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. “We have a good bit of ground to cover,” said Nina Dusang, chief financial officer for the DCH Regional Health System in Tuscaloosa. The CMS Innovation Center deliberately selected markets of different sizes, and with varying spending trends for the mandatory pilot, said Amy Bassano, director of the agency's patient care- models group. Bundled payments, she said, “hold great promise,” but it's not yet clear how broadly the model can work. Federal officials selected joint replacements because the procedures are common for Medicare beneficiaries and cost the program $7 billion a year for hospital care. More >>