Bundled Payments For Care Improvement Advanced: Effects On Hospital And CMS Spending, 2018-21

Area of Science:

• Health Economics
• Healthcare Policy
• Payment Reform

Background:

• The Bundled Payments for Care Improvement Advanced Model (BPCI-A) was designed to lower healthcare spending and create savings for the Centers for Medicare and Medicaid Services (CMS).
• The model's design evolved over four years, but its comprehensive impact on both hospital and CMS spending across this period remained unexamined.

Purpose of the Study:

• To evaluate the impact of the Bundled Payments for Care Improvement Advanced Model (BPCI-A) on hospital and Medicare spending.
• To analyze spending changes across different model years and care episodes for participating and nonparticipating hospitals.

Main Methods:

• A synthetic difference-in-differences analysis was employed.
• Utilized a 100% sample of Medicare fee-for-service beneficiary data from April 2014 to December 2021.
• Compared spending changes in 883 participating hospitals against 1,772 nonparticipating hospitals.

Main Results:

• BPCI-A achieved an average reduction of $324 in 90-day episode spending per hospital, with greater reductions observed in model years 3 and 4.
• Significant spending reductions were noted in orthopedic and neurological care episodes.
• Despite hospital savings, large incentive payments resulted in a net CMS loss of $171 million over the study period, though model year 4 showed net savings.

Conclusions:

• BPCI-A led to a shift in payments from skilled nursing facilities to hospitals, with minimal overall impact on the CMS budget.
• The study suggests that voluntary bundled payment models may not be effective in generating substantial savings for CMS.
• Further research into alternative payment models is warranted to achieve meaningful cost reductions for Medicare.