Medicare's Bundled Payment initiative: most hospitals are focused on a few high-volume conditions

Abstract

The Bundled Payments for Care Improvement initiative is a federally funded innovation model mandated by the Affordable Care Act. It is designed to help transition Medicare away from fee-for-service payments and toward bundling a single payment for an episode of acute care in a hospital and related postacute care in an appropriate setting. While results from the initiative will not be available for several years, current data can help provide critical early insights. However, little is known about the participating organizations and how they are focusing their efforts. We identified participating hospitals and used national Medicare claims data to assess their characteristics and previous spending patterns. These hospitals are mostly large, nonprofit, teaching hospitals in the Northeast, and they have selectively enrolled in the bundled payment initiative covering patient conditions with high clinical volumes. We found no significant differences in episode-based spending between participating and nonparticipating hospitals. Postacute care explains the largest variation in overall episode-based spending, signaling an opportunity to align incentives across providers. However, the focus on a few selected clinical conditions and the high degree of integration that already exists between enrolled hospitals and postacute care providers may limit the generalizability of bundled payment across the Medicare system.

Keywords: Cost of Health Care; Financing Health Care; Health Reform; Health Spending; Hospitals.