A new study in NEJM found that care costs at hospitals participating in a CMS bundled-payment initiative vary by up to 100% and concluded that hospitals that successfully coordinate care are best positioned to benefit from the model.
Under Medicare's Bundled Payments for Care Improvement initiative, CMS sets target prices for episodes of care at individual hospitals and assesses whether organizations are spending above or below those targets. Hospitals spending above the targets will have to pay back excess payments, while hospitals spending below the targets will receive additional payments.
As part of the application process for the initiative, the agency provided prospective applicants with detailed Medicare claims data so they could determine historical prices for certain episodes of care.
- In recent weeks, the Center for Medicare and Medicaid Innovation has shaken up the Bundled Payments for Care Improvement initiative. Watch this Financial Leadership Council webconference to learn more about the specific changes to the initiative and lessons for health systems considering pursuing bundled payment contracts.
For the NEJM study, researchers at Brandeis University analyzed Medicare claims data at more than 100 hospitals who were considering applying for the bundled-payment program. They focused on hospital costs and related care costs in the 90 days after discharge.
Study finds wide cost variation
The researchers found that CMS routinely spends as much or more on care in the 90 days after discharge as it does on the initial hospitalization.
The researcher also found wide variation in the cost of episodes of care at individual hospitals. For any particular episode of care, hospitals with above average costs spent about 40% more than hospitals that kept costs below average. Overall, the researchers found that the difference in costs between the lowest-cost and highest-cost hospitals often exceeded 100%.
Factors that influence wide cost variations
High readmission rates are a major source of discrepancies in spending, the authors note. Among congestive heart failure patients, high-cost facilities' readmission rates were about 40%, which is about 25% higher than readmission rates at low-cost facilities.
The researchers also found that utilization of post-acute care services drives variation. For instance, providers that rely on rehabilitation hospitals and skilled nursing facilities for total joint replacement tend to spend more on care.
Overall, the authors warned that a "critical finding of our analysis is that the current design of Medicare's bundled-payment program poses financial risks for participating hospitals" because "the relatively small number of patients within each type of episode can lead to substantial year-to-year variation in the severity of illness in, and costs for, patients who require treatment."
To succeed under the model, providers must coordinate care
According to the researchers, the study "highlights opportunities for hospitals and their partners to improve quality and reduce spending by reaching out to patients after discharge and reconciling medications, scheduling timely primary care visits, establishing plans for addressing common problems, and coordinating with post-acute-care providers."
"Although many hospitals lack strong clinical relationships with such providers, the data that applicants receive from CMS can help them identify partners by showing where their patients receive services and at what cost," the researchers note (Pittman, MedPage Today, 11/15; Reichard, CQ HealthBeat, 11/15 [subscription required]; Mechanic/Tompkins, NEJM, 11/15).
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