Medicare's voluntary bundled-payment program for hip and knee replacements reduced spending by 1.6% from 2013 to 2016 — less than previously estimated — with no overall change in quality, according to a new study in Health Affairs.
Another new Health Affairs study reported that lower extremity joint replacement is the only type of clinical episode in Medicare bundled-payment programs that has produced savings so far. The meta-analysis found no evidence of reduced spending or quality improvement for other clinical episodes.
The two studies highlight the challenges facing federal policymakers, hospitals and physicians in using bundled payments to achieve cost savings and better quality care on a wide range of medical and surgical episodes.
The Trump administration expanded bundled payments in 2018 through the Bundled Payment for Care Improvement Advanced demonstration program, which gives providers the option to participate in bundles for 33 inpatient and four outpatient conditions.
Under BPCI Advanced, the CMS pays a fixed price for each episode, which starts with an initial hospital admission or outpatient procedure and includes almost all services during the next 90 days. Providers make money if they keep total costs below the target price, which the CMS has discounted by 3%. They're at risk for up to 20% of costs that exceed the target price. Savings payments are adjusted based on performance on seven quality measures.
It's widely seen as one of the most promising approaches to accelerating the nation's transition to value-based payment.
The first study found hospitals had about $377 in adjusted savings for joint replacements in the original BPCI program for 2013 through 2016, compared with prior to the program. The researchers compared spending for patients in hospitals participating in BPCI with spending for patients in non-participating hospitals.
Providers that joined BPCI earlier produced the bulk of savings, compared with those that joined later. That surprised the researchers, who thought the latecomers would have learned effective cost-saving approaches from the early adopters.
The authors also determined that about 30% of the joint replacement savings were driven by selection of patients whose costs were lower because they were healthier or had better social supports.
A previous CMS evaluation had estimated a 3.9% reduction in episode spending on joint replacement after one year of BPCI.
Dr. Amol Navathe of the University of Pennsylvania, a co-author of both new studies, said the findings suggest the CMS should expand its bundled-payment programs for joint replacement, with improved risk adjustment mechanisms to encourage providers to accept all appropriate patients.
The Trump administration previously had rolled back the Obama administration's mandatory Comprehensive Care for Joint Replacement demonstration to fewer markets.
"I think the findings support scaling the mandatory (joint replacement) bundled-payment program to more markets and probably nationwide," Navathe said.
He and other experts argued that while a 1.6% spending reduction seems modest, it's still a policy success that represents real money, given that Medicare pays for more than 500,000 hip and knee replacements a year at a cost of nearly $7 billion.
"We shouldn't turn up our noses at savings of 1.6%," said David Grabowski, a professor of healthcare policy at Harvard University and a member of the Medicare Payment Advisory Commission. "There are very few examples of Medicare policies and programs that can cut spending without harming outcomes."
The meta-analysis article reviewed 20 studies on three of the CMS' bundled payment demonstrations — the Acute Care Episode Demonstration, BPCI and the Comprehensive Care for Joint Replacement model. It found that bundled payment has yet to produce spending reductions for medical and surgical conditions other than lower extremity joint replacement.
There was no evidence that the bundled-payment programs were associated with changes in patient outcomes or unintended consequences such as increased volume of procedures.
The authors said bundled payment has been more successful so far with joint replacement than with other clinical episodes because joint replacement patients tend to be younger, healthier and more affluent. In addition, the complexity of certain types of patients such as spinal fusion patients makes it harder to save money by reducing the use of post-acute services such as skilled nursing and home care.
Providers say they've generally had a harder time succeeding with bundles for conditions such as heart failure and chronic obstructive pulmonary disorder than with elective surgical procedures, at least partly because changing patients' lifestyle behaviors is difficult. As a result, joint replacement has been the most popular bundled-payment episode for providers.
The researchers recommended that the CMS should include more robust risk stratification methods to allow higher payments for more complex patients.
Dr. Ezekiel Emanuel, a University of Pennsylvania health policy professor who co-authored the joint replacement study, cautioned that it's early to evaluate bundled payment, estimating that it may take four years for full savings from the model to materialize. Plus, the effects will be stronger when private payers join Medicare in expanding bundled-payment programs, offering providers greater incentives to streamline their care processes.
Grabowski said policymakers should accept even modest progress from bundled payment.
"Rather than continuing to hold out for policy 'home runs' that dramatically decrease expenditures, we should be excited about the 'singles' and 'doubles' that generate smaller declines in spending without harming patient outcomes," he said.
