Wide Variation in Surgical Spending Within Hospital Systems: A Missed Opportunity for Bundled Payment Success

We sought to measure the extent of variation in episode spending around total hip replacement within and across hospital systems.

Bundled payment programs are pressuring hospitals to reduce spending on surgery. Meanwhile, many hospitals are joining larger health systems with the stated goal of improved care at lower cost.

Cross-sectional study of fee-for-service Medicare patients undergoing total hip replacement in 2016 at hospital systems identified in the American Hospital Association Annual Survey. We calculated risk- and reliability-adjusted average 30-day episode payments at the hospital and system level.

Average episode payments varied nearly as much within hospital systems ($2515 between the lowest- and highest-cost hospitals, 95% confidence interval $2272-$2,758) as they did between the lowest- and highest-cost quintiles of systems ($2712, 95% confidence interval $2545-$2879). Variation was driven by post-acute care utilization. Many systems have concentrated hip replacement volume at relatively high-cost hospitals.

Given the wide variation in surgical spending within health systems, we propose tailored strategies for systems to maximize savings in bundled payment programs.