Health Policy$ense

Savings from Bundled Payments for Joint Replacement: Chart of the Day

Results from voluntary Medicare program


Source: Spending And Quality After Three Years Of Medicare’s Voluntary Bundled Payment For Joint Replacement Surgery, Health Affairs, January 2020.

In Health Affairs, Amol Navathe and colleagues tell us what happened to quality and cost after three years of Medicare’s bundled payment policy for lower extremity joint replacement. The chart above summarizes changes in per-episode costs (quality was unchanged). A few notes on this rigorous evaluation:

  1. Per-episode spending decreased by 1.6% over three years, with savings limited to hospitals that entered the program early (before July 2015). This does not bode well for the new cohort of hospitals entering the next-gen bundled payment program (“BCPI Advanced”) as of January 1, 2020.
  2. In real 2016 dollars, 1.6% amounts to $377 per episode, from a baseline of $23,552. Proponents of bundled payment as a cost containment strategy may be disappointed, given that earlier peer-reviewed and CMS-contracted evaluations estimated saving of nearly 4%.
  3. The new study provides an estimate of the extent of patient selection (that is, savings attributable to picking favorable patients). Through the miracle of instrumental variables, the authors found that 27% of savings (beyond the $377) are driven by patient selection, a cause for concern in any voluntary program.

Bundled payments for joint replacement, as currently designed, are producing modest savings with no decrease in quality. On the other hand, bundled payments for medical conditions have not produced any savings at all, as a literature review in the same issue of Health Affairs concludes. More work is needed to identify the clinical conditions and the patient populations for whom bundled payments improve the value of care. The experience thus far may be useful to policymakers in improving the design of bundled payments to more fully capture their potential savings.

The January 2020 Health Affairs article, Spending And Quality After Three Years Of Medicare’s Voluntary Bundled Payment For Joint Replacement Surgery was authored by Amol S. Navathe, Ezekiel J. Emanuel, Atheendar S. Venkataramani, Qian Huang, Atul Gupta, Claire T. Dinh, Eric Z. Shan, Dylan Small, Norma B. Coe, Erkuan Wang, Xinshuo Ma, Jingsan Zhu, Deborah S. Cousins, and Joshua M. Liao.