Hoda Nouri Khajavi is a PhD candidate at The Graduate Center, CUNY.
Seminar topic: “How Do Hospitals Respond to Bundled Payment Incentives? Evidence from the Medicare’s Bundled Payments for Joint Replacements”
Abstract: Given the dramatic rise in the US health care costs, the Centers for Medicare and Medicaid Services has launched various alternative payment models (APM) to hold health care providers financially accountable. The growing need for APM is more recognized for certain services including total joint replacement (TJR). There are numerous entities involved in TJR, which are not coordinated under the current fee-for-service (FFS) payment method. The fragmented system and the high post-acute care utilization after TJR drive the Medicare average spending ranges from $16,500 to $33,000. This paper studies how the Bundled Payments for Care Improvement (BPCI) initiative, one of the most recent and encompassed APM, reduces Medicare costs by bundling multiple payments over the treatment cycle of a TJR. I find no significant evidence that the BPCI hospitals change their admission patterns. The length of stay decreased significantly by 0.3 day while there was no change in the index hospital total charges. The BPCI significantly decreased the likelihood of discharge to skilled nursing facilities and other rehabilitation centers. There is significant evidence that the behavior of hospitals is consistent between Medicare and non-Medicare patients. These results suggest that the BPCI curtails Medicare expenditures by reducing the post-acute care utilization.