Hospitals saved money under Medicare bundled-payment program

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Medicare payments for lower extremity joint replacement care fell by 3.3% among participating hospitals compared to a control group in the first year of a bundled payment pilot program, according to the Centers for Medicare & Medicaid Services (CMS). Quality of care was maintained in both settings, the federal health insurer said.

CMS required all hospitals in 67 geographic areas to participate in the five-year “Comprehensive Care for Joint Replacement” (CJR) program aimed at lowering healthcare costs and improving outcomes. The program went into effect in January 2016 and bundles payments for hip and knee replacements from hospital admission to 90 days after discharge.

CMS attributed the cost savings to reduced use of the hospitals’ post-acute care services. The CJR model produced a 3.6%, or $880, relative reduction in total payments for elective joint replacement episodes, which accounted for 88% of total volume. Episodes due to fracture produced a 3%, or $1,345, relative reduction in payments. Cost savings occurred in geographic areas with historically high and low joint replacement episode costs. Higher-payment areas saw a 3.9% or $1,127 drop in payments while lower-payment areas’ costs fell by 2.3% or $577 per episode.

Quality of care was measured by readmission rates, emergency department visits, and mortality. Interviewees from CJR participant hospitals reported that they chose to respond to the model by beginning planning earlier, educating patients about discharge to less intensive post-acute care settings, and coordinating with those settings’ providers.

“These positive early results are particularly notable because hospitals were mandated to participate in the CJR model,” the CMS report says. “This means that rather than making a business decision to join a voluntary model, CJR participant hospitals had to evaluate their available resources and market conditions to determine whether and how to act in response to the model’s incentives.”

The CJR payment covers “all related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries,” CMS said when it announced the program in 2015.  At the end of each year, CMS compares each hospital’s total episode payments to its target price. The agency rewards those hospitals whose payments fall below their target price, and beginning in year two, began requiring hospitals with cost overruns to pay the difference.

The CJR program aimed to save about $295 million over 5  years, but in December, CMS cut the program effectively in half, from 67 geographic areas participating to 34, meaning about 470 hospital participants instead of 800. That cuts the expected savings from the CJR program to $189 million, according to CMS.

The agency also delayed the start of two other bundled-payment pilots, the Episode Payment and Cardiac Rehabilitation Incentive Payment models, which were slated to launch Jan. 1, 2018, claiming that the moves give it more room to design and test ways to improve quality and care coordination. Those pilot programs were estimated to save Medicare $170 million over five years.

 

 

 

 

 

 

 

 

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