Meaningful Dollars Saved with Bundled Payments

Feb 24, 2017

Bundled payments led to a "win-win-win-win" reality for one Texas hospital struggling to contain costs for joint replacement surgeries. In this audio interview, two physicians discuss the complexities and benefits of bundled payments.

By 2018, the Centers for Medicare and Medicaid Services (CMS) intends to change its reimbursement practices to reflect the adoption of alternative payment models, such as the Comprehensive Care for Joint Replacement (CJR) program - a bundled payment program that was adopted in 2016. 

Under this program, 800 hospitals in 67 urban areas must accept bundled payments for hospital, physician and post-acute care services for 90 days. An analysis published in JAMA Internal Medicine last month shows that for one health system, the five-hospital Baptist Health System in San Antonio, bundled payments benefited both the hospitals and its patients (in this case, patients undergoing joint replacement). 

“I think the most important point here is that the bundled design really matters,” said Amol S. Navathe, M.D., Ph.D., an assistant professor of medicine and health policy at the University of Pennsylvania’s Perelman School of Medicine, University of Pennsylvania, and corresponding author of the study. “This was a win-win-win-win,” he said in a podcast interview with Prem N. Ramkumar, M.D., MBA, a resident physician  in orthopaedic surgery at the Cleveland Clinic.  

Dr. Navathe’s explains why hospitals and patients are on the winning side in this study: 

  • Patients win because outcomes for joint replacements improved in this study. Prolonged length of stays decreased by 67 percent over four years.
  • Medicare savings amounted to up to $5,500 per episode, which is a substantial savings as compared to expenditures for accountable care organizations on a per patient basis.
  • Baptist itself experienced an almost 30 percent drop in implant costs. “Most ACO programs and other alternative payment model providers take on a lot of risk without a lot of upside,” Dr. Navathe said.
  • The fourth win is for physicians. Bundled payments allow cost savings sharing with physicians.

This study was conducted during a period in which Medicare payments for joint replacements increased by 5 percent, but for Baptist, they experienced a 20 percent reduction in joint replacement costs. It is an indicator of how bundled payments might perform on a larger scale.

Please click on the audio feature above to hear Drs. Navathe and Ramkumar discuss bundled payments.

 

References:

Amol S. Navathe, MD, PhD; Andrea B. Troxel, ScD; Joshua M. Liao, MD; Nan Nan, MS; Jingsan Zhu, MS;Wenjun Zhong, PhD; Ezekiel J. Emanuel, MD, PhD. “Cost of Joint Replacement Using Bundled Payment Models,” JAMA Internal Medicine. Published online January 3, 2017. DOI:10.1001/jamainternmed.2016.8263

 

x