Medicare bundled payment model reduced joint replacement costs

Using a bundled payment model was able to reduce joint replacement Medicare and health system costs without reducing quality of care, according to researchers from the University of Pennsylvania Perelman School of Medicine.

Their findings, published in JAMA Internal Medicine, represent the first effort to study the combined hospital cost and Medicare claims data to identify drivers of joint replacement cost savings. Specifically, the researchers analyzed the costs and quality of care for hip and knee replacements from 2008 to 2015 at the Baptist Health System (BHS) in San Antonio, Texas. They found that the bundled payment model resulted in a 20.8% reduction in costs.

“This study outlines one bundling participant achieved hospital and post-hospital discharge savings while reducing Medicare payments — all without compromising quality,” Amol S. Navathe, MD, PhD, of the University of Pennsylvania Perelman School of Medicine, said in a press release. “The results offer guidance for both providers and a new administration considering decisions that will impact the health of patients and communities nationwide. Policymakers should take note of the fact the results suggest hospitals may directly benefit in bundled payment models.”

Under a bundled payment model, an insurer reimburses hospitals a single, fixed amount for a common procedure and associated costs, rather than paying for separately itemized services and supplies, the release noted. In January 2009, CMS began a voluntary trial of a bundled payment model for various procedures, including knee and hip replacements. BHS was one of the participants.

According to the release, among the 3,738 patients at BHS who received joint replacement surgery during the study period and had no pre-existing complications, the average cost of care, plus 30 days of post-acute care, fell from $26,785 in 2008 to 21,208 in 2015, a reduction of 20.8% per patient.

In addition, the release noted a 29% reduction in the average per-case cost of an artificial joint, accomplished in part using evidence-based data to engage surgeons and manufacturers. Also, there was a 27% drop in the average per-case spending on post-acute care, achieved once post-acute care was added to bundles in 2013.

“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,” Navathe said. “There are still more savings on the table.”


Navathe AS. JAMA Intern Med. 2017;doi: 10.1001/jamainternmed.2016.8263

Disclosure: The researchers report support in part from the Commonwealth Fund.

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