The Impact of Bundled Payments on Quality and Cost of Care

Bundled payment is a new payment reform that encourages health care providers to improve quality and contain costs of care. These arrangements are being rapidly expanded across the country, but evidence about their impact are lacking. This study will use Medicare claims data to evaluate the effect of participation in a large Medicare bundled payment program on the quality and costs of care for common medical and surgical conditions.

The overall objective is to examine the effects of the Bundled Payments for Care Improvement (BPCI) Model 2 on the quality and costs of care for conditions related to seven of the ten Medicare severity disease-related groups (MS-DRGs) most commonly selected by program participation. Five of these are surgical (major joint replacement of the lower extremity; double joint replacement of the lower extremity; revision of the hip or knee, hip and femur procedures except major joint; lower extremity and humerus procedure except hip, foot, and femur) and two are medical (simple pneumonia and respiratory infections; chronic obstructive pulmonary disease, bronchitis/asthma). These MS-DRGs represent two larger service lines: orthopedics and pulmonary. For each of these seven MS-DRGs, the team will first describe characteristics of provider organizations participating in bundled payment arrangements, including geographic characteristics and clinical volume. We will subsequently empirically test the effect of bundled payment arrangements on quality outcomes and costs of care for these conditions. Additionally, the team will examine any spillover effects that occur within the service lines that contain these seven MS-DRGs.