Association of Hospital Participation in Bundled Payments for Care Improvement Advanced With Medicare Spending and Hospital Incentive Payments

Abstract

ImportanceBundled Payments for Care Improvement Advanced (BPCI-A) is a Centers for Medicare & Medicaid Services (CMS) initiative that aims to produce financial savings by incentivizing decreases in clinical spending. Incentives consist of financial bonuses from CMS to hospitals or penalties paid by hospitals to CMS.ObjectiveTo investigate the association of hospital participation in BPCI-A with spending, and to characterize hospitals receiving financial bonuses vs penalties.Design, Setting, and ParticipantsDifference-in-differences and cross-sectional analyses of 4 754 139 patient episodes using 2013-2019 US Medicare claims at 694 participating and 2852 nonparticipating hospitals merged with hospital and market characteristics.ExposuresBPCI-A model years 1 and 2 (October 1, 2018, through December 31, 2019).Main Outcomes and MeasuresHospitals’ per-episode spending, CMS gross and net spending, and the incentive allocated to each hospital.ResultsThe study identified 694 participating hospitals. The analysis observed a −$175 change in mean per-episode spending (95% CI, −$378 to $28) and an aggregate spending change of −$75.1 million (95% CI, −$162.1 million to $12.0 million) across the 428 670 episodes in BPCI-A model years 1 and 2. However, CMS disbursed $354.3 million (95% CI, $212.0 million to $496.0 million) more in bonuses than it received in penalties. Hospital participation in BPCI-A was associated with a net loss to CMS of $279.2 million (95% CI, $135.0 million to $423.0 million). Hospitals in the lowest quartile of Medicaid days received a mean penalty of $0.41 million; (95% CI, $0.09 million to $0.72 million), while those in the highest quartile received a mean bonus of $1.57 million; (95% CI, $1.09 million to $2.08 million). Similar patterns were observed for hospitals across increasing quartiles of Disproportionate Share Hospital percentage and of patients from racial and ethnic minority groups.Conclusions and RelevanceAmong US hospitals measured between 2013 and 2019, participation in BPCI-A was significantly associated with an increase in net CMS spending. Bonuses accrued disproportionately to hospitals providing care for marginalized communities.

The Path Ahead for Bundled Payments

“…Target price determinations will continue to be a major issue for ongoing and future bundled payment programs. However, this analysis by Sashikumar et al and other studies suggest that it may be difficult to prospectively determine target prices without significant uncertainty, potential variability in the size of financial incentives for participants, and impact on program spending for Medicare. Unlike those in total cost of care models, spending benchmarks in episode-based models are more vulnerable to volatility and confounding from other health care trends, such as from changes in the price of expensive infusion drugs.…”

“…Together with prior work, the evaluation by Sashikumar et al highlights several implications for policymakers as they chart the future course of bundled payments. First, policymakers should interpret the influence of payment models through the lenses of both net and gross savings.…”

“…The findings from both Sashikumar et al and Medicare contractors suggest that over the first 15 months of the initiative, BPCI Advanced may have led to gross savings among participants, particularly new bundled payment participants, but net losses to Medicare . While some may view net losses as a program failure, that conclusion overlooks practice changes that reduced spending compared with what would have occurred in the absence of bundled payments.…”

“…The report by Sashikumar and colleagues in this issue of JAMA brings new results into this policy context . Using claims data from 694 participating hospitals and a difference-in-differences methodology, the authors analyzed data from the BPCI Advanced initiative (from October 1, 2018, through December 31, 2019) and found that the program was associated with an estimated $75 million decrease in gross spending, but after distribution of financial bonuses, it was also associated with an estimated $279 million increase in net spending for Medicare . Hospitals that served larger proportions of historically marginalized populations earned disproportionately large bonuses, in stark contrast to analyses of other value-based programs…”

“…The study by Sashikumar et al in this issue of JAMA is an important addition to the literature on bundled payments. Collectively, the evidence base suggests that there are reasons to view the payment model simultaneously through its care redesign successes, net savings limitations, and equity implications.…”