Press Release


Embargoed Until Contact

November 07, 2011

Sue Ducat
Director of Communications
(301) 841-9962
sducat@projecthope.org

   

New Study: Variations in Medicare Payments for Inpatient Surgery Strengthen Case for Bundling

 

Researchers found payment differences of $2,549 for colon surgery and $7,759 for back surgery, see room for greater efficiencies in postdischarge care

 

Bethesda, MD-- Medicare payments for four common types of inpatient surgery--hip replacement, coronary artery bypass grafting, back surgery, and colon removal-- and their follow-up care can vary among hospitals by 49 percent to 130 percent. The result is that payments to the highest-cost hospitals exceed those to the lowest-cost facilities by up to $2,549 for colon removal surgery and $7,759 for back surgery, according to a study published in the November issue of Health Affairs.

 

The study, one of the first ever to examine differences in surgical payments, was led by David C. Miller, an assistant professor of urology at the University of Michigan Medical School, in Ann Arbor. It analyzed Medicare claims data from 2005 to 2007 for the four inpatient surgical procedures. The difference of up to $7,759 in payments per surgical episode persisted even after adjustments for such factors as the severity of patients' illness. The study concluded that nearly 30 percent of hospitals are receiving payments above the national norm for multiple common procedures.

 

The wide differences in payment suggest that Medicare and other payers could reap considerable savings by combining reimbursements to hospitals, physicians, and other providers into a so-called bundled payment-- in other words, make a single payment for a defined episode of care. The Centers for Medicare and Medicaid Services (CMS) has already launched a demonstration project to evaluate the use of bundled payments for certain procedures, including hip replacement and bypass surgery, and it is evaluating other potential payment bundles as well. The new study "doesn't prove absolutely that bundled payments will work, but it demonstrates the potential for cost savings under this model," Miller says.

 

To examine the differences in payment, Miller and his colleagues looked at payment information for all services from the date of hospital admission for surgery to thirty days after the hospital discharge. They adjusted the data for all predictable factors, such as regional differences due to wage rates and found that the variation in payment levels was driven by several factors. Some of the variation was driven by differences in surgeons' practice styles, such as: inpatient consultations by hospitalists; critical care physicians; and medical specialists. Other variations were attributable to the amount or cost of care that surgical patients received following a hospital discharge, such as care provided by rehabilitation hospitals, home health care agencies, skilled nursing facilities, and nursing homes.

 

Miller notes that the study did not attempt to determine whether differences in payment equated to differences in quality. That relationship, he says, remains to be determined. However, for high-cost hospitals, the study's findings could serve as a wake-up call to increase efficiency and reduce costs. "Many hospitals have considerable room to improve their cost efficiency for inpatient surgery and should look for patterns of excess utilization, particularly among surgical specialties, other inpatient specialist consultations, and various types of postdischarge care," the authors wrote. Those efficiencies are likely to come from better care coordination and better communication across episodes of care, according to Miller.

 
 
About Health Affairs
 

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at www.healthaffairs.org. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.