Bundled Payment Model Reduced Medicare Spending by Cutting Post-Acute Care

Preliminary results from the bundled payment initiative focused on joint replacements suggest that savings under the program has come largely from cutting skilled nursing and other long-term care services.

The results from the early stages of the Comprehensive Care for Joint Replacement (CJR) bundled payment model came shortly after an announcement from the Centers for Medicare & Medicaid Services (CMS) that the Next Generation Accountable Care Organization (ACO) Model saved $62 million by cutting spending in skilled nursing facilities.

The early evaluation results drew from the initial stages of CJR model implementation, using episodes initiated in the first performance year — when all CJR hospitals in the 67 metropolitan statistical areas participated. That timeframe includes episodes initiated on or after April 1, 2016 through December 31 of that same year. The lower extremity joint replacement (LEJR) episodes began with the hospitalization for surgery and extended through the 90 days after hospital discharge.

Bundled payments allow participants to reap the savings if they can provide care under a certain spending target while maintaining quality. The CJR model holds participating hospitals financially accountable for the cost and quality of an episode of care, with CMS assessing whether the hospitals met quality and financial targets at the end of each model performance year.

The evaluation results suggest that CJR hospitals responded to the model by taking actions that moved patients to less intensive post-acute settings, which in turn led to statistically significant reductions in total episode payments. For LEJR episodes, average total payments fell by $910 more for CJR episodes, compared with control group episodes, and the payment reductions persisted throughout different kinds of episodes, according to the first annual report evaluating the CJR model.

Total episode payments decreased 3.3% more for CJR episodes than for control group ones, and the reductions in total episode payments were driven by decreasing the use of more intensive post-acute settings. The length of post-acute stay also declined significantly, with the average number of SNF days decreasing for patients with both elective and fracture episodes among CJR episodes.

It wasn’t entirely bad news for SNFs; for fracture episodes, the changes in utilization suggest CJR participant hospitals substituted SNFs for IRF care, though patients also spent fewer days in a SNF.

Interviewees from the hospital participants confirmed that their focus was on changing the use of post-acute care. They encouraged use of less expensive post-acute settings in response to the CJR model through expanding patient education and starting discharge planning earlier.  In addition, the participating hospitals increased coordination with post-acute providers and developed preferred provider networks.

This echoes findings published in Health Affairs last month indicating that hospitals participating in lower joint replacement episodes in either CJR or the Bundled Payments for Care Improvement (BPCI) program were steering patients home as a dominant strategy. Both increased coordination and preferred networks were notable features of the hospitals’ response.

Once mandatory in the first 67 geographic areas, CMS rolled back compulsory participation in the CJR program to 34 areas last fall.

Written by Maggie Flynn

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Maggie Flynn on Linkedin
Maggie Flynn
Business reporter at Aging Media Network
When she's not working, Maggie enjoys running, reading, writing and sports, in no particular order. Favorite things include murder mysteries, Lake Michigan and the Pittsburgh Penguins.

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