How Patient Complexity and Surgical Approach Influence Episode-Based Payment Models for Colectomy

Area of Science:

• Health Economics
• Surgical Policy
• Healthcare Payment Models

Background:

• Bundled payment programs shift financial responsibility to hospitals for entire care episodes.
• Payment reforms are expanding beyond cardiac surgery and joint replacements to major operations like colectomy under Medicare's Bundled Payments for Care Improvement - Advanced Model.

Purpose of the Study:

• To evaluate how specific policies and surgical practice patterns influence hospital reimbursement in a bundled payment program for colectomy.
• To assess the impact of risk adjustment and laparoscopic surgery utilization on shared savings in colectomy bundled payments.

Main Methods:

• Population-based study using national Medicare Provider Analysis and Review (MedPAR) data (2010-2014).
• Simulation of per case reconciliation payments based on actual vs. benchmark episode spending for colectomy.
• Instrumental variable methods used to assess the influence of laparoscopic surgery variation on shared savings, controlling for selection bias.

Main Results:

• Under simulated bundled payments, 51.8% of hospitals achieved shared savings, with an average penalty of -$234 per case.
• Risk adjustment increased shared savings to 54.3% of hospitals, resulting in an average per case payment of +$237.
• Higher laparoscopic surgery rates correlated with increased per case reconciliation payments, with 70% laparoscopic procedures yielding +$294 compared to -$472 for 10%.

Conclusions:

• Bundled payment models for colectomy require strategic preparation for optimizing episode efficiency.
• Incorporating risk adjustment and increasing laparoscopic surgery utilization are potential strategies to achieve shared savings and enhance surgeon engagement in alternative payment models for surgical care.