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On November 6, 2017, CMS published its final rule for the 2018 Outpatient Prospective Payment System (OPPS). The changes will go into effect January 1, 2018. 

Among other changes, the rule will allow Medicare payment for certain total knee replacement procedures performed in the outpatient setting (although not in ambulatory surgery centers) and signals a major shift in CMS’s thinking regarding the safety and efficacy of total knee replacements. CMS also evaluated total shoulder and hip replacements in outpatient settings but declined to extend Medicare payment for these procedures in outpatient facilities.

The rule finalized CMS’s proposal to remove total knee arthroplasty (TKA) from the Medicare inpatient-only procedure (IOP) list. Going forward, the change will allow TKA procedures performed in both inpatient and outpatient facilities to be reimbursed under the OPPS. Additionally, CMS will halt TKA “site of service” audits by recovery audit contractors (RAC) for 2 years. This change will allow providers to choose an appropriate site of service for the patient without the fear of reimbursement denials by RACs. CMS expects providers to develop protocols governing these decisions within this 2-year period. 

CMS repeatedly stressed that removal of TKA from the IOP list does not mean TKA now must only be performed on an outpatient basis. Instead, providers must decide whether a patient’s condition, including their age and expected recovery time, requires inpatient or outpatient care. CMS expects younger, healthier Medicare patients to receive the bulk of outpatient TKA procedures going forward.

While CMS received numerous comments advocating similar changes for partial and total hip replacements, the agency did not receive a substantial amount of comments evaluating partial and total shoulder replacements in the outpatient setting. CMS declined to adopt any changes for any of these procedures at this time. Such procedures must still be performed in an inpatient setting to receive Medicare reimbursement.

Similarly, and although widely discussed prior to the final rule, CMS still will not reimburse TKA procedures when performed in ambulatory surgery centers (ASCs). Medicare-covered ASC services are listed on the separate “ASC covered surgical procedures” list. For 2018, CMS has added only cervical artificial discectomy, second level cervical discectomy, and total laparoscopic hysterectomy of the uterus over 250 grams to the list of ASC covered services.

Over the past several years, private insurance has increasingly covered TKA performed in ASCs. In its proposed rule, however, CMS noted that TKA generally requires more than 24 hours of active medical care, which by their very nature ASCs cannot provide. So, although numerous groups advocated that TKA procedures were both safe and effective in the ASC setting, CMS has not added TKA to the list of covered ASC services at this time. CMS indicated it would monitor the safety and efficacy of TKA in ASCs going forward.

The continued exclusion of TKA from the ASC procedures list will be a disappointment to many in the ASC community. However, the final rule does provide some silver linings. First, the final rule signals CMS’s and the industry’s increasing confidence in TKAs performed in less medically-intensive settings. ASCs should leverage this confidence when negotiating coverage of TKAs by private payors and in discussions with state health departments. Second, the rules indicate CMS’s openness to TKA coverage once the procedure is proven safe and effective in the ASC setting for healthier Medicare patients. 

You can read the full text of the final rule here.