Bundled payments for joint replacement could save hospitals $2 billion

A study in JAMA Internal Medicine found hospitals can save an average of 8 percent without impacting quality in Medicare’s bundled payment for joint replacement.

CMS made the joint replacement bundled payments model mandatory in November 2015. The data in this study was based on earlier Medicare claims between 2008 and 2015 at the five-hospital Baptist Health System (BHS) in San Antonio. Nearly 3,500 patients with lower extremity joint replacement were included in the study during the time BHS participated in two voluntary demonstration projects: Acute Care Episodes (ACE) and Bundled Payments for Care Improvement (BPCI).

When no complications arose from joint replacements, the Medicare cost for the entire episode declined by an average of 20.8 percent, to $21,208. When there were complications, savings were still recorded, with the average cost dropping 13.8 percent, to $33,216.

Researchers estimated that if every hospital used the model for joint replacement procedures, Medicare would save $2 billion a year.

In BHS’s case, much of the savings came from changes which don’t require intensive care coordination investments, like reducing the cost of implants.

“Baptist Health System worked with its surgeons to review medical evidence, identify a list of clinically equivalent implants (with exceptions allowed for unique anatomical or clinical considerations), determine a lower target implant price, and contract with only manufacturers that met that price,” wrote University of Pennsylvania health policy professor Amol Navathe, MD, PhD, and his coauthors. “BHS subsequently implemented an online process through which manufacturers anonymously bid against each other. Because most manufacturers ultimately agreed to lower prices, BHS was able to reduce implant costs while retaining surgeon choice.”

The savings didn’t appear to affect quality. In fact, there was some indication the model could improve quality, as prolonged length of stay dropped 67 percent, while patient risk scores, readmission rates and emergency room visits remained level.

The study also found that plan design mattered, because the hospital reduced more expensive post-acute care costs only once it was included in the BPCI.

“Along with the likely opportunity for additional cost reductions in areas such as operating room efficiency and (post-acute care) complications, these results suggest that careful bundle design is critical. Physicians and hospitals seem likely, at least initially, to redesign care for specific activities that are financially incentivized,” Navathe and his coauthors wrote.

Despite the positive results, mandatory bundled payment models face an uncertain future.

The pick to be the next HHS Secretary, U.S. Rep. Tom Price, MD, R-Georgia, has said requiring providers to participate in those models is outside the authority of CMS. He signed a letter along with many other Republicans in September 2016 asking the agency to cease all mandatory payment models developed under the Center for Medicare and Medicaid Innovation (CMMI).

“Policies that have the potential to create access issues for beneficiaries, further provider consolidation, and reduce provider participation in Medicare can drastically deteriorate quality of care our seniors rely on,” the congressmen wrote. “This would be a step backwards in our unified effort to move to higher quality, more value-based care for our nation's seniors.”