HHS Using Alternative Facts to Tout 2017 Accomplishments

Costs of outpatient versus inpatient knee replacement a clear area of contention in wake of report. 

Last week seemed to be a quiet time on the Medicare regulatory front. Perhaps the three-day government shutdown resulted in things ramping back up, however.

For a while I thought I’d have nothing to talk about besides total knee replacements for RACmonitor eNews readers. If you haven’t heard about that, you better listen to my RACmonitor.com webinar right away. It’s quite confusing, and there is a lot of revenue at stake.

Fortunately, my lack of a new topic vanished at noon last Friday, when the U.S. Department of Health and Human Services (HHS) released its 37-page report titled 2017: A Year of Accomplishment. This thoroughly comprehensive review of seemingly every activity undertaken by every division of HHS, including the National Institutes of Health (NIH), the Food and Drug Administration (FDA), and the Centers for Disease Control and Prevention (CDC) will probably not be read by many, but I read it, or at least up to page 5, when my jaw dropped.

What got my hairs to stand on end? Well, HHS claimed as an accomplishment the following: “CMS removed procedures from the inpatient-only list (in the Outpatient Prospective Payment System Rule, or OPPS), giving patients greater choice to decide which site of service is right for them for six procedures, including total knee replacements, one of the most common and costly procedures. Medicare beneficiaries will now have the option to seek care in a lower cost setting of care (i.e., an outpatient setting rather than a more expensive inpatient setting.)”

Is this blatantly wrong? It sure is, and let me explain why, point by point. First of all, patients never have a choice of whether they are inpatients or outpatients. We all know that doctors need to follow the rules no matter what the patient “decides.” Now, I will admit that CMS did say in the OPPS rule that doctors may consider patient preferences when determining the status for total knee replacement (stating at 82 FR 59383 that “the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and preferences.”) But CMS provided absolutely no details on how much weight we are allowed to give to patient preference, or whether that preference needs to be rational or meet any standard of medical necessity.

HHS also noted that total knee replacement is one of the most costly procedures. Perhaps they are unaware that CMS has a list of prices of procedures that is available to the public, and that from that list anyone could see that there are 185 procedures that are equally expensive or more expensive for outpatients than total knee replacement. Now I will agree that a knee replacement is a bit more expensive than the last item on the list, which is a half-milligram dose of diclofenac costing 19 cents, but knee replacement is a heck of a lot less costly than a prosthetic retina at $122,000.

HHS also claims that the inpatient setting is more expensive than outpatient. Oh really? Maybe they should tell AARP and NBC News that, since they both encourage patients to insist on inpatient admission because it is less costly. They must also have a bit of amnesia about the fact that self-administered mediations are not covered as outpatient, but are covered as inpatient, and that they can add a couple hundred dollars to an outpatient visit. And they conveniently seemed to have forgotten that if a patient had a Part A stay within the prior 60 days, their total knee replacement performed as an inpatient procedure will cost them absolutely nothing.

Because it can be confusing, let me review the cost for a knee replacement as inpatient or outpatient. If done as inpatient, the patient is responsible for the Part A deductible of $1,340, with no other out-of-pocket costs at all. If done as outpatient, the patient is responsible for their Part B deductible of $183, then a 20 percent coinsurance on the approved amount of each line-item charge incurred during the hospital stay. But since total knee replacement is classified as a comprehensive Ambulatory Payment Classification (APC), there is only one line-item charge that is approved. And that coinsurance is capped at the inpatient deductible per approved line item, hence the patient owes a maximum of $1,340. But, as noted above, self-administered drugs are excluded from Part B coverage, so if the hospital charges for those (and more hospitals are electing not to charge for them), then the patient must pay that cost. In other words, an inpatient total knee replacement will cost the same or be less costly than an outpatient surgery.

An outpatient total knee replacement also means that if the patient has preoperative testing performed in the three calendar days prior to surgery, the patient will be responsible for their 20 percent coinsurance on each test. If they have surgery as an inpatient, almost all services provided to the patient at the hospital or any hospital-owned facility is bundled into the payment for the admission. So one can add this as more reason why inpatient total knee replacement is less expensive than outpatient surgery.

Furthermore, HHS totally ignores the fact that the only way a patient can access their Part A skilled nursing facility benefit is if they have an inpatient admission of three or more days. Of course, HHS could fix that by waiving the requirement; we all know that many organizations have begged for the 1960s-era rule to be changed, but so far those pleas have fallen on deaf ears.   

I am sure that the political turmoil of 2017, including the resignation of the HHS Secretary after the private jet scandal and the negative publicity over the banning the use of seven words or phrases by CDC employees, led the Trump administration to determine that it had to tout the accomplishments of HHS as a counterpoint.

But perhaps when they draft their 2018 accomplishment list next year, they should have it fact-checked by career staff within each division and avoid publishing fake news.


Ronald Hirsch, MD, FACP, CHCQM, CHRI

Ronald Hirsch, MD, is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays. The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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