A Bundle of Joy

As expected, CMS announced last week that its “Comprehensive Care for Joint Replacement” program was on its deathbed. This program “bundles” Medicare payment for hip and knee joint replacement surgery into a single payment to cover hospital and post-acute care. Initially rolled out on a trial, voluntary basis, the program became mandatory for all hospitals in 67 areas of the country. The plan was to extend it to 98 metropolitan areas. Instead, is cutting back the number of areas where the program is mandatory to 34. Since Tom Price, Secretary of the Department of Health and Human Services, has previously stated that the mandatory bundling initiative was tantamount to “experimenting with Americans’ health,” and CMS director Seema Verma concurred, the retrenchment bodes ill for the health of the program going forward.

Now, bundling as instituted by CMS is not perfect. The way the program works is that hospitals are held accountable for the cost of care during the hospitalization and for 90 days during the post-acute period. The hospital gets a bonus if the total cost of care falls below a set threshold and pays a penalty if it exceeds that threshold, incentivizing the hospital to work with orthopedists and rehab facilities to optimized care. Concerns have been raised that hospitals are unfairly penalized for providing care to sick, complex patients because the reimbursement rate is not adjusted to account for these factors. Hospitals have protested that they should not be the only ones to be held to account—why not extend the circle of responsibility to include orthopedists and the post-acute units themselves? But while the program could be improved, it has nonetheless shown great promise.

First there was the voluntary program, which led to a greater fall in costs when reimbursement came as a bundled payment than with conventional fee for service payment. More impressive, since after all a voluntary program selects for those institutions that are best prepared to improve performance, were the preliminary results of the mandatory program. In one of the 67 areas where the model was mandatory, average Medicare expenditures per episode fell 21 percent; in patients with complications, expenditures fell 14 percent. A little more than half of the savings came from internal hospital cost reductions; the remainder came from decreased post-acute spending. Quality remained unchanged.

What’s important to realize is that bundling makes sense from a clinical perspective. It forces the players to coordinate care—if the acute care hospital sends patients out too soon or does not communicate with the rehab facility, readmissions are likely to result. It appropriately thinks in terms of “episodes” of care—ideally, it should incorporate the evaluation and diagnostic studies done prior to admission as well as hospital and rehabilitative care.

“Bundling” is the conceptual basis of managed care. It encourages everyone participating in patient care to share in the responsibility for clinical outcomes. The Comprehensive Care for Joint Replacement program is a step in the right direction. We should go forwards, not backwards. Let Tom Price know!