Experience with designing and implementing a bundled payment program for total hip replacement

Background: Bundled payments, also known as episode-based payments, are intended to contain health care costs and promote quality. In 2011 a bundled payment pilot program for total hip replacement was implemented by an integrated health care delivery system in conjunction with a commercial health plan subsidiary. In July 2015 the Centers for Medicare & Medicaid Services (CMS) proposed the Comprehensive Care for Joint Replacement Model to test bundled payment for hip and knee replacement. Methods: Stakeholders were identified and a structure for program development and implementation was created. An Oversight Committee provided governance over a Clinical Model Subgroup and a Financial Model Subgroup. Results: The pilot program included (1) a clinical model of care encompassing the period from the preoperative evaluation through the third postoperative visit, (2) a pricing model, (3) a program to share savings, and (4) a patient engagement and expectation strategy. Compared to 32 historical controls - patients treated before bundle implementation - 45 post-bundle-implementation patients with total hip replacement had a similar length of hospital stay (3.0 versus 3.4 days, p = .24), higher rates of discharge to home or home with services than to a rehabilitation facility (87% versus 63%), similar adjusted median total payments ($22,272 versus $22,567, p = .43), and lower median posthospital payments ($704 versus $1,121, p = .002), and were more likely to receive guideline-consistent care (99% versus 95%, p = .05). Discussion: The bundled payment pilot program was associated with similar total costs, decreased posthospital costs, fewer discharges to rehabilitation facilities, and improved quality. Successful implementation of the program hinged on buy-in from stakeholders and close collaboration between stakeholders and the clinical and financial teams.