Association Between Hospital Voluntary Participation, Mandatory Participation, or Nonparticipation in Bundled Payments and Medicare Episodic Spending for Hip and Knee Replacements

Abstract

This study uses Medicare claims data to compare spending for hip and joint replacements among hospitals with voluntary vs mandatory participation vs nonparticipation in the Medicare Bundled Payments for Care Improvement program between 2011 and 2017.

Medicare has used both voluntary and mandatory participation to engage health care organizations in value-based payment models. Compared with mandatory participants, voluntary participants are assumed to achieve greater savings because they self-select into programs due to greater opportunity to reduce spending. However, no empirical data exist comparing savings under mandatory vs voluntary programs.

In 2013, Medicare started the voluntary Bundled Payments for Care Improvement (BPCI) program, which included hip and knee joint replacements. In 2016, under the Comprehensive Care for Joint Replacement (CJR) program, Medicare randomized hospitals in 75 metropolitan statistical areas to receive mandatory hip and knee joint replacement bundled payments, whereas hospitals in 121 metropolitan statistical areas continued receiving fee-for-service payments. This created an opportunity to examine the association between voluntary vs mandatory hospital participation in a bundled payment program for joint replacements and episodic spending changes.^1,2,3

Methods

The University of Pennsylvania institutional review board approved the study with a waiver of consent. Following prior work,^3,4 we used 2011-2017 Medicare claims to evaluate spending among hospitals in metropolitan statistical areas randomized via the CJR program and weighted by strata used in the Medicare randomization protocol. The hospitals randomized to mandatory bundled payments in the 75 metropolitan statistical areas in the CJR program were divided into hospitals (1) that self-selected into bundled payments for joint replacement via the BPCI program before being subject to the CJR program (voluntary hospitals) or (2) that were not participating in the BPCI program for joint replacement prior to CJR program participation (mandatory hospitals). Hospitals were assigned to these groups regardless of subsequent dropout.

Hospitals in the 121 metropolitan statistical areas randomized to continue receiving fee-for-service payments were defined as the comparison group if they did not participate in the BPCI program for joint replacements prior to CJR program participation (hospitals not participating in the bundled payment program) or were excluded if they did. Consistent with prior evidence that joint replacement bundle programs target institutional postacute care,^2,3 the outcome measure selected was episodic spending on institutional care (the sum of index hospitalizations and 90-day postdischarge readmissions, skilled nursing, inpatient rehabilitation, and long-term acute care facility spending). All spending estimates were adjusted for inflation into 2017 dollars.

To account for time-varying entry into the BPCI program and the influence of BPCI program participation on a hospital’s episodic spending during the period preceding CJR program participation, we used event study methods to examine changes in spending before and after starting the bundled payment program (ie, the exposures were time-varying indicators of BPCI or CJR program participation). Risk-adjusted values were estimated for each hospital group during their common periods before and after starting the bundled payment program using generalized linear difference-in-differences models that included quarter-year fixed effects, hospital fixed effects that adjusted for time-invariant hospital characteristics, patient and time-varying market characteristics, and standard errors clustered at the metropolitan statistical area level. There were nondivergent trends in episodic spending across hospital groups during the period before starting the bundled payment program.

Statistical tests were 2-sided and considered significant at α = .05. Analyses were conducted using Stata version 16.0 (StataCorp).

Results

The sample consisted of 1 346 756 Medicare fee-for-service beneficiaries undergoing joint replacement surgery at 92 voluntary hospitals, 752 mandatory hospitals, and 894 hospitals not participating in the bundled payment program (Table 1). Voluntary hospitals were larger than mandatory and nonparticipant hospitals and were more likely to be nonprofit, teaching institutions. Compared with patients at other hospitals, patients at voluntary hospitals were more likely to be non-White individuals in markets with a higher penetration of accountable care organizations.

Table 1. Hospital, Patient, and Market Characteristics by Hospital Participation in Bundled Payment Program, 2011-2017.

	Hospitals participating in bundled payment program		Hospitals not participating in bundled payment program	P value
	Voluntary	Mandatory
Hospital characteristics
No. of hospitals	92	752	894
Total No. of hospital beds, mean (SD)	367 (321)	279 (250)	255 (228)	<.001
Profit status, No. (%)
Nonprofit	71 (78.0)	458 (62.1)	551 (63.3)	.002
For profit	19 (20.9)	186 (25.2)	238 (27.4)
Government	1 (1.1)	93 (12.6)	81 (9.3)
Hospital status, No. (%)
Major teaching	16 (17.6)	76 (10.3)	92 (10.6)	.004
Minor teaching	54 (59.3)	349 (47.4)	400 (46.0)
Nonteaching	21 (23.1)	312 (42.3)	378 (43.5)
Safety net hospitals, No. (%)	19 (20.7)	230 (30.6)	192 (21.5)	<.001
Joint replacement complication rate, mean (SD)a	2.77 (0.58)	2.78 (0.55)	2.75 (0.54)	.57
Risk-adjusted readmission rate, mean (SD)a	4.57 (0.60)	4.62 (0.56)	4.61 (0.59)	.76
Patient characteristics
No. of episodes	147 052	576 505	829 838
No. of patients	128 438	500 253	718 065
Age at admission, mean (SD), y	73.5 (7.5)	73.2 (7.8)	73.1 (7.7)	<.001
Sex, No. (%)
Female	52 322 (35.6)	208 440 (36.2)	303 369 (36.6)	<.001
Male	94 730 (64.4)	368 065 (63.8)	526 469 (63.4)
Race and ethnicity, No. (%)b
White	128 674 (87.5)	513 480 (89.1)	751 220 (90.5)	<.001
Black	11 101 (7.6)	35 194 (6.1)	47 763 (5.8)
Otherc	7277 (5.0)	27 831 (4.8)	30 855 (3.7)
Medicare and Medicaid dual eligibility, No. (%)	12 185 (8.3)	60 815 (10.6)	76 641 (9.2)	<.001
Market characteristics
Medicare Advantage, median (IQR), %d	0.31 (0.27-0.42)	0.32 (0.25-0.45)	0.30 (0.21-0.40)	<.001
Accountable care organizations, median (IQR), %e	0.1 (0-0.2)	0.02 (0-0.2)	0.02 (0-0.2)	<.001
Hospital Herfindahl-Hirschman Index, median (IQR)f	761 (394-1571)	1060 (629-3193)	2151 (633-3513)	<.001

