Medicare's New Bundled Payment For Joint Replacement May Penalize Hospitals That Treat Medically Complex Patients.
In an effort to reduce episode payment variation for joint replacement at US hospitals, the Centers for Medicare and Medicaid Services (CMS) recently implemented the Comprehensive Care for Joint Replacement bundled payment program. Some stakeholders are concerned that the program may unintentionally penalize hospitals because it lacks a mechanism (such as risk adjustment) to sufficiently account for patients' medical complexity. Using Medicare claims for patients in Michigan who underwent lower extremity joint replacement in the period 2011-13, we applied payment methods analogous to those CMS intends to use in determining annual bonuses or penalties (reconciliation payments) to hospitals. We calculated the net difference in reconciliation payments with and without risk adjustment. We found that reconciliation payments were reduced by $827 per episode for each standard-deviation increase in a hospital's patient complexity. Moreover, we found that risk adjustment could increase reconciliation payments to some hospitals by as much as $114,184 annually. Our findings suggest that CMS should include risk adjustment in the Comprehensive Care for Joint Replacement program and in future bundled payment programs.
Chandy Ellimoottil (cellimoo@med.umich.edu) is an assistant professor in the Department of Urology and the Institute for Healthcare Policy and Innovation at the University of Michigan, in Ann Arbor. He is also director of analytics for the Michigan Value Collaborative.
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Andrew M. Ryan is an associate professor in the Department of Health Management and Policy, University of Michigan.
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Hechuan Hou is a statistician in the Michigan Value Collaborative.
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James Dupree is an assistant professor in the Department of Urology and the Institute for Healthcare Policy and Innovation, University of Michigan. He is the codirector of the Michigan Value Collaborative.
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Brian Hallstrom is an assistant professor in the Department of Orthopaedic Surgery at the University of Michigan and the codirector of the Michigan Arthroplasty Registry Collaborative Quality Initiative.
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David C. Miller is an associate professor in the Department of Urology and the Institute for Healthcare Policy and Innovation, University of Michigan.
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D000368:Aged; D019643:Arthroplasty, Replacement / Q000191:economics* / Q000706:statistics & numerical data; D003191:Comprehensive Health Care / Q000191:economics; D017046:Cost Savings; D016208:Databases, Factual; D017050:Episode of Care; D005260:Female; D005544:Forecasting; D017721:Hospital Costs; D006801:Humans; D007345:Insurance Claim Review; D007349:Insurance, Health, Reimbursement / Q000191:economics; D008297:Male; D006278:Medicare / Q000191:economics*; D008824:Michigan; D008875:Middle Aged; D017063:Outcome Assessment, Health Care; D064872:Patient Care Bundles / Q000191:economics / Q000639:trends*; D012189:Retrospective Studies; D014481:United States
Health Economics; Health Reform; Health Spending