Before a patient can receive a hip or knee replacement at an ASC, someone must determine whether it is safe for them to go home the same day. The practice must know whether a caregiver will be waiting, whether the patient can navigate the house and whether pain, medications and physical therapy can be managed without a hospital team nearby.
After surgery, someone must answer the call when the swelling looks alarming. Someone must intervene before pain sends the patient to an emergency department. Someone must manage the recovery included in Medicare’s 90-day global payment.
The hospital bed may be gone. The patient remains. That distinction is at the center of the orthopedic response to CMS’ Proposed 2027 Medicare Physician Fee Schedule.
The OrthoForum, which represents physician-owned orthopedic practices, estimates the proposal could reduce Medicare physician payment for total hip and knee replacements by approximately 20%. The organization says that would follow an 8% reduction affecting joint replacement surgeons in 2026.
CMS does not publish a 20% estimate for the two procedures. Its own specialtywide analysis projects that proposed changes to work, practice-expense and malpractice relative value units would reduce orthopedic surgery payments by an average of 7%, including 5% for services performed in nonfacility settings and 8% for facility-based services. Those projections do not include the separate change in the physician fee schedule conversion factor.
The proposed qualifying alternative payment model conversion factor would fall 1.19% to $33.17, while the conversion factor for other clinicians would decline 1.68% to $32.84. The reductions largely reflect the expiration of a temporary 2.5% payment increase Congress provided for 2026.
For Jeffrey Racca, MD, CEO of Albuquerque-based New Mexico Orthopaedic Associates and chair of the OrthoForum Advocacy Committee, the dispute is larger than one year’s payment. It is about whether Medicare can continue steering joint replacements into lower-cost settings while making the independent practices that built those pathways harder to sustain.
“We’ve got no credit for the money that we save Medicare through the outpatient world,” Dr. Racca told Becker’s.
The 19% CMS can see
The proposed rule offers a clear explanation for the reductions. Total hip and knee replacement recently underwent a physician-led revaluation through the American Medical Association/Specialty Society Relative Value Scale Update Committee, or RUC.
The codes were flagged because Medicare data showed they were performed in the inpatient setting less than half the time from 2021 through 2023, yet their global payments continued to include inpatient hospital visits. For both procedures, survey results reduced the estimated total physician time from more than six hours to 305 minutes, a 19% decline.
The RUC recommended reducing the work relative value unit for both hip and knee replacement from 19.11 to 16.70; CMS decided that was not enough. For total hip replacement, CMS is proposing a work value of 15.37. For total knee replacement, it is proposing 15.94. The agency said the RUC recommendations would produce an increase in the implied intensity of the services even as the surveyed time fell and the typical case moved from inpatient to outpatient care.
CMS accepted the RUC’s recommended direct practice-expense inputs for both codes. Its disagreement centers largely on how much physician work remains in the episode. That is where the government’s analysis and the independent surgeon’s experience diverge.
CMS sees fewer inpatient visits, shorter surveyed time and a more routine outpatient procedure. Dr. Racca sees work that has changed location.
The labor behind the shorter stay
Joint replacement has become more efficient. Better anesthesia, surgical techniques, patient selection and recovery protocols have allowed many patients to leave the hospital sooner. Many /cases can now be performed in ASCs, where Medicare generally pays less for the facility component than it does in a hospital outpatient department.
But moving the operation to the surgery center also comes with responsibilities that can be overlooked. Patients must be screened more carefully before outpatient surgery. The practice must identify medical risks, confirm support at home and arrange physical therapy, equipment and medication before the procedure.
“That patient is actually much harder to take care of because they have to be screened more,” Dr. Racca said. “You don’t have the discharge planners at the hospital to do everything for you.”
The same redistribution occurs after surgery. A patient recovering in the hospital has nurses monitoring pain, mobility and early complications. When recovery moves home, the surgeon’s practice often builds the infrastructure to replace part of that support.
Practices hire case managers and nurse navigators. They conduct postoperative calls, respond to portal messages and create rapid pathways for patients who might otherwise visit the emergency department.
Joel James, vice president of advocacy at OrthoForum, said those employees remain on the practice’s payroll while the surgeon is operating at the ASC. The clinic’s rent, equipment and administrative expenses do not stop because the physician is working in a separate facility.
The 90-day global payment also means the episode extends well beyond the procedure. The surgeon remains responsible for medication adjustments, wound concerns, follow-up visits and complications that may develop weeks later.
Efficiency did not eliminate that work. It dispersed it across a longer episode and a larger team.
The payment policy rewards the destination, not the journey
The difference is especially striking when the physician proposal is placed beside CMS’ separate 2027 payment proposal for hospitals and ASCs. CMS has proposed a 2.4% increase in hospital outpatient and ASC payment rates for facilities meeting quality-reporting requirements. At the same time, the agency’s physician proposal would reduce orthopedic payments and lower the conversion factors used to calculate professional reimbursement.
Those payment systems cover different resources and are governed by different statutory formulas. A facility-rate increase does not automatically mean a hospital or ASC will profit more on every procedure.
Still, the contrast captures the frustration expressed by physician groups. Medicare recognizes that the cost of maintaining a facility rises over time. Physician practices argue that their labor, staffing and operating expenses rise as well, but the fee schedule does not provide a stable inflationary update.
Dr. Racca said OrthoForum data shows practice expenses rose approximately 40% between 2020 and 2024. He compared the dynamic with a business being forced to lower its prices while every input becomes more expensive.
“You can keep pounding us into the ground, but eventually there’s nothing to pound on anymore,” he said.
The tipping point may not look dramatic
Warnings about patient access can sound like a negotiating tactic. Physician groups oppose a reduction, so they predict patients will suffer. Dr. Racca said the threat is more practical than rhetorical.
