The case for keeping Medicare's mandatory bundled-payment programs

Hospitals that receive bundled payments for joint replacements either voluntarily or through Medicare's mandatory programs, vary by size and volume, but not in spending or quality. 

That signals a need for both programs, according to a new study from researchers at the Perelman School of Medicine at the University of Pennsylvania and published in Health Affairs. 

What the results mean to hospital finance and operations leaders is that voluntary programs tend to engage larger non-profit hospitals, whereas some hospitals with lower volumes and fewer resources might only participate under a mandatory program.

Some policymakers, contending that mandatory bundled-payment programs disadvantage some hospitals, have called for these programs to be strictly voluntary. The study, however, found no evidence that hospitals in the mandatory program were obviously disadvantaged compared to their voluntary counterparts.

Medicare's bundled-payment model is a cost-containment strategy that has been rolled out on a trial basis for more than 2,000 U.S. hospitals in recent years. The most prominent bundled-payment programs have been those relating to knee and hip replacement surgeries, which account for a large portion of annual Medicare spending. Participating hospitals are incentivized to keep their spending per patient -- for the joint-replacement surgery plus a few months of post-operative care -- below a standard benchmark figure, while maintaining a high level of care quality.

Initially the bundled-payment model for joint replacements was introduced as a voluntary option and enrolled more than 300 hospitals. Evidence of its success at lowering costs and maintaining quality led to a newer, mandatory program covering nearly 800 hospitals, as a prelude to a much wider use of bundled payment models. 

But there have been concerns that some covered hospitals will not be able to achieve cost savings, and will stop performing these surgeries rather than lose money on them. The Centers for Medicare and Medicaid Services recently started cutting back its mandatory bundled payment programs, putting more emphasis on voluntary programs.

Using data from CMS and the American Hospital Association, researchers found no large differences in baseline spending, care quality, or financial risk exposure for voluntary versus mandatory program hospitals. But there were significant organizational differences between the two groups. Those in the voluntary program were of course self-selected; they were on average larger, and handled a greater volume of joint-replacement surgeries. To some extent that was expected, as the same research team found that hospitals that save money under bundled-payments programs tend to be larger, with a higher volume of procedures. 

What that means, though, is that hospitals in the voluntary program probably are not as representative of hospitals nationwide.

"In other words, we think mandatory bundled-payment programs can produce more generalizable evidence of cost-savings," the authors said.

Meanwhile, many in healthcare are waiting for CMS to release the provider data for the BPCI Advanced Program. The agency originally indicated it would release this information in May. Once CMS shares the information, providers will have until August 1 to review their data, adjust program participation, and prepare for the official kickoff in October.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com