Bundled payments cut Medicare costs, study finds

A recent change in the way Medicare pays for joint replacements is saving millions of dollars annually — and could save billions — without impacting patient care, a new study has found (Source: “Bundled Payments Work, Study Finds, But HHS Nominee No Fan,” Kaiser Health News, Jan. 3, 2017).

Under the new program, Medicare effectively agrees to pay hospitals a set fee — a bundled payment — for all care related to hip or knee replacement surgery, from the time of the surgery until 90 days after.  Starting in April 2016, CMS required around 800 hospitals in 67 cities to use the bundled payment model for joint replacements and 90 days of care after the surgery as part of the Comprehensive Care for Joint Replacement program. The program had previously been road-tested on a smaller number of hospitals on a voluntary basis, which formed the focus of the research.

Tom Price, the president-elect’s HHS nominee, a congressman from Georgia and an orthopedic surgeon, has actively opposed the idea of mandating bundled payments for these orthopedic operations, calling it “experimenting with Americans’ health,” in a letter to the Medicare agency just last September. In addition, the agency which designed and implemented the experiment, the Center for Medicare and Medicaid Innovation, was created by the Affordable Care Act to devise new methods for encouraging cost-effective care. It will disappear if the act is repealed, as President-elect Trump has promised to do.

The study appeared Tuesday in the Journal of the American Medical Association. Though one of its authors is Dr. Ezekiel Emanuel, a professor at the University of Pennsylvania who helped design the ACA, the research relies on Medicare claims data from 2008 through mid-2015, long before the presidential election.

The study found that hospitals saved an average of 8 percent under the program, and some saved much more. Price has been skeptical that bundled payments did save money, but the researchers estimate that if every hospital used this model, it would save Medicare $2 billion annually.