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January 9, 2019

Do mandatory bundled payments cut spending? Yes—but only slightly, study suggests.

Daily Briefing

    Read Advisory Board's take: What this says about the future of bundled payments

    Medicare spending on hip and knee replacement surgeries decreased slightly over two years under the Comprehensive Care for Joint Replacement (CJR) program, according to study published Wednesday in the New England Journal of Medicine.

    About CJR

    The CJR model, which Medicare implemented in April 2016, holds participating hospitals accountable for episodic spending performance on eligible fee-for-service hip and knee replacements for Medicare beneficiaries. Hospitals that meet certain benchmarks for quality and cost measures receive a bonus payment, while hospitals that exceed the set target could be penalized.

    For the first two performance years, CMS implemented the model in 67 U.S. regions where 800 hospitals were required to participate. CMS in December 2017 published a final rule that, among other things, made the program voluntary for 33 of the 67 metropolitan areas.

    Study details

    For the study, researchers reviewed Medicare claims from 2015 through 2017 to evaluate the program's first two performance years. The researchers focused on hip- and knee-replacement episodes in 75 geographic regions chosen for mandatory participation, and compared them with a control group encompassing 121 geographic regions. In total, the researchers examined 280,161 hip or knee replacement procedures in 803 hospitals that participated in the program, and 377,278 hip or knee replacements in 962 hospitals located in the control areas.


    The researchers found hospitals in the regions chosen for mandatory participation spent 3.1%, or $812, less on each joint replacement episode than hospitals in the control areas. The researchers said hospitals in the regions chosen for mandatory participation spent less than hospitals in the control areas largely because hospitals in the mandatory regions were less likely to discharge patients to post-acute care facilities.

    Overall, the researchers concluded that Medicare saw "a modest reduction in spending per hip- or knee-replacement episode, without an increase in rates of complications" during the first two years of the CJR model (Gooch, Becker's Hospital CFO Report, 1/3; Lagasse, Healthcare Finance News, 1/4; Barnett, New England Journal of Medicine, 1/2).

    Advisory Board's take

    Eric Fontana, Managing Director, Data and Analytics Group and Kenna Hawes, Senior Data Analyst, Data and Analytics Group

    It's encouraging to see one of CMS' mandatory value-based care models achieve savings as designed over the first two years, even if the savings are modest. It will be interesting to observe the evolution of the acute-post acute provider dynamic as hospitals attempt to drive further savings through CY 2020, when the CJR program concludes.

    HHS Secretary Alex Azar appears to have far greater interest than his predecessor in pursuing bundled payment models. In light of demonstrable CJR savings, we wouldn't be surprised to see mandatory bundled payment programs with similar methodologic approaches (such as the previously-cancelled EPMs for cardiac conditions) get a second look.

    Next, take one step toward CJR success: Know your joint replacement episodic spending

    Advisory Board's Data and Analytics Group has developed a tool to help you assess your episodic spending and ensure your organization is on track for success under CJR.

    Our Joint Replacement Episode Profiler allows you to view national average episodic spending allocation by site of service and time intervals following anchor discharge, as well as modify your view from five to 90 days following anchor hospitalization.

    Access the Tool

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