Bundled Payments Save Money ‘Nearly Exclusively’ By Cutting Skilled Nursing

A key mandatory bundled payment program saved the government money almost entirely through the reduction of skilled nursing facility reimbursements, a new study from researchers at Harvard University concluded.

Between 2016 and 2017, the Comprehensive Care for Joint Replacement (CJR) bundled payment model resulted in spending reductions of $1,084 per episode, the team concluded; after factoring in reconciliation payments awarded to top performers, the net savings worked out to $212 apiece, or a decline of 0.7%.

The researchers — led by Michael Barnett of the Harvard T.H. Chan School of Public Health and Andrew Wilcock of Harvard Medical School — attributed that spending drop almost entirely to a 5.9% relative decline in the number of episodes that resulted in a patient discharge to a post-acute care facility.


“Decreased Medicare spending on hip- and knee-replacement episodes at hospitals in the CJR program was nearly exclusively related to reductions in the use of post–acute care services in skilled nursing facilities and inpatient rehabilitation facilities,” the team wrote in their study, published this week in the New England Journal of Medicine. “This is not surprising, because post–acute care services are a large and highly variable fraction of spending in hip- or knee- replacement episodes, and hospitals have strong financial incentives to reduce the frequency of post–acute care services.”

In particular, spending on post-acute services dropped $527 per episode among participants in CJR, along with a 1.7-day reduction in length of stay for patients that spent time in SNFs or other PAC settings. Notably, the team found no substantial changes in patient outcomes associated with the changes in discharge patterns and usage.

“Post–acute care services may be the easiest target for hospitals to decrease episode-level spending because it is often unclear when these services are beneficial or what intensity of post–acute care is most appropriate,” they wrote.


The Harvard group focused on the CJR because of its initial mandatory participation requirement, though they noted that the Trump administration eased that aspect of the program in 2017. Under the CJR model, hospitals either share savings or face penalties for not meeting certain spending-reduction benchmarks set by the Centers for Medicare & Medicaid Services — in this case, specifically related to inpatient knee and joint replacements.

Other researchers have reached similar conclusions to the Harvard scholars. CMS itself reported that the CJR resulted in per-episode payment reductions to SNFs of $455 between the second and fourth quarters of 2016, while spending on home health agencies rose slightly. A similar analysis of other bundled-payment initiatives from University of Pennsylvania researchers found that hospitals primarily attempt to adapt to the models by discharging patients home as often as possible.

“Hospitals are really pushing as many of their patients as possible to go home, and that represents a cultural shift, in that the home environment is now being seen by hospitals as a legitimate setting for post-acute care,” UPenn’s Jane Zhu told SNN this past summer.

Barnett expressed a similar conclusion in a statement regarding his study findings.

“The big question has always been whether this new model can lead hospitals to meaningfully reduce spending without harming patients,” he said. “This study indicates that with the right financial incentive, hospitals can save money without compromising quality by sending more patients home rather than to a nursing facility.”

Just how far SNF usage will decline remains a matter of speculation, as CJR and other bundled-payment programs are still relatively new on the scene — and the care coordination they require may take years to reach full optimization. For instance, a September study from consulting firm Avalere Health found that accountable care organizations (ACOs), a similar kind of risk- and profit-sharing structure, need an average of three years before they begin producing savings, regardless of the specific risk/reward profile.

And while Barnett noted that a direct comparison between ACOs and the CJR program isn’t clear, the trend toward declining SNF volume is present in both models, he said.

“I think SNF volumes will continue to decline, though where the bottom will be is anyone’s guess,” Barnett told SNN via e-mail. “Most patients going to SNFs probably need that level of care, but there’s still a squishy gray zone of patients who may not need all that much SNF care or any at all.”

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