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January 9, 2020

Do bundled payments actually reduce costs? Here's what a new review found.

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    Bundled payment models have reduced costs for lower extremity joint replacements, but have had no measurable impact on the costs of other procedures and conditions, according to a study published Monday in Health Affairs

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

    CMS, insurers shift toward bundled payments

    The study comes as CMS and private health insurers have shifted toward implementing bundled payments for certain procedures and conditions. Under bundled payment models, insurers, Medicare, or state Medicaid programs give providers a lump sum for the cost of the total episode of care. The specifics of the payment arrangement varies from program to program but, generally, if the episode costs less than the budgeted amount, providers get to keep the savings. In some cases, providers may be responsible for the extra cost if the total cost of care exceeds the provider payment.

    The Trump administration has been testing and developing new bundled payment models to determine whether episode-based payments could reduce Medicare spending and improve quality of care. For instance, CMS last year proposed a mandatory bundled payment model to replace Medicare's current fee-for-service payment model for radiation oncology in certain geographic regions.

    Separately, insurers and state Medicaid programs last October started testing bundled payments in maternity care to reduce cesarean section rates and improve costs.

    Are bundled payment models effective?

    To determine whether bundled payment programs are effective in reducing costs and improving quality, researchers reviewed 20 studies published between 2016 and 2019 that analyzed the effects of three federal bundled payment models: the Acute Care Episode Demonstration, the Bundled Payments for Care Improvement (BPCI) model, and the Comprehensive Care for Joint Replacement model.

    Of the 16 studies that examined the models' impacts on cost, six found a "significant decrease" in episode payments for hip and knee replacements, according to the researchers. For instance, they noted that one of the studies found a $1,166 decrease in episode spending for patients undergoing a knee or hip replacement.

    But the researchers wrote that, while there's evidence showing bundled payments reduced costs for lower-extremity joint replacements, studies have failed to "demonstrate similar benefits for other clinical episodes." The researchers found no significant changes in spending on care episodes for cardiovascular conditions, spinal fusion, or revision surgery for a worn-out joint replacement.

    In addition, the researchers found no evidence that bundled payments were associated with any changes in patient outcomes or the quality and volume of care.

    What the findings could mean for bundled payment models

    The researchers said bundled payments might be more successful at reducing costs for lower-extremity joint replacements than other conditions because the patients receiving the joint replacements tend to be younger, healthier, and have "lower rates of poverty and disability than patients" with other medical conditions that were included in the bundled payment programs, such as cardiovascular conditions. Lower-extremity joint replacements also are less complex procedures than others included in the bundled payment models, such as spinal fusions, making it easier for providers to save money initially and reduce the need for post-operative services.

    Further, providers have said it is likely easier to save money on joint replacements because treatments for other conditions included in the bundled payment models can rely on patients changing their habits, which providers cannot control, Modern Healthcare's "Transformation Hub" reports.

    Ultimately, the researchers warned that implementing bundled payment models for treatments for more complex conditions could reduce patient access to the services. Given the penalty for cases that exceed the bundled payment target price, providers may be reluctant to accept these patients, which could in turn lead to decreased access to care," the researchers wrote.

    The researchers added that their findings indicate CMS should "include more robust risk stratification of patients in bundled payment programs to allow higher payments for more complex patients."

    But Ezekiel Emanuel, a health policy professor at the University of Pennsylvania who has worked on research regarding bundled payment models, said it's too early to adequately evaluate bundled payment models, noting that the models are in their early stages and it could take time for savings to come to fruition. Further, he said the models' effects could be more robust as private insurers begin implementing the models (Meyer, "Transformation Hub," Modern Healthcare, 1/6; King, FierceHealthcare, 1/7).

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