January 5, 2017

Study: Health system saves 20 percent on joint replacements under bundled payment model

Daily Briefing

    A study finds that Medicare's new bundled payment model is tied to substantial cost savings without any reduction in care quality—but the future of the Care for Joint Replacement Model under the Trump administration remains far from certain.

    How mandatory bundled payments work—and why their future is uncertain

    Currently, providers participating in the mandatory joint care bundled payment model, called the Comprehensive Care for Joint Replacement (CJR) Model, are held to episodic cost thresholds for hip and knee replacements for Medicare beneficiaries. Hospitals that meet certain benchmarks for quality and cost measures can receive a bonus payment, while hospitals that exceed the set target can be penalized. About 800 hospitals located in 67 U.S. regions have participated in the model since April 2016.

    According to KHN, the bundled payment model could be eliminated under the new administration. President-elect Donald Trump's nominee for HHS Secretary, Rep. Tom Price (R-Ga.)—an orthopedic surgeon—has argued that mandatory payment models exceed CMS' authority and  curb providers and patients' decision-making power.         

    Bundled-payment model linked to cost savings, study finds

    While CJR's future remains uncertain, a new study published in JAMA Internal Medicine found that after Baptist Health System—a five-hospital health system in San Antonio, Texas—adopted bundled payments, the system saw joint replacement costs drop by about 21 percent while care quality remained consistent.

    For the study, researchers at the Perelman School of Medicine at the University of Pennsylvania and New York University School of Medicine examined the effects of bundled payments for joint replacements at Baptist Health, which began testing bundled payments in 2008. Specifically, the researchers looked at the costs and quality for joint replacements performed between 2008 and 2015 among 3,738 Medicare beneficiaries who had no significant preexisting complications.

    The researchers found that Baptist's average cost for a joint replacement plus 30 days of post-acute care (PAC) dropped by about 21 percent, from $26,785 in 2008 to $21,208 in 2015. Researchers attributed the decrease primarily to declines in the average per-case cost of artificial joints and PAC spending. According to the researchers, the hospital system reduced the average per-case cost of an artificial joint by about $2,000—a 29 percent reduction—by using what Baptist's surgeons determined to be the least costly medically equivalent implants. Meanwhile, after PAC was incorporated into the bundled payment model in 2013, Baptist Health's per-case PAC decreased by more than $2,400, a 27 percent reduction.

    The researchers also found that performance on quality metrics remained consistent or improved. Patients at Baptist were no more likely than patients nationwide to be readmitted or require emergency care. In addition, according to the study, extended hospital stays declined by 67 percent even as the severity of patient conditions stayed the same.

    The researchers estimated that if every hospital adopted the bundled payment model, Medicare would save $2 billion annually. 

    Implications

    Lead author Amol Navathe, an assistant professor in the department of Medical Ethics and Health Policy at Perelman, said the study suggested the health system has room for further cost savings. "On the whole, the health system's rapid achievement of savings through changes in a few key areas suggests that hospitals in the long run will be able to reduce costs in many areas, not only internally but through greater care coordination with external facilities," he said.

    According to a press release from Perelman, the findings suggest that cost-reduction strategies need to incentivize physicians and hospital managers to be effective. "It's striking that those costs fell only with the introduction of a bundled payment model that incentivized physicians too," Navathe said.

    Further, Navathe argued that the findings seem to contradict the argument that bundled payments reduce doctors' and patients' influence over care decisions. He said the study suggests that the bundled payment model encourages collaboration among providers, patients, and administrators because the model curbs costs only if physicians work together to create standardized care pathways. "Preplanning, setting of expectations and communicating up-front is resource intensive, when they have the incentive to do that they were willing to expend the extra resources to make that happen," Navathe said (Bluth, Kaiser Health News, 1/3; Ross, "On Call," STAT News,  1/4; Perelman School of Medicine release, 1/3; Navathe et al., JAMA Internal Medicine, 1/3; Murphy, Becker's Hospital Review, 1/4).

    One step toward CJR success: Know your joint replacement episode 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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