“I think 20% may be the tipping point,” he said. That does not mean practices will immediately announce that they no longer accept Medicare.
Access can deteriorate much more quietly. A practice may struggle to recruit a joint replacement surgeon. A physician may stop covering complicated fractures around existing implants because hospital calls no longer make economic sense. A group may defer an ASC expansion, reduce services in a rural market or sell to a larger organization.
The surgeon may continue operating after the acquisition. The site and price of the care may change.
“Our physicians who are taking care of these complicated patients are going to have to either leave our practices because they won’t be able to afford to stay here, or they’re going to have to go to work for hospital systems or private equity groups,” Dr. Racca said.
OrthoForum has warned that the reductions could disproportionately affect practices caring for older, medically complex patients and surgeons willing to handle difficult cases.
The consolidation contradiction
The proposed cuts arrive as policymakers voice concern about consolidation and the loss of independent medical practices. Yet Dr. Racca and Mr. James believe Medicare payment policy has steadily made independence less viable.
Independent groups must finance their own staff, real estate, equipment, information technology and revenue-cycle operations. They may also invest directly in imaging, physical therapy and surgery centers. That ownership creates pressure to control costs. It also exposes physicians directly when reimbursement fails to keep pace with expenses.
“Everything we do in independent practice is cheaper than in a hospital setting,” Dr. Racca said. “An X-ray here is cheaper. An MRI here is cheaper. Our ambulatory surgery centers are cheaper than hospital outpatient departments.”
The broader site-of-service price difference is well established: Medicare generally pays an ASC less than a hospital outpatient department for the facility services associated with the same covered procedure. But professional payment reductions do not necessarily keep physicians in the lowest-cost setting.
If a practice can no longer support the surgeon independently, the surgeon may become employed by the hospital. The physician’s professional payment remains constrained, but the patient increasingly receives care within a more expensive organizational structure.
The policy saves money on the physician line while potentially increasing spending elsewhere.
The practices that proved the model cannot lead it
The frustration extends beyond fee-for-service reimbursement. Independent orthopedic groups participated in Medicare’s earlier bundled-payment initiatives, assuming responsibility for cost and quality across an episode rather than only the operation.
Mr. James said 55 OrthoForum practices participating in the original Bundled Payments for Care Improvement initiative saved Medicare more than $250 million over five years. The groups view that history as proof that independent physicians are willing to accept accountability and can redesign episodes at a lower cost.
“We want to provide high-quality care,” Dr. Racca said. “We want to be held accountable for that care.”
Yet newer mandatory models place hospitals at the center. The Comprehensive Care for Joint Replacement model holds selected hospitals responsible for spending and quality surrounding joint replacement episodes. The Transforming Episode Accountability Model similarly makes hospitals the accountable participants for several surgical episodes.
Independent physicians can collaborate with hospitals, but they cannot participate directly on equal terms as the episode initiator.
Mr. James sees a contradiction. Independent practices helped demonstrate that orthopedic episodes could be redesigned, shifted outpatient and managed more efficiently. Now, they are increasingly dependent on a hospital to enter the value-based models built from those lessons. The practices are being asked to provide lower-cost care without being given the same control over how the savings are earned or shared.
The deeper problem
Dr. Racca wants CMS to reverse the proposed reductions to the hip and knee replacement codes before the rule is finalized. He does not believe that alone will stabilize physician practice.
The physician fee schedule operates under budget-neutrality requirements. When CMS raises projected spending for certain services, it generally must offset those increases with reductions elsewhere. The result is a payment system in which physicians compete over a fixed pool while the cost of delivering care continues to rise.
For 2027, CMS proposes a positive 0.53% budget-neutrality adjustment. That increase, however, is not enough to offset the expiration of the temporary 2.5% payment increase provided for 2026. Dr. Racca said he would like to see Congress reform budget neutrality and permanently connect physician payment with the Medicare Economic Index, which measures changes in the costs of operating a practice.
Annual congressional interventions may prevent the full scheduled reduction from taking effect, but they do not create predictability. A practice cannot confidently recruit a surgeon, hire nurses or build a new facility when its payment outlook depends on whether Congress approves another temporary adjustment late in the year.
The rule also sits within a fee schedule already shaped by the 2.5% efficiency adjustment CMS finalized for many non-time-based services beginning in 2026. CMS said the policy is intended to account for productivity gains and changes in medical practice. Orthopedists argue that efficiency should not become a permanent penalty.
The work did not disappear
CMS’ logic is understandable on paper. The patient spends less time in the hospital. The surveys report fewer minutes. The procedure has become standardized enough to move into the outpatient setting.
From that perspective, lower physician work values reflect progress. But the outpatient transformation was not automatic.
Dr. Racca said moving joint replacements into ASCs requires more patient screening, planning for support at home and postoperative management across the 90-day episode. Mr. James added that practices have hired case managers and nurses to perform some of the follow-up once handled in hospitals. The lower-cost setting did not eliminate the work; it shifted more of it to the physician practice..
The question is whether Medicare’s valuation system can recognize work that no longer occurs where it once did. OrthoForum’s warning is not that every surgeon will refuse to treat Medicare patients the day a final rule is published. It is that the economics will alter thousands of smaller decisions: whether to recruit, invest, cover call, expand or remain independent.
Over time, those decisions determine where patients receive care, how much that care costs and how far they must travel to find it.
Medicare wants joint replacement delivered with fewer hospital days, lower facility costs and greater accountability across recovery.
Independent orthopedic practices helped build that lower-cost system, Dr. Racca and Mr. James said. They argued the hospital stay disappeared because physicians and their teams made outpatient recovery possible, but the work did not.
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