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Medicare's bundled payment experiment for joint replacements shows moderate savings

The model has resulted in just over a 3 percent reduction in costs, and analysts forecast this will increase as the model matures.

Jeff Lagasse, Associate Editor

Medicare's randomized trial of a new bundled payment model for hip and knee replacement surgeries led to $812 in savings per procedure, or a 3.1 percent reduction in costs, when compared with traditional means of paying for care, finds new research.

Published in the New England Journal of Medicine, the study found that the bundled payment model was also associated with a reduction in use of skilled nursing care after the hospitalization, but had no effects on complication rates among patients.

Bundled payments are an alternative payment strategy that health plans, Medicare and Medicaid are experimenting with to reduce expenses. Unlike traditional fee-for-service payments, bundled payments provide a single, fixed payment for a procedure and follow-up care rather than individually paying all parties separately.


In 2016, Medicare implemented the Comprehensive Care for Joint Replacement Model. In this randomized controlled trial, all hospitals in randomly selected cities had to accept a bundled payment model for hip or knee joint replacements. The program is the largest randomized policy experiment in Medicare to date of a new payment model.

Under the model, hospitals in the selected cities received bonuses or penalties depending on how much they spent on follow-up care 90 days after joint-replacement patients were discharged.

The new analysis showed that before accounting for administrative costs, bonuses and penalties, the bundled payment model resulted in a modest 3 percent savings for each patient and that complications rates did not increase. The cost savings were driven almost exclusively from reducing the use of post-acute care nursing facilities.

One concern that has been expressed over bundled payments is that such models may incentivize hospitals to avoid operating on sicker, more costly patients. The findings, however, showed that the model had little impact on the number of higher-risk patients who received lower extremity joint replacements.

The cost savings will likely continue to grow as the bundled payment model matures, the researchers said.


Initially the bundled-payment model for joint replacements was introduced as a voluntary option and enrolled more than 300 hospitals. Evidence of its success at lowering costs and maintaining quality led to a newer, mandatory program covering nearly 800 hospitals, as a prelude to a much wider use of bundled payment models.

Twitter: @JELagasse

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