Bundled Payments for Joint Replacements Saved Medicare Money — with No Quality Declines

A major bundled payment program for hip and knee replacement episodes has produced savings for the government without corresponding declines in quality, according to a new study — confirming the central motive behind a program that has drawn the ire of post-acute operators.

The Bundled Payments for Care Improvement model (BPCI) seeks to both decrease Medicare expenditures and streamline reimbursements by providing one set amount for all providers involved in an episode of care — which may involve major losses for providers should costs per episode go over the expected reimbursement.

Based on three years’ worth of results, patients who entered a BPCI-participating hospital ended up with total episodic savings of $377, or a drop of 1.6% compared to non-participating providers. At the same time, there were “no differential changes in quality,” according to a team led by researchers at the University of Pennsylvania; the results were released Monday in the most recent issue of the journal Health Affairs.


The bulk of the savings came from early participants in the model, though the researchers noted the potential for sustained success in their results.

“Early 1.8% savings came from early entrants that sustained savings over time,” they wrote. “These results suggest that observed decreases in SNF and IRF spending continued in the late BPCI period and align with evidence from other value-based payment arrangements such as accountable care organizations and the Alternative Quality Contract that organizations can achieve savings over longer time periods.”

Under the most recent update to the model, known as BPCI Advanced, hospitals and physician groups are in charge of the application procedures and for the 90-day post-acute care following surgery — not nursing homes.


This has caused consternation among skilled nursing providers, who already tend to see BPCI and other bundled payment initiatives — such as the Comprehensive Care for Joint Replacement (CJR) model — as a potential drain on reimbursements. Because the skilled nursing setting costs more than home health, the thinking goes, the hospitals and provider networks in the driver’s seat of BPCI plans see reducing SNF days as an obvious target for savings.

“Bundling is not your friend,” Gregory Burke, who serves as director of innovation strategies at the United Hospital Fund, told SNN last May.

Phil Fogg, CEO of skilled nursing provider Marquis Companies, expressed similar concerns last year.

“If the hospital owns the bundles, I really do think it’s one of the biggest threats to our profession,” Marquis Companies CEO Phil Fogg said during a panel discussion on the future of skilled nursing. “When you get another provider in the health care continuum who’s profiting from lowering our utilization, I have a problem with that.”

The early results bore out skilled nursing operators’ concerns, according to researcher Joshua Liao, medical director of payment strategy at UW Medicine in Washington state.

“What we see from our analysis is that among organizations participating in LEJR [Lower Extremity Joint Replacement] bundles, one response is to shift from discharging patients to SNFs towards home, with or without home health, and that this shift is that one source of savings observed under LEJR bundles,” Liao told SNN in an e-mail.

Still, Anne Tumlinson, founder and CEO of consulting firm Anne Tumlinson Innovations, suggested that bundled payments offer a similar upside to the popular Institutional Special Needs Plans (I-SNPs), or in-house Medicare Advantage plans.

“If you’re thinking about being an I-SNP, why aren’t you thinking about being a bundled payment convener?” she told SNN in April 2019.  “It’s kind of the same — same capabilities, same objective and goal, which is to move farther up the food chain,” she told SNN.

The University of Pennsylvania study cites an initial CMS evaluation in 2013 that found a 3.9% decrease in the costs for these surgeries and after care under the bundled care model, without negative effects on quality of care.

In 2018, CMS expanded the bundled payment program with the BPCI Advanced model for the next five years, offering “bundled payment for up to 37 clinical episodes that correspond to various surgical procedures and medical conditions” — and enrolling about 1,300 hospitals and physician groups.

Although CMS has conducted its own research of the bundled payment program, a lack of outside national reporting points to questions regarding longer-term outcomes of savings outside of the two cycles of participant involvement — which involved a 15-month gap between cycles, the researchers reported.

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