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Physician Practice Variation Under Orthopedic Bundled Payment
Joshua M. Liao, MD, MSc; Ezekiel J. Emanuel, MD, PhD; Gary L. Whittington, BSBA; Dylan S. Small, PhD; Andrea B. Troxel, ScD; Jingsan Zhu, MS, MBA; Wenjun Zhong, PhD; and Amol S. Navathe, MD, PhD
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Physician Practice Variation Under Orthopedic Bundled Payment

Joshua M. Liao, MD, MSc; Ezekiel J. Emanuel, MD, PhD; Gary L. Whittington, BSBA; Dylan S. Small, PhD; Andrea B. Troxel, ScD; Jingsan Zhu, MS, MBA; Wenjun Zhong, PhD; and Amol S. Navathe, MD, PhD
This study demonstrates that variation reduction is an important, but not requisite, component of organizational success under orthopedic bundled payment.
ABSTRACT

Objectives: To describe the extent of and longitudinal changes in physician practice variation with respect to implant costs, institutional postacute care (PAC) provider utilization, and total episode payments, as well as to evaluate the association between physician volume and quality and these outcomes.

Study Design: Observational study.

Methods: We combined claims and internal hospital cost data for 34 physicians responsible for 3614 joint replacement episodes under bundled payment at Baptist Health System (BHS). Multilevel multivariable generalized linear models were employed and the intraclass correlation (ICC) was used to quantify between-physician variation.

Results: There was significant between-physician variation in implant costs, institutional PAC provider utilization, and total episode payments not explained by observable variables (P <.001 for all). Over 5 years, the ICC decreased from 0.26 to 0.06, 0.15 to 0.13, and 0.12 to 0.10 for implant costs, institutional PAC provider utilization, and total episode payments, respectively, but differences were not statistically significant. Both higher physician case volume and quality were associated with decreased total episode payments and institutional PAC provider utilization, but not with changes in implant costs.

Conclusions: Considerable physician practice variation was observed under bundled payment at BHS and decreased to a greater degree for implant costs than institutional PAC provider utilization or total episode payments. Institutional PAC provider utilization and total episode payments were associated with physician volume and quality. Although some organizational strategies achieve gains by reducing physician practice variation, variation reduction is not an absolute requisite for success under bundled payment.

Am J Manag Care. 2018;24(6):287-293
Takeaway Points

Amid the proliferation of orthopedic bundles, organizations can benefit from understanding whether strategies must reduce physician practice variation in order to succeed. Analyzing the experience of a long-standing participant in Medicare orthopedic joint replacement bundles, we found that although some strategies achieve gains by reducing physician practice variation, variation reduction is not an absolute requisite for success under bundled payment.
  • There was significant physician practice variation in implant costs, institutional postacute care (PAC) provider utilization, and total episode payments.
  • Over time, physician practice variation decreased to a greater degree for implant costs than for institutional PAC provider utilization or total episode payments.
To increase value and address substantial cost and quality variation in care, CMS has rapidly expanded orthopedic bundled payment initiatives. By receiving a single “bundled” amount for an entire episode of care, hospitals and physicians are accountable for quality and costs under bundled payment.

After early success bundling acute care among a small group of providers in the voluntary Acute Care Episode (ACE) demonstration,1 CMS extended its focus across the care continuum. In 2012, it launched the Bundled Payments for Care Improvement (BPCI) initiative,2 a large national program through which many hospitals voluntarily accept bundled payment for joint replacement episodes encompassing acute and postacute care (PAC). More recently, in April 2016, CMS used the BPCI framework to initiate the Comprehensive Care for Joint Replacement model,3 a mandatory program that initially held approximately 800 hospitals in 67 metropolitan areas financially accountable for the costs and quality of episodes spanning hospitalization through 90 days of PAC.

Early evidence from BPCI suggests that bundled payment can reduce episode costs and produce savings for both CMS and hospitals while possibly increasing quality.4,5 Because physician practice style contributes to large variation in hospital and postacute spending for surgeries such as hip replacement,6 variation reduction is frequently championed in bundle payment strategy.7,8 However, there is little empirical evidence about whether organizational strategies must reduce physician practice variation in order to succeed.

In this study, we describe physician practice variation at Baptist Health System (BHS), a continuous participant in Medicare joint replacement bundles since 2009. BHS achieved high performance—demonstrating notable reductions in total episode payments and hospital savings during a period when joint replacement expenditures rose nationwide5,9—by engaging physicians to reduce surgical implant costs and postdischarge utilization of institutional PAC providers.5,10 We evaluate the extent of and longitudinal changes in physician practice variation with respect to implant costs, institutional PAC provider utilization, and total episode payments, as well as the associations among physician volume and quality and these 3 outcomes.

METHODS

Study Period

The study was divided into 4 periods. The first was the baseline period (July 2008-December 2008), when BHS received nonbundled fee-for-service payments prior to ACE participation. The second was the ACE period (July 2009-June 2012), during which BHS implemented joint replacement bundles for acute hospitalization. The ACE period consisted of 3 years: ACE year 1 (July 2009-June 2010), ACE year 2 (July 2010-June 2011), and ACE year 3 (July 2011-June 2012). The third was the transition period (July 2012-September 2013), when BHS prepared to transition to BPCI Model 2 and did not receive bundled payment. The fourth was the BPCI period (October 2013-June 2015), in which BHS implemented joint replacement bundles for episodes spanning acute hospitalization through 30 days of PAC. The BPCI period consisted of 2 years: BPCI year 1 (October 2013-June 2014) and BPCI year 2 (July 2014-June 2015).

Data Sources

We obtained both Medicare claims and internal hospital cost data directly from BHS.5 Using Medicare data, we constructed care episodes that were consistent with the health system’s BPCI arrangement with CMS and encompassed acute hospitalization plus 30 days of PAC.5 Data were not available during the transition period between ACE and BPCI when BHS was not paid by CMS under bundled payment.

Study Population

Our analytic sample consisted of 3614 patient episodes from a panel of 34 physicians who performed at least 1 joint replacement surgery in both the ACE and BPCI periods. Overall, 51 orthopedic surgeons affiliated with BHS performed a combined total of 3725 joint replacement surgeries on Medicare beneficiaries under Medicare Severity Diagnosis Related Group 470, Major joint replacement or reattachment of lower extremity without major complications or comorbidities. We excluded physicians who performed surgeries only in the ACE period (n = 9) or BPCI period (n = 8).


 
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