Home E-Weekly January 10, 2017

Do Bundled Payments Cut Joint Replacement Costs?

Published: January 9, 2017

ALL INCLUSIVE Medicare's bundled payment for joint replacements model began in 2009.

Medicare's bundled payment model can decrease the cost of total joint replacement surgery by 20% without sacrificing quality outcomes, according to new research published in JAMA Internal Medicine.

The assessment of 3,738 hip and knee replacements performed at 5 hospitals of the Baptist Health System (BHS) network in San Antonio, Texas, shows the average cost of the procedures and 30 days of post-op care decreased from $26,785 to $21,208 between 2008 and 2015. The savings were realized primarily through a 29% drop in the cost of implants and a 27% decrease in spending on post-op recovery care, according to the study.

Medicare reimbursed joint replacements based on the fee-for-service payment model at the beginning of the study period, but in January 2009 began the voluntary trial of the bundled payment model, which pays hospitals a single amount for surgery and 30 days of follow-up care. Hospitals paid under the bundled payment format are incentivized to reduce the cost of care, especially related to expensive recoveries in rehab facilities, in order to increase the gap between total expenses and Medicare's fixed reimbursement payments.

The findings demonstrate how bundled payments contribute to savings related to the costs of in-hospital surgical treatment and post-discharge recovery care, says study lead author Amol S. Navathe, MD, PhD, an assistant professor in the department of medical ethics and health policy at the University of Pennsylvania's Perelman School of Medicine in Philadelphia.

Says Dr. Navathe, "Policymakers should take note of the fact the results suggest hospitals may directly benefit in bundled payment models."

Daniel Cook

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