Health Policy$ense

Unintended Consequences of Bundled Payment on Racial Disparities

Said Ibrahim's timely JAMA Viewpoint

The projected growth, and widespread variation, in the cost of joint replacement surgeries prompted Medicare to introduce a bundled payment plan for these procedures.  In a new JAMA Viewpoint, Said Ibrahim, a LDI Senior Fellow and Co-Director of the VA’s Center for Health Equity Research and Promotion, and co-authors Hyunjee Kim and K. John McConnell recommend that the Comprehensive Care for Joint Replacement (CJR) program be evaluated for its impact on well-documented racial disparities in utilization and outcomes of elective joint replacement.

Hip and knee replacements are the most common surgeries for Medicare beneficiaries, with  the number of joint replacements projected to increase drastically in the next two decades. Many policymakers and providers have enthusiastically embraced bundled payments for their potential to reduce costs and improve quality. The Centers for Medicare and Medicaid Services (CMS) aims to have 50 percent of traditional Medicare payments tied to alternative payment models, of which bundled payments are a part, by 2018.

Under the CJR model, hospitals are accountable for Medicare costs related to lower extremity joint replacement for 90 days after hospital discharge. The program currently involves acute care hospitals from 67 randomly selected metropolitan areas, for which a target payment rate has been set based on historical costs and regional averages. For the first year of the program (2016), if payments for each episode are lower than the target rate, hospitals will receive the difference. On the flipside, starting in 2017 hospitals will have to repay Medicare for exceeding the target payment. CMS projects that CJR will save $343 million over the next five years, with most savings generated from reduced readmissions and better use of post-acute care.            

In JAMA, Ibrahim and colleagues make the case that racial disparities in total joint replacement for African American patients manifests in two main ways – the likelihood of having joint replacement surgery and the quality of postoperative care. Ibrahim’s research has found that African American patients are less likely to undergo joint replacement surgery than white patients, even though arthritis, work limitations and severe pain disproportionately affect African American patients. This is partially explained by African American patients’ lower preference for receiving total joint replacement, although Ibrahim stresses that other complex reasons are at play, including provider and system-level factors.  

A different study by Ibrahim showed that, even after adjusting for individual and facility-level factors, African American patients undergoing elective knee joint replacement are more likely to be discharged to an inpatient rehabilitation facility (IRF) or a skilled nursing facility (SNF), rather than to home with qualified health services. Research has shown that patients discharged to an IRF/SNF had a significantly higher risk of 30-readmission to the hospital than those discharged home with health services.

The JAMA Viewpoint urges researchers to carefully consider how bundled payments may interact with existing disparities. With more risk shifted on to the provider side, hospitals may choose to avoid high-risk patients. This includes patients of low socioeconomic status, in which African Americans are disproportionately represented, potentially widening the racial gap in undergoing joint replacement surgery.

The authors also present, more optimistically, the possibility that the CJR program might reduce postoperative disparities in patients who receive joint replacement surgery. The CJR’s strong financial incentives to provide high-value postacute care may benefit all patients, regardless of race and socioeconomic status. “The gains in quality may be greatest for black patients who are historically exposed to higher rates of poor-quality postacute care and higher risk of readmissions,” the authors note.

The recent evaluation of CMS’s Bundled Payments for Care Improvement initiative, which is separate from the CJR, does not include race in its analysis of patient characteristics. In its look ahead, however, it does recognize that as the program matures, one of the most important advances will be the ability to examine outcomes across less aggregated clinical groups. The words of caution from Ibrahim and colleagues in JAMA could not be timelier and are an important contribution to the ongoing development and evaluation of bundled payment models. Policymakers, researchers and providers need to evaluate these new models in a more comprehensive way, and fine-tune them accordingly.