Volume Increases and Shared Decision-making in Joint Replacement Bundles

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In April 2016, the Centers for Medicare and Medicaid Services (CMS) enacted a major policy change by mandating for the first time that providers participate in an alternative payment model. The Comprehensive Care for Joint Replacement (CJR) program requires nearly 800 hospitals and thousands of physicians across 67 markets to accept bundled payments for major joint replacement of lower extremity (MJRLE). Hospitals must bear financial risk for care episodes beginning with elective MJRLE admission and extending 90 days after discharge. In July, CMS announced its intention to add hip and femur fracture to CJR and expand mandatory bundles to patients admitted for acute myocardial infarction (AMI) or coronary artery bypass graft surgery in 98 markets.1
These mandatory bundles build upon the Bundled Payment for Care Improvement (BPCI) program, an ongoing CMS demonstration in which 539 hospitals and physician practices are voluntarily participating under “Model 2,” and accept bundled payment for episodes that encompass acute hospitalization and postacute care.
Although data from independent evaluations are lacking, early evidence from BPCI Model 2 suggests that bundled payment may benefit patients and providers.2,3 Medicare's own evaluation after the second year of BPCI demonstrated an approximate 8% decrease in per episode spending for MJRLE bundles with stable-to-improved quality.3 Patient-reported functional outcomes, such as return to mobility and pain, also seemed to improve among a subsample.
Despite these results, however, one major concern about bundled payment—raised again in response to the recent CMS study—is that overall Medicare spending may not decrease if providers respond by increasing the volume of procedures.4 Such a compensatory response could occur because in contrast to population-based payment models such as Accountable Care Organizations, under bundled payment providers retain the incentive to do more because they are paid on a per-episode basis. For example, additional analysis of the CMS study demonstrated that even though per-episode spending for MJRLE was lower among BPCI participants, both case volume and total MJRLE episode payments were higher than in nonparticipant hospitals. The feared attributes of this volume response are potential demand inducement by physicians and hospitals attempting to add volume, as well as inappropriate patient selection that leads to more procedures for healthy or low-risk patients and decreases access for higher-risk patients.
In this perspective, we argue that although policymakers should be vigilant about unintended consequences such as inappropriate patient selection, neither volume increases nor a resulting lack of spending reductions inherently signals policy failure. Instead, if procedures become higher-quality and lower-risk under bundled payment, volume increases may actually be patient-centered.
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