Mandatory bundled payment program drains hospitals with complex patients, study says

Hospitals that take care of complex patients could take a financial hit under Medicare's new mandatory bundled payment approach for certain types of care, according to a new study by University of Michigan Institute for Healthcare Policy researchers.

The Comprehensive Care for Joint Replacement program pays hospitals a set bundled amount for the full episode of care provided to the hip/knee replacement patient instead of paying individual charges for each aspect of care like the surgery, hospital stay, and post-op care. However, providers may see payment cuts to a hospital if their spending is above target, and increase payments if spending is below a target.

[Also: Mammogram reimbursement would work best as bundled payments]

U-M researchers used anonymous data from 23,251 Michigan residents that had undergone hip or knee replacement surgery at 60 different hospitals during a three-year period from 2011 to 2013. Hospitals that treated sicker, older patients, or those who had other health problems  were at risk of losing hundreds of thousands of dollars because of the higher complexity of their patients and the resulting higher costs to treat them.

Researchers proposed using a standard risk-adjustment measure to adjust calculations and take into account patient complexity to lessen the financial impact. They calculated the net difference in reconciliation payments with and without risk adjustment, and found that reconciliation payments were reduced by $827 per episode for each standard-deviation increase in a hospital's patient complexity. However, they also found that risk adjustment could increase reconciliation payments to some hospitals by as much as $114,184 annually, researchers said.

[Also: Cardiac bundled payments could yield big winners and losers]

Only a few months old, the payment program only applies to hip and knee replacements in 800 hospitals in select metro areas, but is highly likely to broaden its scope to other conditions and other hospitals, therefore increasing the potential financial impact to hospitals with complex patients.

Moreover, the researchers said there is still time to introduce risk-adjustment into the CJR program because the formula that dictates payments and penalties for hospitals based on regional price comparison isn't due to take real effect until the program's third year.

"Patient complexity matters," said Chandy Ellimoottil, a urologist and lead author of the new research. "Rolling out a one-size fits all model could really hurt hospitals that are trying to appropriately treat patients. We don't want to incentivize reducing access to care for Medicare patients who are medically complex."

Twitter: @BethJSanborn