title: What Financial Incentives Will Be Created by Medicare Bundled Payments for Total Hip Arthroplasty?
abstract: Bundled payments are gaining popularity in arthroplasty as a tactic for encouraging providers and hospitals to work together to reduce costs. However, this payment model could potentially motivate providers to avoid unprofitable patients, limiting their access to care. Rigorous risk adjustment can prevent this adverse effect, but most current bundling models use limited, if any, risk-adjustment techniques. This study aims to identify and quantify the financial incentives that are likely to develop with total hip arthroplasty (THA) bundled payments that are not accompanied by comprehensive risk stratification.
  
  
  
  Financial data were collected for all Medicare-eligible patients (age 65+) undergoing primary unilateral THA at an academic center over a 2-year period (n = 553). Bundles were considered to include operative hospitalizations and unplanned readmissions. Multivariate regression was performed to assess the impact of clinical and demographic factors on the variable cost of THA episodes, including unplanned readmissions. (Variable costs reflect the financial incentives that will emerge under bundled payments).
  
  
  
  Increased costs were associated with advanced age (P < .001), elevated body mass index (BMI; P = .005), surgery performed for hip fracture (P < .001), higher American Society of Anaesthesiologists (ASA) Physical Classification System grades (P < .001), and MCCs (Medicare modifier for major complications; P < .001). Regression coefficients were $155/y, $107/BMI point, $2775 for fracture cases, $2137/ASA grade, and $4892 for major complications. No association was found between costs and gender or race.
  
  
  
  If generalizable, our results suggest that Centers for Medicare and Medicaid Services bundled payments encompassing acute inpatient care should be adjusted upward by the aforementioned amounts (regression coefficients above) for advanced age, increasing BMI, cases performed for fractures, elevated ASA grade, and major complications (as defined by Medicare MCC modifiers). Furthermore, these figures likely underestimate costs in many bundling models which incorporate larger proportions of postdischarge care. Failure to adjust for factors affecting costs may create barriers to care for specific patient populations.
authors.affiliation: Department of Orthopaedics, University of North Carolina Hospitals, Chapel Hill, North Carolina.
authors.forename: R Carter
authors.initials: RC
authors.lastname: Clement
authors.affiliation: Department of Orthopaedic Surgery, Jefferson University, Philadelphia, Pennsylvania.
authors.forename: Michael M
authors.initials: MM
authors.lastname: Kheir
authors.affiliation: School of Medicine, University of North Carolina Hospitals, Chapel Hill, North Carolina.
authors.forename: Adrianne E
authors.initials: AE
authors.lastname: Soo
authors.affiliation: Department of Orthopaedics, Hospital for Special Surgery, New York, New York.
authors.forename: Peter B
authors.initials: PB
authors.lastname: Derman
authors.affiliation: Department of Orthopaedics, Hospital of the University of Pennsylvania, Philadelphia, Pennsylvania.
authors.forename: L Scott
authors.initials: LS
authors.lastname: Levin
authors.affiliation: Department of Anesthesiology and Critical Care, University of Pennsylvania Health System, Philadelphia, Pennsylvania.
authors.forename: Lee A
authors.initials: LA
authors.lastname: Fleisher
mesh_terms: D000368:Aged; D019644:Arthroplasty, Replacement, Hip / Q000191:economics*; D003365:Costs and Cost Analysis; D005260:Female; D005102:Health Expenditures; D006620:Hip Fractures; D006761:Hospitals; D006801:Humans; D007297:Inpatients; D008297:Male; D008484:Medicaid; D006278:Medicare / Q000191:economics*; D009042:Motivation; D064872:Patient Care Bundles / Q000191:economics*; D020379:Risk Adjustment; D014481:United States
keywords: Centers for Medicare and Medicaid Services; bundled payments; financial incentives; risk adjustment; total hip arthroplasty