Health Equity

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Can Mandatory Value-Based Payment Models Improve Health Equity?

LDI Fellows Find the Comprehensive Care for Joint Replacement Model Narrowed Disparities in Complications for Dually Eligible Beneficiaries

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Clinician examining a person's knee.

In a recent study, LDI Fellows analyzed the Comprehensive Care for Joint Replacement (CJR) model and found that it reduced disparities in joint replacement complications for dually eligible Medicare beneficiaries.

Looking back at its first decade, the Centers for Medicare and Medicaid Services (CMS) Innovation Center recognized that advancing health equity had to be a priority for all future payment models. If the mission of value-based payment was indeed to improve quality, then the target needed to be intractable disparities in outcomes for historically marginalized populations. New models would set equity goals, not just spending goals, aided by better data on beneficiaries’ social needs.

One barrier to addressing equity has been engaging safety-net providers in payment models. Health care providers that have traditionally chosen to participate in voluntary models tend to serve fewer Medicare beneficiaries with low income, who belong to racial minorities, or who live in rural areas.

Mandatory models offer an alternative approach. For instance, requiring participation from all health care organizations in a given area allows a broader population to access the potential benefits of payment innovation. In bundled payment models, for example, individuals with low income could benefit from better care coordination. Holding providers accountable for outcomes may focus more attention on the real determinants of those outcomes, which include social as well as medical factors.

Mandatory models, however, could also pose risks to safety-net providers and the patients that they serve. Without appropriate risk adjustment or design flexibilities, safety-net providers may incur disproportionate financial penalties, further impeding their ability to provide quality care. Prior evidence from the largest mandatory CMS model to date, the Comprehensive Care for Joint Replacement (CJR) Model, also suggests that the model led to fewer surgeries for patients who are Black—who already have less access to this important surgery than white individuals.

The equity implications for mandatory models, therefore, are uncertain.

In our recent study published in Health Services Research, we took a new look at CJR. We wanted to examine whether this mandatory model made any difference in longstanding outcome disparities for individuals with low income—specifically in terms of the higher rates of surgical complications among beneficiaries who are dually eligible for Medicare and Medicaid.

We used Medicare data to analyze outcomes for 1,603,555 Medicare beneficiaries who received lower extremity joint replacement at CJR and non-CJR participating hospitals between 2011-2017. We found that among participating hospitals, disparities narrowed following participation in the model. While the absolute decrease in the complication rate was small—0.8 percentage points (See Figure 1)—this corresponded to a nearly 20% relative reduction in the disparity in complications between dual and non-dual-eligible individuals.

Figure 1: Risk‐standardized plot of joint replacement complication rates for dual‐eligible (solid) and non‐dual‐eligible individuals (dashed), for participating (green) and nonparticipating hospitals (gray), before and after mandatory participation in bundled payments (red line). Source: Kilaru et al., Health Services Research,  2024.

Implications

This study is the first to demonstrate reduced disparities for a quality outcome among individuals who are low income under value-based payment. Importantly, CJR did not include specific incentives to improve health equity. Furthermore, the model used standard risk adjustment methods to account for population differences between hospitals, rather than new approaches to account for social risk or specialized tracks for safety-net facilities.

CMS has considered equity-focused features in the design of its new—and mandatory—bundled payment model: Transforming Episode Accountability Model (TEAM). Starting in 2026, 742 U.S. hospitals will receive bundled payments for five common surgical procedures, including lower extremity joint replacement. Of note, TEAM offers less financial risk to safety-net hospitals, addressing a key concern for these institutions. The model will also include risk adjustment for social as well as clinical factors to ensure that benchmarks account for social determinants of health. Participants will be encouraged to submit health equity plans and collect data on health-related social needs.

The new model offers a critical additional test for the lessons learned in CJR, including the results of our study. Will the model reduce access for individuals that might be deemed too costly to receive surgery? Will safety-net hospitals make changes in care delivery because of bundled payments without incurring disproportionate penalties? And, as we saw with our study, will the model improve disparities for individuals who have traditionally experienced worse outcomes? The success of payment models has long been determined by whether they reduce health care spending—we hope that equity outcomes are just as important to the long-term evolution of payment reform.

The study, “Association Between Mandatory Bundled Payments and Changes in Socioeconomic Disparities for Joint Replacement Outcomes,” was published on August 11, 2024, in Health Services Research. Authors include Austin S. Kilaru, Joshua M. Liao, Erkuan Wang, Yueming Zhao, Jingsan Zhu, Grace Ng, Torrey Shirk, Deborah S. Cousins, Genevieve P. Kanter, Said Ibrahim, and Amol S. Navathe.

Author

Austin Kilaru, MD, MSHP

Assistant Professor, Emergency Medicine, Perelman School of Medicine

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