Abbreviation: IQR, interquartile range.

^aObtained directly as rates from Hospital Compare.

^bObtained from Medicare claims, which contained White and Black categories that were used directly in the analysis. Information about race was assessed due to the potential relationship between patient race and both receipt of joint replacement in the bundled payment program and spending on institutional care.

^cThis category included Asian, Hispanic, North American Native, and other.

^dDefined based on the proportion of all Medicare beneficiaries enrolled.

^eDefined as the proportion of all Medicare fee-for-service beneficiaries enrolled.

^fMeasure of market concentration in which higher values represent more concentration (lower competition) and lower values represent less concentration (greater competition). In this study, this index represents the concentration of hospitals in a given market.

Risk-adjusted episodic spending decreased among voluntary hospitals from $21 182 before bundled payments to $18 452 after bundled payments; among mandatory hospitals, spending decreased from $18 390 to $15 652; and among hospitals not participating, spending decreased from $17 132 to $14 871 (Table 2). Compared with hospitals not participating, both voluntary hospitals (difference-in-differences estimate, −$469 [95% CI, −$795 to −$142]; P = .005) and mandatory hospitals (difference-in-differences estimate, −$477 [95% CI, −$771 to −$183]; P = .002) exhibited differentially lower risk-adjusted episodic spending. Voluntary and mandatory hospitals did not exhibit differential changes in risk-adjusted episodic spending (difference-in-differences estimate, −$8 [95% CI, −$337 to $322]; P = .96).

Table 2. Spending on Institutional Care Before and After Participation in Hip and Knee Joint Replacement Bundled Payment Program, 2011-2017.

	Hospitals participating in bundled payment program				Hospitals not participating in bundled payment program		Difference-in-differences estimate (95% CI), $a
	Voluntary		Mandatory
	Before bundled payment	After bundled payment	Before bundled payment	After bundled payment	Before bundled payment	After bundled payment	Voluntary hospitals vs hospitals not participating in bundled payment program	Mandatory hospitals vs hospitals not participating in bundled payment program
No. of hospitals	92	92	744	710	879	855
No. of episodes	73 462	73 590	414 675	161 830	593 629	236 209
Spending on institutional care (95% CI), $	21 182 (21 022 to 21 343)	18 452 (18 144 to 18 760)	18 390 (18 230 to 18 551)	15 652 (15 410 to 15 894)	17 132 (16 972 to 17 293)	14 871 (14 692 to 15 050)	−469 (−795 to −142)b	−477 (−771 to −183)c

^aCalculated using generalized linear models and a time-varying indicator of participation in the Bundled Payments for Care Improvement (BPCI) program or the Comprehensive Care for Joint Replacement program and hospital-specific bundled payment periods for voluntary hospitals based on time-varying participation in the BPCI program. Models included hospital fixed effects (thereby controlling for time-invariant hospital characteristics) and were additionally adjusted for patient and time-varying market characteristics. Estimated risk-adjusted spending values were reported for a fixed period of 2011 quarter 1 to 2013 quarter 3 (the period before bundled payment common to all groups) and a fixed period of 2016 quarter 2 to 2017 quarter 3 (the period after bundled payment common to all groups) to align with difference-in-differences reporting standards. Voluntary and mandatory hospitals did not exhibit differential changes in risk-adjusted episodic spending (difference-in-differences estimate, −$8 [95% CI, −$337 to $322]; P = .96).

^bP = .005.

^cP = .002.

Discussion

Hospitals in bundled payment programs achieved lower episodic spending for hip and knee replacements than hospitals not participating in the programs, but spending changes did not differ between the voluntary and mandatory hospitals. This result does not support the concept that organizations perform better when self-selecting into programs.^5,6

Study limitations include residual confounding and limited generalizability to other payment models or non–joint replacement bundled payment programs. Nonetheless, these findings may inform policy debates about the benefits of mandatory vs voluntary payment models.

Section Editor: Jody W. Zylke, MD, Deputy Editor.