The program caps potential gains and losses at a percentage of the target price, with the percentage increasing from 5% to 20% over the course of the program. Hospitals are exempt from losses in the first year.
But ultimately, it will be easier to fail than succeed. Hospitals can only save so much, but the potential for costs to rise is significantly greater, de Brantes said.
Nursing homes are a likely target for spending reductions. Patients often go home after joint replacement surgery, but the number who land in nursing homes varies widely across the U.S., for reasons that researchers say often has little to do with need.
The quality of skilled-nursing facilities also varies sharply, and the way Medicare pays them creates an incentive to overtreat patients, according to the Medicare Payment Advisory Commission.
Nursing home spending accounted for 60% of the nearly $10,000 difference between low-cost and high-cost joint replacements in cities across New Jersey, New York and Pennsylvania, according to a 2015 analysis of three years of Medicare data by Vizient, formerly the VHA-UHC Alliance.
Catholic Health Initiatives, an Englewood, Colo.-based hospital system, is targeting skilled-nursing and rehabilitation hospitals to reduce spending on hips and knees across 18 markets that will fall under the mandatory target prices that start next month.
That strategy has proved successful in the markets where CHI volunteered for bundled payments under another Medicare effort that launched three years ago, said Dr. Christopher Stanley, national vice president of population health for the system.
Hip and knee patients now attend a pre-surgery “academy.” Doctors identify health conditions that can be addressed before surgery to improve results, such as smoking or poorly managed diabetes.
CHI's data from the voluntary bundled-payment initiative also revealed “very eye-opening” differences across markets for the number of patients who went to nursing homes and rehabilitation hospitals, ranging from 10% in one market to 50% in another, Stanley said. So the system shared those numbers with doctors and asked surgeons to create standards for the ideal treatment of hip and knee patients, which helped the hospitals significantly reduce their use of those facilities. CHI also compiles a list of preferred nursing homes vetted for quality and efficiency.
For hospitals with no experience with bundles, the April 1 deadline for the mandatory program has approached quickly. The CMS unveiled the program in July and finalized the rules in November. Providers argued vigorously for the launch to be delayed until at least January 2017, but the CMS declined. A long-shot bill introduced last week in the House would put it off until 2018.
Many of the included hospitals, according to consultants, have yet to receive historical Medicare data from the CMS on joint-replacement costs for nursing homes, home care and other post-acute services. To get the data, they must request access and agree to federal privacy rules. Without it, they can't identify which post-acute-care providers are likely to be most efficient.
Officials at DCH Regional have stalled talks with nursing homes until they can analyze the data to select the best potential partners, Dusang said.
In the meantime, they have sought out local orthopedic surgeons to explain the program and discuss options. They also invested in patient education ahead of hip- and knee- replacement surgery, an effort that started in early 2015 to reduce nursing home use. A pilot of the program boosted the percentage of patients who returned home after surgery from 11% to 62%.
Clearwater, Fla.-based BayCare Health System also recently introduced pre-surgery education for hip and knee patients. BayCare employees also visit patients at home before procedures to assess their resources, said Lou Galdieri, president of two BayCare hospitals and the executive leading the system's joint-replacement efforts.
BayCare has seven Tampa-area hospitals that will be included in the Medicare pilot, with prices for hips and knees that range above and below the regional average. The system is now analyzing data provided by the CMS to assess spending across the metropolitan area's post-acute-care providers and understand how nursing home use varies.
The Florida communities the hospitals serve are home to large numbers of frail seniors without family nearby to help them recover, Galdieri noted. “While we are looking at where the majority of our patients are going, it's to our advantage to develop various community partners.”