New: Bundled Payments Save Money for Medical Condition Episodes (Not Just Surgery)

In a recent article in the British Journal of Medicine, VSSL's Dr. Joshua Liao and colleagues from the University of Pennsylvania published the first known analysis demonstrating that hospitals participating in Medicare's voluntary bundled payment program achieved financial savings with stable quality for episodes related to common medical conditions (acute myocardial infarction, congestive heart failure, chronic obstructive pulmonary disease, and pneumonia).

Figure 1. Risk adjusted changes in spending associated with hospital participation in bundled payments for care improvement for four medical conditions, 2011-16. The associations between participation in the bundled payments for care improvement initiative (BPCI) and changes in spending were estimated with separate difference-in-differences models, using a hospital condition specific indicator of entry to the BPCI programme, patient and time varying market characteristics, and quarterly time and hospital fixed effects. All models were generalized linear models with a log-link function and gamma distribution. Low volume hospitals with fewer than 10 episodes for each condition were treated as a single hospital to enable clustered models to converge for the skilled nursing facility care and outpatient professional fees outcomes. BPCI hospital participation was associated with a decrease in all institutional post-acute care spending and skilled nursing facility care spending specifically, as well as outpatient professional fees, combined with increases in spending for home health services

Major policy implications from the study:

1. The association between medical condition bundles and long term savings is reassuring to policymakers pursuing bundles as a cost containment strategy

2. That savings grew after one year of participation suggests that medical condition bundles require time to produce benefits

3. A mechanism for achieving savings in medical condition bundles appears to be reducing the duration of skilled nursing care

4. Policy design can lead to impacts on measured performance

Dr. Liao and colleagues conclude:

In this longer term evaluation of a large national programme on medical bundled payments in the US, participation in bundles for four common medical conditions was associated with savings at three years. The savings were generated by practice changes that decreased use of high intensity care after hospital discharge without affecting quality, which also suggests that bundles for medical conditions could require multiple years before changes in savings and practice emerge.

Read the full article here, as well as an accompany editorial detailing a potential technical, but highly relevant, policy design issue here. Find out more about Dr. Liao here and his work in bundled payments here.