The Impact of Medicare Bundled Payments: Evidence from a Nationwide Randomized Evaluation for Lower Extremity Joint Replacement

Bundled payments (BP) are a key part of Medicare’s shift away from the traditional fee-for-service (FFS) payment model. We propose to study a nationwide randomized-controlled trial (RCT) of bundled payments for knee and hip replacements that was designed and implemented by CMS and launched in April 2016.
This bundled payment model for lower-extremity joint replacement holds acute care hospitals (ACHs) financially responsible for the spending and quality of an entire episode of care. It targets two types of hospital admissions: major joint replacement or reattachment of lower extremity with and without major complications or comorbidities (MS-DRG 469 and 470). An episode begins with an ACH stay that results in a discharge in one of the two included DRGs, and ends 90 days after ACH discharge. Before each performance year begins, hospitals receive their target prices from CMS, determined by historical hospital and regional episode expenditures and a 3% discount factor to reflect Medicare’s portion of savings from CJR. Hospitals are eligible for reconciliation payment from CMS if they spend less than the target prices for an episode, provided that they met an “acceptable” quality standard. Conversely, they are responsible for paying the difference if they spend more than the target prices.

2016-04-01

2020-12-31

Share of LEJR admissions discharged to institutional Post Acute Care (PAC)

[Time Frame: discharge destination from index LEJR admission]
[Safety Issue: No]
Definition: Institutional Post Acute Care includes SNF, LTCH, and IRF

1. Share of LEJR admissions discharged to any Post Acute Care (PAC)
2. Number of days in Institutional PAC during episode
3. Total covered Medicare payments during episode
4. Total covered Medicare payments for Institutional PAC during episode
5. Total covered Medicare payments for any PAC during episode
6. Total beneficiary payments owed out of pocket during episode

1. Definition: Any PAC includes Institutional Post Acute Care plus home health agency.
2. Definition: number of days in institutional PAC facilities (sum of length of stays in SNF, LTCH and IRF)
3. Definition: Total covered Medicare payments are defined as the total amount of Medicare Part A and part B FFS payments that are included in the bundle. Note that, as defined, total covered Medicare payments are the payments that would be made in the absence of BP (i.e. payments that would occur under FFS Medicare). These are counterfactual for the treatment MSAs. If the data become available, we plan to also look at actual payments made during the episode (which would include any reconciliation payments or repayments to or from hospitals in the treatment MSAs).

We propose to study a randomized-controlled trial (RCT) of bundled payments for knee and hip replacement called Comprehensive Care for Joint Replacement (CJR). The RCT was designed by CMS, launched in April 2016, and is expected to last 5 years. Randomization was conducted at the Metropolitan Statistical Area (MSA) level, with 67 MSAs and about 800 hospitals assigned to the treatment group. The CJR model is a Medicare bundled payment model for lower-extremity joint replacement (LEJR) that holds acute care hospitals (ACHs) financially responsible for the spending and quality of the entire episode of care. The CJR model targets two types of hospital admissions: major joint replacement or reattachment of lower extremity with and without major complications or comorbidities (MS-DRG 469 and 470). An episode begins with an ACH stay that results in a discharge in one of the two included DRGs, and ends 90 days after ACH discharge.

In July 2015, CMS publicly announced its exclusion criteria for eligible MSAs in its proposed rule, and posted the list of 196 eligible MSAs on the CJR website. The exclusion criteria were designed to limit the sample to MSAs with a reasonable volume in the LEJR DRGs and to exclude MSAs with a high take-up of BPCI. CMS also published the randomization procedure (including strata and treatment probabilities within strata), and the resulting 75 treatment MSAs (80 Federal Register 134, 2015). We have verified that we can replicate CMS’s randomization procedure.

Randomization was done by the federal government.

CMS conducted randomization at the MSA level

Yes

196 MSAs

196 eligible MSAs x number of LEJR episodes

75 MSAs assigned to treatment group, 121 control