What you need to know about the forces reshaping our industry.


July 25, 2018

Bundled payments did not significantly lower Medicare spending, research shows

Daily Briefing

    Hospital participation in Medicare's Bundled Payments for Care Improvement (BPCI) initiative was not associated with significant changes in Medicare payments or certain care quality and outcomes, according to a study published Thursday in New England Journal of Medicine, FierceHealthcare reports. 

    Prepare for success in the world of alternative payment with our bundled payment resource series


    The Center for Medicare and Medicaid Innovation (CMMI) in 2013 launched BPCI, which is comprised of four "broadly defined" care models that establish bundled payments for multiple services received during an episode of care. Models 1 and 4 apply to inpatient hospital care; Model 1 ended in 2016. Models 2 and 3 involve post-acute care.

    The program is testing whether paying lump sums for episodes of care would lower health care costs without harming quality. As of April 2018, CMMI said 1,100 participants were enrolled in BPCI, including acute-care hospitals, skilled-nursing facilities, and physician group practices.

    Study details

    For the study, researchers reviewed Medicare claims from 2013 through 2015 to identify admissions for at least one of the five common medical conditions included under BPCI:

    • Acute myocardial infarction (AMI);
    • Chronic obstructive pulmonary disease (COPD);
    • Congestive heart failure (CHF);
    • Pneumonia; and
    • Sepsis.

    The researchers compared Medicare payments per episode of care—described as the hospitalization plus 90 days after discharge—and other metrics for the five conditions at hospitals participating in BCPI, such as:

    • How long Medicare beneficiaries being treated for one of the five conditions stayed in the hospital;
    • How many of such patients died;
    • How many of such patients were readmitted; and
    • The number of emergency department (ED) visits among such beneficiaries.

    The researchers then compared BPCI participants with control hospitals that were not participating in the program. In total, the researchers examined 492 hospitals that participated in BPCI for at least one of the five conditions.


    Overall, the researchers found that the bundled payments under BPCI were "not associated with significant changes" in any of the observed metrics.

    While previous research showed the BPCI "initiative was associated with reductions in Medicare payments for total joint replacement," the researchers in the latest study did not find significant Medicare payment reductions for medical conditions.

    The researchers found that the average Medicare payment per episode of care across the five conditions decreased from a baseline of $24,280 to $23,993 from 2013 to 2015 at the hospitals participating in BCPI. In comparison, the researchers found the average Medicare payment per episode of care across the five conditions decreased from a baseline of $23,901 to $23,503 from 2013 to 2015 at the control hospitals. The researchers said they found no statistically significant difference between the average Medicare payments at hospitals participating in BCPI and hospitals not participating in BPCI.

    The researchers concluded, "Hospital participation in five common medical bundles under BPCI was not associated with significant changes in Medicare payments, clinical complexity, length of stay, emergency department use, hospital readmission, or mortality."


    Several experts have shared their surprise at the study's findings on social media. For instance, Adrianna McIntyre, a contributor to the Incidental Economist and PhD student at Harvard University, in a tweet called the findings a "bummer," noting that because BPCI is a voluntary program "we'd expect hospitals that opted in with bundling to have better odds of success."

    However, Amitabh Chandra, a health economist at the Harvard Kennedy School of Government, in a tweet said he does not believe "the punchline 'bundled payments don't save' will be the final word on this topic." He suggested that CMS' next iteration, BPCI Advanced, could address some of the original programs problems.

    Karen Joynt Maddox, an author of the study and an assistant professor of medicine at Washington University, pointed to the study methodology to explain the difference between her team's findings and previous research on bundled payments for total joint replacement. She said the previous study focuses on joint replacement, which is a planned procedure for which a physician decides whether a patient is "healthy enough to undergo," while the second study focuses on treatment for costlier and unplanned medical conditions, uses a shorter follow-up period, and includes an older patient population.

    Still, Joynt Maddox said, "To really bend the cost curve, we're going to have to do more than just put an incentive at the hospital level. … One possible reason [BPCI] didn't work could be that many costs depend more on the home-care service or the nursing home, which are not incentivized to reduce costs like the hospital is." She continued, "The goal is to get the hospitals to work more closely with these care providers, but that may not be happening. We need a more holistic approach to coordinate care for these complicated patients, which will take time and a lot of new partnerships and collaborations outside the hospital walls" (Haefner, Becker's Hospital CFO Report, 7/20; Baker, "Vitals," Axios, 7/20; Minemyer, FierceHealthcare, 7/23; News Medical, 7/19; CMS website, 7/3).

    Resource series: Prepare for success in the world of bundled payments

    We've compiled our best resources to help leaders prepare a path to success in the world of bundled payments.

  • Build a Stronger Hospital-Specialist Partnership
  • 10 Keys to an Efficient Post-Acute Episode
  • Capture Value Through Supply Purchasing
  • Setting the Standard for Patient Care
  • Access the Resources

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.