Care Processes Experience with Designing and Implementing a Bundled Payment Program for Total Hip Replacement

Volume 41 Number 9 September 2015 406 Bundled payments, also known as episode-based payments, represent the reimbursement of health care providers for projected costs over a distinct episode of care.1–4 They are an alternative to the current fee-for-service payment system, in which hospitals and physicians are paid for each service provided.5–7 A number of health systems have begun to report their experience with bundled payments, both with private payers and with Medicare,3 and states such as Arkansas and Massachusetts have fostered the development of bundled payment programs as a key health care reform strategy.7,8 Bundled payments are now being scaled to the national level in the United States, as the Affordable Care Act specifies that the Centers for Medicare & Medicaid Services (CMS) implement a bundled payment pilot program.9 In August 2011 CMS released a request for applications for the Bundled Payments for Care Improvement Initiative in advance of the national pilot program. In its request, CMS stated that bundled payments are “one way to encourage physicians, hospitals, and other health care providers to work together to better coordinate care for patients when they are in the hospital and after they are discharged.”10 As of July 2014, there were 105 providers—hospitals, physicians, and postacute agencies—in the “risk-bearing” phase of the CMS bundled payment program, and 6,424 providers in the non–risk bearing phase, many of whom are expected to undertake some risk starting in 2015.11 In July 2015 CMS announced a proposal for the Comprehensive Care for Joint Replacement Model, which would test bundled payment for hip and knee replacement by requiring all hospitals to participate in 75 geographic areas.12 Despite high levels of enthusiasm for bundled payment programs,1,2 their impact on clinical and financial outcomes remains uncertain. Furthermore, the best approach to creating and implementing such a program is not well established. In this article, we describe our health system’s experience in developing and implementing a bundled payment program and examine its effects on quality and cost for patients under going Care Processes