Medicare’s Hip and Knee Payment Cuts Could Undermine Washington’s Pro-Competition Agenda

Washington says it wants healthcare to cost less, competition to increase, and patients to have more choices. Yet the Centers for Medicare & Medicaid Services (CMS) is proposing a policy that could push independent orthopedic practices out of business, accelerate consolidation into higher cost hospital systems, and make it harder for seniors to get hip and knee replacements close to home. Patients will ultimately bear the impact through fewer choices, longer travel, and potentially higher costs for care.

Medicare already cut surgeon reimbursement for hip and knee replacements by more than 7% this year. Now, CMS is proposing to cut those payments by another 20% in 2027. Combined, the cuts amount to nearly 30% in less than two years for the surgeons who diagnose patients, optimize patients, operate, and manage their recovery. The irony is hard to miss: The government is demanding that physicians deliver more efficient care while simultaneously treating that efficiency as a reason to pay them less.

I have spent nearly two decades replacing hips and knees at Rothman, at Brigham and Women’s Hospital as chief of arthroplasty, at Harvard Medical School, and now as chair of orthopedic surgery at UT Southwestern. Throughout my career, I’ve watched joint replacements become safer, more precise, and more efficient. Patients recover faster and return to their daily lives sooner than they once did.

Yet while the care has improved, the economics of providing it have moved sharply in the other direction.

Over the last 25 years, surgeon reimbursement for hip and knee replacements has fallen 41%, while the cost of operating an orthopedic practice has increased 59%. Medicare can spend as much as $25,000 on a hip replacement when hospital care, implants, anesthesia, and other services are included. Under the proposed rule, the surgeon who evaluates the patient, performs the operation, and manages recovery for 90 days would receive less than 4% of that total.

Joint replacement is one of the most cost-effective interventions in medicine, giving patients significantly more quality years of life after surgery. Yet, cutting physician payments while maintaining or increasing payments to institutions encourages consolidation, a direct contradiction to the Administration’s agenda centered on greater competition and lower prices.

Independent practices cannot absorb a nearly 30% reduction in Medicare payments indefinitely, particularly while their costs continue to rise. Some will close, and others will be forced to sell to larger health systems simply to remain viable. Only 42% of American physicians remained in private practice in 2024, while the share of American Association of Hip and Knee Surgeon members who moved from independent practice to hospital employment has more than quadrupled since 2009.

Consolidation is not the bargain Medicare should be seeking. Physician practices acquired by hospital systems spend nearly 20% more per patient than physician-owned practices, while a recent study of 276 hospital acquisitions found that physician prices increased 15% within two years.

The consequences are even more serious in rural America. Nearly half of the nation’s nonmetropolitan counties have no orthopedic surgeon. When an independent practice closes or a specialty department disappears, rural patients cannot simply find another surgeon nearby. They may have to travel hundreds of miles for a procedure that could have been performed in their own community, placing additional burdens on seniors, families, and caregivers.

CMS has justified the proposed payment reduction in part by pointing to the shift of joint replacement into outpatient settings and shorter hospital stays. But shorter hospital stays do not mean surgeons are doing less work. Patients now undergo weeks of preparation and medical optimization before surgery, and surgeons remain responsible for their care through a 90-day postoperative period with multiple touch points in the recovery period.

Medicare’s own data also fails to capture the full scope of that work. The Department of Health and Human Services Office of Inspector General reported last year that Medicare claims significantly underreport postoperative visits because of billing and documentation gaps. Another study cited by CMS found that hip replacement surgery takes approximately 5% longer than Medicare’s fee schedule assumes. Those findings make the proposed cut particularly difficult to square with CMS’s own review. The data behind that review recommended increasing the assigned value of hip and knee replacement, not reducing it.

Surgeons have spent the last decade doing exactly what policymakers asked: improving efficiency, reducing costs, shortening hospital stays, and participating in value-based care. Hip and knee surgeons now lead every specialty in Medicare’s value-based payment programs and have generated more than $112 million in savings for the program over two years.

The reward is another 20% pay cut.

To prevent this proposal from becoming reality, CMS should maintain physician payments at current levels while working with the surgeons who perform these operations to determine what it actually costs to provide high-quality joint replacement care. Congress, the White House, and OMB should urge CMS to reconsider the reduction before the rule is finalized.

If Washington wants more competition, it should not create policies that make independent practices less viable. If it wants lower costs, it should not push physicians toward more expensive health systems. And if it wants seniors to have access to care close to home, it should not make it harder for rural communities to sustain the surgeons who serve them.

Antonia F. Chen, MD, MBA, is President of the American Association of Hip and Knee Surgeons and an orthopedic surgeon specializing in hip and knee replacement.