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Cost of Joint Replacement Using Bundled Payment Models.

Amol S Navathe1, Andrea B Troxel2, Joshua M Liao3

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Bundled payments for joint replacement surgery significantly reduced Medicare expenditures and hospital costs. Savings were achieved through internal cost reductions and decreased post-acute care spending, particularly when included in the payment bundle.

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Area of Science:

  • Health economics
  • Healthcare policy
  • Orthopedic surgery

Background:

  • Medicare's Comprehensive Care for Joint Replacement (CJR) model mandates bundled payments for joint replacements.
  • Limited data exists from prior demonstration projects (ACE, BPCI) to guide hospitals in redesigning care for mandatory bundles.
  • This study analyzes the impact of bundled payments on quality, costs, and post-acute care spending.

Purpose of the Study:

  • To analyze changes in quality, internal hospital costs, and post-acute care (PAC) spending for lower extremity joint replacement bundled payment episodes.
  • To assess the impact of bundled payment models on Medicare episode expenditures and hospital savings.

Main Methods:

  • Observational study of 3942 patients undergoing lower extremity joint replacement at Baptist Health System (BHS).
  • BHS participated in Acute Care Episodes (ACE) and Bundled Payments for Care Improvement (BPCI) demonstration projects.
  • Analysis of Medicare payments, readmissions, emergency department visits, length of stay, internal costs, and PAC spending.

Main Results:

  • Average Medicare episode expenditures decreased by 20.8% for uncomplicated joint replacements ($26,785 to $21,208).
  • Readmissions and emergency department visits showed non-significant declines; prolonged length of stay decreased significantly (67.0%).
  • Hospital savings were derived from internal cost reductions (51.2%) and PAC spending reductions (48.8%), with implant cost reductions being a major contributor.

Conclusions:

  • Bundled payment for joint replacement procedures was associated with substantial hospital savings and reduced Medicare payments.
  • Decreases in PAC spending were observed only when PAC costs were included in the bundled payment.
  • The findings suggest bundled payments can effectively reduce healthcare costs in joint replacement episodes.