Bundled Payment

How hospitals saved $1,000 per case in a mandatory bundle

July 3, 2019 5:10 pm
  • The prominent role of post-acute care in providing CJR savings echoed the experience of other bundled payment models.
  • Physician involvement provided a variety of savings to participant hospitals.
  • Patient complexity played a key role in several outcome categories.

Several hospital approaches were key to obtaining savings of nearly $1,000 per episode in Medicare’s first mandatory bundled payment model.

Hospitals saved Medicare an estimated $17.4 million through the program, according to a contractor’s report on the second-year results for the Comprehensive Care for Joint Replacement (CJR) model. Hospital spending decreased by an average of $997, or 3.7%, more for CJR episodes compared with episodes in a comparison group.

The Lewin Group report tracked CJR model results from its launch in April 2016 through December 2017. The model is ongoing, but it was modified by the Trump administration starting in 2018 to cut in half the number of hospitals required to participate. Total participation declined from more than 800 hospitals to about 470.

The CJR episode of care begins with the hospitalization for lower-extremity joint replacements and continues until 90 days after hospital discharge. The bundle includes all Medicare-covered items and services provided during this period. Because of uncertainty around the per episode payment decrease to providers, however, the estimated financial impact to Medicare ranges from a $41.2 million loss to a $75.9 million savings.

  • The roots of the savings identified by the Lewin researchers echoed those seen in other bundled payment programs, including:
  • Reductions in institutional post-acute care (PAC) use
  • Reductions in inpatient rehabilitation facility discharges by 27.4%
  • Decreases in per-case skilled nursing facility payments by $508 (through a 2.3-day length-of-stay decrease)
  • Increases in the share of CJR patients initially discharged to a home health agency (HHA)

Since there was no change in the proportion of patients who received HHA services at some point in the episode, there was no statistically significant change in HHA payments.

Reducing length of stay and taking other steps to derive savings

To reduce length of stay, hospitals implemented changes to pain management and physical therapy services, hospital officials told Lewin researchers.

“Hospital representatives also reported extending patient follow-up for a longer period and developing PAC protocols and preferred PAC provider networks to strengthen post-discharge outcomes,” the researchers wrote.

Savings steps that involved physicians included:

  • Sharing internal cost savings with partnering providers, such as orthopedic surgeons
  • Engaging surgeons in efforts to redirect patient-discharge destinations from SNFs to home
  • Improving care coordination after discharge to reduce readmissions

PAC providers said they increased collaboration with other healthcare providers, including hospitals, orthopedic surgeons, primary care providers and other PAC providers.

Participants reported implementing care redesigns, including:

  • Increasing physical therapy prior to surgery
  • Identifying higher-risk patients early to facilitate safe discharge
  • Changing pain management and physical therapy protocols
  • Extending the patient follow-up period
  • Developing PAC protocols and preferred PAC provider networks

Certain approaches helped hospitals thrive

Although most CJR hospitals received bonus payments under the model in at least one of the first two years, about one-quarter received none in either year. The share receiving bonus payments increased from 52% in the first year to 69% in the second.

A broad range of hospitals were included in CJR “due to its mandatory, random design,” according to the report, but common characteristics of recipients that were more likely to receive bonus payments included:

  • Tending to have more CJR episodes
  • Starting the CJR model with episode costs below their quality-adjusted target price
  • Having higher quality scores
  • Having lower average patient complexity

Meanwhile, the 23% of CJR hospitals that did not receive a bonus payment in either year had lower CJR volume, performed a smaller share of such procedures in their markets and had higher average patient complexity. Hospitals that did not earn bonus payments until the second year tended to have a reduction in the complexity of their patient mix between years.

Factors that drove hospital investments in bundled payments

Hospital leaders’ decisions on how to implement bundled payments were driven by details of the local market, possession of a complete orthopedic service line, internal resources and past experiences.

“Many interviewees indicated that the opportunity to prepare for future bundled payment models was a strong motivating factor in hospitals’ response to the model. Hospital representatives indicated that prior hospital initiatives or participation in other payment and delivery models helped prepare for the CJR model,” the report stated.

Hospital officials interviewed by the Lewin researchers said the influence of the CJR model was not distinguishable from market factors that influenced decisions about their orthopedic service lines.


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