CMS to test new reimbursement system for hip and knee replacements in the U.S.

The Centers for Medicare & Medicaid Services (CMS) has announced a 5-year plan to test a new system for how it reimburses hospitals for hip and knee replacement surgeries that currently cost about $7 billion a year.

The program, which was announced Thursday, will track patients post-surgery and then pay hospitals based on criteria that measures the quality of the outcomes of the procedures. An assessment will then be made and either a financial bonus will be granted or a penalty levied.

About 25% of the surgical procedures in the U.S. will be affected, and the agency hopes to save up to $150 million under the program, Bloomberg reported. If approved, the program would begin Jan. 1.

"Hospitals and physicians would have an incentive to work together to deliver more effective and efficient care," Sylvia Matthews Burwell, the Secretary of Health and Human Services, said on a conference call with reporters.

Medicare shelled out about $586 billion in 2013 to cover more than 50 million elderly and disabled people in the country, the news service said. Reducing those costs has been a major goal under the Obama administration, which introduced the Affordable Care Act.

The test program will be mandatory for more than 800 U.S. hospitals covering 75 regions and should provide CMS with improved data on the effectiveness of the initiative. Stryker ($SYK), Zimmer Biomet ($ZMH) and Johnson & Johnson ($JNJ) are among the top medical device producers of artificial knees and hips.

- see the Bloomberg story

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