Health Reform Hospitals Medicare Supply of Medical Services

Do does episode bundling improve quality and reduce cost?

This is the question put forth in a paper by Chen et al. (2017).  The authors examine Medicare’s Acute Care Episode (ACE) Demonstration Program, which was a small, voluntary episode-based bundled payment program. According to the CMS website,

There were 28 cardiac and 9 orthopedic inpatient surgical services and procedures included in the bundled payment demonstration. These elective procedures were selected because volume has historically been high; there was sufficient marketplace competition to ensure interested demonstration applicants; the services were easy to specify, and quality metrics were available for them.

One can think of ACE as a precursor to the Bundled Payments for Care Improvement (BPCI) initiative. The Chen study used a difference-in-difference approach among ACE and non-ACE providers and found that:

…the ACE Demonstration was not significantly associated with 30‐day Medicare payments (for orthopedic surgery: −$358 with 95 percent CI: −$894, +$178; for cardiac surgery: +$514 with 95 percent CI: −$1,517, +$2,545), or 30‐day mortality (for orthopedic surgery: −0.10 with 95 percent CI: −0.50, 0.31; for cardiac surgery: −0.27 with 95 percent CI: −1.25, 0.72). Program participation was associated with a decrease in total 30‐day post‐acute care payments (for cardiac surgery: −$718; 95 percent CI: −$1,431, −$6; and for orthopedic surgery: −$591; 95 percent CI: $‐$1,161, −$22).

In short, there was no change in overall episode cost nor quality of care, however, post-acute care payments did decrease.  Although this was a small demonstration for a limited number of procedures, one would hypothesize that episode based payment would incentivize less use of post-acute care (including hospitalizations), but with some potential that quality of care could worsen and quantity of care provided within the episode  could decrease.


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