Potential Financial Effects on Hospitals of the Removal of Common Orthopaedic and Spinal Procedures From Medicare's "Inpatient-Only" List: A Comparison of the Medicare Fee-for-service Payment Model Versus Maryland's Global Budget Revenue Model

Background: When treating Medicare beneficiaries, orthopaedic surgeons must follow Centers for Medicare & Medicaid Services (CMS) policies regarding whether to perform surgical treatments under inpatient or outpatient status. Recently, most orthopaedic and spinal procedures were removed from the CMS's "inpatient-only" list (IPOL). We investigated differences in hospital payments under the Diagnosis Related Group (DRG)/Ambulatory Payment Classification (APC) system when common orthopaedic/spinal procedures are done under outpatient rather than inpatient status. We compared these differences under the DRG/APC model with differences in payments to Maryland hospitals, which are paid under the alternative Global Budget Revenue model. Methods: We used the CMS Inpatient Pricer and CMS Addendum B to retrieve the mean duration-of-stay data, estimated DRG (inpatient) payment, and APC (outpatient) payment for eight common orthopaedic/spinal procedures for four non-Maryland hospitals (2 urban academic hospitals and 2 neighboring community hospitals). We retrieved Maryland's Health Services Cost Review Commission hospital rates for the same eight procedures done under inpatient or outpatient status to estimate hospital charges for a Maryland urban academic hospital and a neighboring community hospital. Results: Among the four non-Maryland hospitals, estimated differences in payment for hospitalizations under inpatient versus outpatient status for common orthopaedic/spinal procedures with a mean duration of stay of <2 days, whose status would be most subject to change from inpatient to outpatient by its removal from the IPOL, ranged from $19 to $13,042. For the two Maryland hospitals, differences in outpatient versus inpatient payment for these same procedures ranged from $182 to $1,273. Discussion: Non-Maryland hospitals receive widely different CMS payments for common orthopaedic/spinal procedures based on a change in hospitalization status (inpatient to outpatient) prompted by the procedure being removed from the IPOL. The Maryland global budget revenue mitigates most of the effect of hospitalization status on hospital payment and may serve as a guide toward DRG/APC payment reassessment.