Bundled payments cut PAC episode costs by 27%, study shows

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Medicare's bundled payment program for hip and knee replacements succeeded in cutting costs, largely due to reduced spending on post-acute care, new research shows.

The study, published Tuesday by researchers at the University of Pennsylvania, used Medicare claims and hospital cost data to pinpoint what was driving savings in the Comprehensive Care for Joint Replacement bundled payment model. Results showed that the model cut total spending in each joint replacement episode by more than 20%, resulting in savings of more than $5,500 per beneficiary.

Those savings were largely achieved through a decrease in per-case spending on post-acute care, as well as a drop in the average cost of the artificial joint itself. Over the time span analyzed in the study — 2008 to 2015 — artificial joint costs fell an average of 29%, or $1,920. The average spending on post-acute care dropped 27%, or more than $2,400 per beneficiary.

The study also found no change, and in some cases an improvement, in the quality of care experienced by beneficiaries included in the program.

“On the whole, the health system's rapid achievement of savings through changes in a few key areas suggests that hospitals in the long run will be able to reduce costs in many areas, not only internally but through greater care coordination with external facilities,” said lead author Amol Navathe, M.D., Ph.D. “There are still more savings on the table.”

Results of the study appear in JAMA Internal Medicine.