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 439 BPCI hip cases to the four other hospitals that did 459 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 1,574 primary hip 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 898 hips done during the 16-month BPCI initiative period with the 676 hips 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 14.1% (from $21,823 to $18,755, p=0.02) at the higher volume hospital and by 13.1% (from $32,138 to $27,940, p=0.02) at the lower volume hospitals. During the BPCI period, the mean Medicare target cost was $18,490 at the higher volume hospital and $25,021 at the lower volume hospitals (p<0.001). At the higher volume hospital, the major components of the savings included $526,028 from reduced readmission rates (11.5% versus 3.0%, p<0.001), $393,757 primarily due to reduced length of stay at skilled nursing facilities (mean 33 days versus 26 days, p=0.07), and $205,459 associated with a decreased percentage of patients using inpatient rehabilitation (6.6% versus 3.2%, p=0.03). At the lower volume hospitals, the major components of the savings included $1,002,447 associated with a reduction in the length of stay at skilled nursing facilities (mean 37 days versus 27 days, p<0.001), $487,356 associated with a decrease in the percentage of patients using inpatient rehab (11.6% versus 6.5%, p=0.01), and $355,695 associated with reduced readmission costs. Despite the savings, the mean reconciliation penalty was $184 per case at the higher volume hospital and $2,309 per case at the lower volume hospitals. Stratified by the type of hip replacement, reconciliation for elective primaries resulted in a mean reward of $848 per case for the 409 hips performed at the higher volume hospital and $2,497 per case for the 266 hips done at the lower volume hospitals. For hip fracture cases, reconciliation resulted in a mean penalty of $14,248 per case among the 30 hips done at the higher volume hospital and $8,932 per case for the 193 hips done at the lower volume hospitals.
Conclusions
Based on the reduction in costs and decreased readmission rates, the BPCI initiative is achieving its objectives. Although the higher and lower volume hospitals achieved savings during BPCI participation, the target costs were lower than the actual costs resulting in a reconciliation penalty that was driven by the cost of hip fractures. The reconciliation rewards associated with elective primary THAs compared to the substantial penalties associated with hip fractures support the premise that these groups should have different targets costs.
