The Service Line

Orthopedic surgeons who replace knees and hips are about ten days from learning whether Medicare will really pay them roughly 17 to 20 percent less work value per case. The Centers for Medicare and Medicaid Services (CMS) proposed in July to cut work relative value units (RVUs) for total knee replacement from 19.11 to 15.94, total hip from 19.11 to 15.37, total shoulder from 21.58 to 17.49 and shoulder hemiarthroplasty from 17.44 to 13.81, per Healio’s Orthopedics Today commentary, and projects a 7 percent aggregate drop in allowed charges for orthopedic surgery. CMS accepted the Relative Value Scale Update Committee’s removal of inpatient hospital visits from these codes but went deeper than the committee recommended. The proposal also pays 50 percent for a same-day office visit billed with a 0, 10 or 90 day global procedure, and the 2026 one-year 2.5 percent conversion factor bump expires, leaving a proposed $32.84 non-qualifying factor, down 1.68 percent per the CMS fact sheet. Comments closed September 14 with more than 43,000 filed, and the final rule is expected around November 1. This continues our July coverage of the American Academy of Orthopaedic Surgeons (AAOS) fight over the cut; the new development is the calendar, not the numbers. Confidence: High on the proposed values and conversion factors; Medium on the final rule timing, which is an expectation, not an announced date; Low that CMS withdraws the cuts in full. Sources: CY 2027 Physician Fee Schedule proposed rule fact sheet, CMS, Medicare physician fee schedule 2027, Healio Orthopedics Today, CY 2027 proposed rule comment letter, AAOS.

Reimbursement

The hospital side of the same squeeze is already final: a mandatory national joint replacement bundle starts January 1, 2028. CMS finalized CJR-X in the fiscal year 2027 inpatient rule, requiring most acute care hospitals paid under both the inpatient and outpatient payment systems to take accountability for hip, knee and ankle replacement episodes in inpatient and outpatient settings. Episodes run 90 days after discharge, against 30 days in the Transforming Episode Accountability Model (TEAM), and hospitals must clear a minimum composite quality score before earning reconciliation payments. TEAM hospitals, Maryland hospitals and critical access hospitals are exempt, and the same rule adds spinal fusion Medicare Severity Diagnosis Related Groups (MS-DRGs) as TEAM anchors. Becker’s reports CMS intends site-neutral pricing for low-acuity lower extremity replacements, which would erode the cost edge ambulatory surgery centers (ASCs) use to win this volume. For a group or ASC, the 2028 question is whether your hospital partner will steer cases to you or pull them in to protect a 90-day target. This continues our August coverage of the final rule. Confidence: High on the start date, episode length and exemptions per CMS; Medium on the site-neutral pricing detail, which rests on trade reporting. Sources: CJR-X model page, CMS Innovation Center, FY 2027 IPPS and LTCH PPS final rule summary, ECG Management Consultants, The ASC squeeze hiding inside CMS joint replacement mandate, Becker’s ASC Review.

Enforcement

Two Washington health systems agreed to pay a combined $155.5 million to settle class actions over spine surgeries by a single neurosurgeon. Providence and MultiCare settled two suits brought by more than 2,000 patients each of Dr. Jason Dreyer, with $2,000 available to any treated patient and larger awards only on a finding that surgery was unnecessary, excessive or substandard, the Spokesman-Review reported October 4. The suits allege Providence paid surgeons through a productivity bonus that rewarded complex-case volume, and that MultiCare hired Dreyer despite warnings. Both systems deny wrongdoing, and the deals still need court approval, which plaintiffs’ counsel expects after January 1. Government settlements already closed: about $22.7 million from Providence, $1.2 million from Dreyer and $3.7 million from MultiCare, per the Spokesman-Review. For any employer of high-volume spine surgeons, the lesson is that compensation design now creates civil exposure on top of False Claims Act exposure. Confidence: High on the $155.5 million total and approval status per two outlets; Medium on the earlier government amounts, which we did not confirm in the Department of Justice release. Sources: Providence and MultiCare settle two class action lawsuits, Spokesman-Review, MultiCare Health System will pay millions to settle fraud case, U.S. Attorney’s Office Eastern District of Washington, Providence, MultiCare to pay $155.5M, Becker’s Hospital Review.

Who’s Buying

A San Antonio spine clinic is suing a national surgery center operator, alleging acquisition talks were a recruiting tool. South Texas Spinal Clinic sued Surgery Partners, the Tennessee-based ASC and hospital operator, on October 9 in the Texas Business Court, seeking more than $5 million, Becker’s reported. The complaint says the sides signed a nondisclosure agreement in November 2024, Surgery Partners reviewed physician productivity data, talks ended in December 2025, and four physicians, including the clinic’s board representative on a Surgery Partners-affiliated hospital, then left for a competing group. Claims include trade secret misappropriation, fraud and tortious interference. These are allegations, and we found no Surgery Partners response. The practical point for any group in a sale process is to wall off per-physician productivity data in diligence and tighten what a buyer’s affiliated board seat can see. Confidence: High that the suit was filed as described; Low on the merits. Source: Surgery Partners faces $5M+ lawsuit over poached spine physicians, Becker’s Spine Review.

Clinical Policy

CMS now says out loud that Medicare is paying for surgical follow-up visits that are not happening. In the proposed fee schedule, CMS states that post-operative visits during the global period “are not occurring,” proposes to pause the Medicare Access and CHIP Reauthorization Act (MACRA) section 523 visit-reporting data collection, and will post a public file with imputed RVUs for 10 and 90 day visits. Healio’s commentary cites a RAND study for CMS finding surgeons reported 38 percent of expected postoperative visits, and 32 percent for orthopedic surgeons. The staffing economics follow: if follow-up is moving to advanced practice providers, physical therapy or telehealth, the global package is the next code family CMS reprices. The commentary recommends reporting CPT 99024 on every postoperative encounter, which is the only evidence you will have in the argument. We found no new orthopedic coverage determination this window. Confidence: High on CMS’s statements; Medium on the RAND figures, read through Healio. Sources: CY 2027 Physician Fee Schedule proposed rule fact sheet, CMS, Medicare physician fee schedule 2027, Healio Orthopedics Today.

The Operator Metric

The number to track this week: about $104, the surgeon work value lost on each Medicare total knee if the proposal is finalized as written. The proposed knee work RVU drop of 3.17 (19.11 to 15.94), multiplied by the proposed $32.84 non-qualifying conversion factor, is roughly $104. Total hip loses 3.74 RVUs, roughly $123. This is our arithmetic on work RVUs only, before geographic adjustment and the separate practice expense and malpractice changes, so it understates or overstates the final check. Multiply it by your own Medicare knee and hip volume now, so that when the final rule lands around November 1 you can reprice surgeon compensation and ASC contracts in a day, not a quarter. Confidence: High on the inputs as proposed; Medium on the final result, since CMS can change both values and the conversion factor. Sources: CY 2027 Physician Fee Schedule proposed rule fact sheet, CMS, Medicare physician fee schedule 2027, Healio Orthopedics Today.