Abstract
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Background
The Bundled Payments for Care Improvement (BPCI) initiative was introduced to reduce healthcare costs while maintaining quality. We examined data from a healthcare system comprised of five hospitals that elected to participate in the BPCI Major Joint Replacement of the Lower Extremity Model 2 initiative beginning July 1, 2015. We compared one hospital that did 507 BPCI knee cases to the four other hospitals that did 566 cases. Stratifying the data by hospital volume, we sought to determine if costs decreased during the BPCI period, how the savings were achieved, and if savings resulted in financial rewards for participation.
Methods
The Medicare data included the target cost for each episode (based on historical data from 2009–2012 for each hospital that was adjusted quarterly) and actual Part A and Part B spending for 90 days. Using 1,836 primary knee replacements, we analyzed the costs associated with the anchor hospitalization, inpatient rehabilitation, skilled nursing facilities, home health, outpatient physical therapy and readmission to compare the 1,073 knees done during the 16-month BPCI initiative period with the 763 knees done during the 1-year period preceding BPCI participation. Owing to the nonparametric distribution of the cost data, a Mann-Whitney U test was used to compare the higher volume hospital with the four lower volume hospitals.
Results
Compared to the preceding year, the mean episode of care cost during BPCI participation decreased by 8.5% (from $20,853 to $19,087, p=0.24) at the higher volume hospital while remaining virtually unchanged (going from $20,383 to $20,380, p=0.10) at the lower volume hospitals. During the BPCI period, the mean Medicare 90-day target cost was $18,307 at the higher volume hospital and $22,287 at the lower volume hospitals (p<0.001). At the higher volume hospital, the major components of the savings included $367,290 from reduced readmission rates (5.7% versus 8.7%, p=0.11), $207,608 primarily due to a reduction in the length of stay at skilled nursing facilities (mean 15 days versus 25 days, p=0.005), and $130,894 associated with a decreased percentage of patients using inpatient rehabilitation (3.2% versus 4.9%, p=0.22). Although offset by other cost increases, the largest component of the savings at the lower volume hospitals was $262,548 due to a decrease in the percentage of patients (2.3% versus 4.8%, p=0.04) using inpatient rehabilitation. Despite its savings, the mean reconciliation penalty was $851 per case at the higher volume hospital while the lower volume hospitals received a mean reward of $2,165 per case.
Conclusion
Based on the reduction in costs and decreased readmission rates, the BPCI initiative is achieving its objectives. Despite an 8.5% decrease in costs, the $18,307 target based on historical data resulted in an $851 penalty per case at the higher volume hospital. In contrast, as a result of a $3,980 higher target, the lower volume hospitals were rewarded even though they did not achieve cost savings. As structured, there is no incentive for centers with historically low costs to participate in BPCI.
