Bundled payments for surgical colectomy among medicare enrollees: Potential savings vs the need for further reform

Faiz Gani, Martin A Makary, Elizabeth C. Wick, Jonathan Efron, Sandy H Fang, Bashar Safar, John Hundt, Timothy M. Pawlik

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IMPORTANCE: The Bundled Payments for Care Improvement Initiative was proposed by the Centers for Medicare and Medicaid Services to obtain and reward a greater value of care. Still in its infancy, little is known regarding the potential effects of the Bundled Payments for Care Improvement Initiative on hospital payments and net margins. OBJECTIVE: To investigate the potential effects of the Bundled Payments for Care Improvement Initiative on net margins among Medicare patients undergoing colectomy at a tertiary care hospital. DESIGN, SETTING, AND PARTICIPANTS: Cross-sectional retrospective analysis conducted in October 2015. Medicare enrollees undergoing an elective colectomy at a large tertiary care hospital between January 1, 2009, and December 31, 2013, were identified using diagnosis-related group and International Classification of Diseases, Ninth Revision, Clinical Modification diagnosis codes. MAIN OUTCOMES AND MEASURES: Multivariable linear regression analysiswas performed to calculate risk-adjusted, diagnosis-related group-specific hospital costs and payments for each patient. Net margins were calculated as the difference between total hospital costs and total payments received. RESULTS: A total of 821 Medicare enrollees underwent an elective colectomy and met inclusion criteria. The median age of patients was 69 years (interquartile range [IQR], 65-74 years), with 51.3%being female. Postoperative complications were observed among 27.5%of patients (n = 226) and the median length of stay was 8 days (IQR, 5-14 days). The median risk-adjusted cost among all patients was $24 951 (IQR, $16 197-$38 922). Risk-adjusted costs were higher among patients who developed a postoperative complication ($42 537 [IQR, $28 918-$72 316] vs $22 829 [IQR, $14 820-$26 150]; P <.001) and among patients with an observed to expected length of stay greater than 1 ($36 826 [IQR, $24 951-$65 016] vs $16 197 [IQR, $14 182-$23 998]; P <.001). The median payment under the fee-for-service structure was $29 603 (IQR, $17 742-$44 819), resulting in an overall net margin of $3177 (IQR, -$1692 to $10 773), with 33.7%of patients (n = 277) contributing to an overall negative margin. In contrast, under the bundled payment paradigm, the net margin per patient was $3442 (IQR, -$9311 to $8203), with 41.7%of patients (n = 342) contributing to a net negative margin. CONCLUSIONS AND RELEVANCE: Postoperative complications, length of stay, and total hospital costs were strongly associated with hospital costs. Payments under the bundled payments system were lower and the proportion of patients contributing to a net negative margin increased. Further study is warranted to define the effect of bundled payments on quality of care and hospital finances.

Original languageEnglish (US)
JournalJAMA Surgery
Issue number5
StatePublished - May 1 2016


ASJC Scopus subject areas

  • Surgery

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