Early Lessons on Bundled Payment at an Academic Medical Center

Abstract

Introduction: Orthopaedic care is shifting to alternative payment models. We examined whether New York University Langone Medical Center achieved savings under the Centers for Medicare and Medicaid Services Bundled Payments for Care Improvement initiative.

Methods: This study was a difference-in-differences study of Medicare fee-for-service patients hospitalized from April 2011 to June 2012 and October 2013 to December 2014 for lower extremity joint arthroplasty, cardiac valve procedures, or spine surgery (intervention groups), or for congestive heart failure, major bowel procedures, medical peripheral vascular disorders, medical noninfectious orthopaedic care, or stroke (control group). We examined total episode costs and costs by service category.

Results: We included 2,940 intervention episodes and 1,474 control episodes. Relative to the trend in the control group, lower extremity joint arthroplasty episodes achieved the greatest savings: adjusted average episode cost during the intervention period decreased by $3,017 (95% confidence interval [CI], -$6,066 to $31). For cardiac procedures, the adjusted average episode cost decreased by $2,999 (95% CI, -$8,103 to $2,105), and for spinal fusion, it increased by $8,291 (95% CI, $2,879 to $13,703). Savings were driven predominantly by shifting postdischarge care from inpatient rehabilitation facilities to home. Spinal fusion index admission costs increased because of changes in surgical technique.

Discussion: Under bundled payment, New York University Langone Medical Center decreased total episode costs in patients undergoing lower extremity joint arthroplasty. For patients undergoing cardiac valve procedures, evidence of savings was not as strong, and for patients undergoing spinal fusion, total episode costs increased. For all three conditions, the proportion of patients referred to inpatient rehabilitation facilities upon discharge decreased. These changes were not associated with an increase in index hospital length of stay or readmission rate.

Conclusion: Opportunities for savings under bundled payment may be greater for lower extremity joint arthroplasty than for other conditions.

Figure 1. Average episode expenditures by period

SOURCE: Authors’ analysis of Medicare claims data from April 1, 2011–June 30, 2012 (baseline period) and October 1, 2013–December 31, 2014 (risk-bearing period). NOTES: The figure shows mean episode costs for each condition during three different time periods. The Pre-baseline period (July 2009 through March 2011) is included to show the general trend before the start of the risk period. Baseline period is April 2011 through June 2012. Risk period is October 2013 through December 2014. All averages are adjusted to reflect changes in the proportion of cases with complications.

Figure 2. Ratio of risk period to baseline episode costs

SOURCE: Authors’ analysis of Medicare claims data from April 1, 2011–June 30, 2012 (baseline period) and October 1, 2013–December 31, 2014 (risk-bearing period). NOTES: The estimated ratios for each expenditure category and condition are based on average expenditures in each time period, adjusted for different distribution of complication status. The control condition estimates were further adjusted to account for changes in the mix of types reflected in the group. The “Other” expenditure category includes post discharge outpatient professional, durable medical equipment, inpatient psychiatric care, transfers to other hospitals, and hospice expenditures.

Figure 3. 90-day all cause readmission rates by condition and average length of stay during index admission

SOURCE: Authors’ analysis of Medicare claims data from April 1, 2011–June 30, 2012 (baseline period) and October 1, 2013–December 31, 2014 (risk-bearing period). NOTES: The figure shows all cause readmission rates for each condition during three different time periods. The pre-baseline period (July 2009 through March 2011) is included to show the general trend before the start of the risk period. Baseline period is April 2011 through June 2012. Risk period is October 2013 through December 2014. All averages are adjusted to reflect changes in the proportion of cases with complications.