term and the term has been used by others in describing the project.

The American Academy of Orthopaedic Surgeons believes that HCFA should aggressively seek to clarify to the public and to providers that hospitals which will be involved in the joint replacement demonstration project will not be officially-designated Centers of Excellence. Moreover, HCFA should publicly state that the participation of hospitals in the joint replacement demonstration project will not necessarily indicate or imply that they provide higher quality joint replacement procedures than non-selected hospitals which provide the same procedures.

August 1995

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