The average total cost to replace worn hips or knees in Tuscaloosa, Ala., can top $31,780—one of the highest prices across dozens of U.S. metropolitan areas, including Los Angeles and Seattle, where just about everything else costs more.
Starting April 1, the clock starts ticking for Tuscaloosa’s hospitals to lower their price for new hips and knees or lose money.
The western Alabama city is one of 67 markets where Medicare will for three months combine all the costs for joint-replacement surgery and any associated care into a single payment, what federal officials call a “target price” or “bundled payment.”
Hospitals that hold costs below that amount can keep the difference. Hospitals that don’t must repay the government. The model isn’t new to Medicare, but so far its experiments with bundles have been voluntary. The effort that begins next month—which will run for five years—is the first to be mandatory and is projected to save Medicare $343 million.