Health Affairs: Ortho may be better than heart conditions for bundled payments

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In an analysis of Medicare data, researchers determined that hospitals faced lower financial risks for treating patients with hip fractures and joint replacements in a pilot program on bundled payment, which also assessed congestive heart failure and stroke. Increasing the episode length captured more costs and readmissions but did not add an equivalent amount of financial risk, they concluded in a study published in the September issue of Health Affairs.

Neeraj Sood, PhD, director of international programs in the Leonard D. Schaeffer Center for Health Economics and an associate professor of pharmaceutical economics and policy at the University of Southern California in Los Angeles, and colleagues examined the National Pilot Program on Payment Bundling that is included in the Affordable Care Act of 2010 to identify the advantages and disadvantages of the program. Under the bundled payment model, a hospital would receive a bundled payment for a continuum of care, from inpatient to post-acute and outpatient services. Because the program is voluntary, high financial risk likely would dissuade potential participants from joining.

“Bundled payments are increasingly seen as a way to reduce Medicare costs, increase coordination of care and improve quality,” Sood and colleagues wrote. “However, bundling may also have unintended adverse consequences, such as restricting patients’ choice of post-acute care providers and stinting on care.”

The researchers looked into what they considered two key design questions: the conditions to be included in the pilot and the length of an episode. They selected five common conditions: chronic obstructive pulmonary disease (COPD), congestive heart failure, stroke, lower extremity joint replacement and hip fracture. Financial risk, they noted, included variation in costs for a given condition and the potential to reduce costs without compromising patient outcomes.

They found joint replacements and hip fractures carried the lowest financial risk. COPD and stroke were 2.57 and 3.12 times more costly, respectively, largely due to variability in episode costs.

They pointed out that longer episodes of care increased the likelihood that the patient would stabilize but also brought in more cost variability, creating financial risks to hospitals. They found that longer episode lengths led to more costs and readmissions but not an equivalent amount of financial risk.

“The recent Bundled Payments for Care initiative offers another important avenue for studying the effects of alternative bundled payment design,” they concluded. “Such evidence would be of value not only to Medicare, but also to Medicaid and private insurers.”