This means, they explained, “more investment in steps to improve the continuum of care and preventing readmissions and other complications, through better coordination of care, better discharge planning and use of post-acute services, and other innovative approaches to deliver care more efficiently.”

However, according to their paper published in the September issue of Health Affairs, the team from the University of Michigan Institute for Healthcare Policy and Innovation identified concerns that the bundled system “unintentionally penalizes hospitals because it lacks a mechanism (such as risk adjustment) to sufficiently account for patients' medical complexity.”


New system penalizes providers for treating complex cases
Led by Ellimoottil, a urologist whose research extends to bundled payments for many types of care, the study simulated rewards and penalties according to what Medicare would do in the CJR Program.

"Using Medicare claims for patients in Michigan who underwent lower extremity joint replacement in the period 2011-13, we applied payment methods analogous to those CMS intends to use in determining annual bonuses or penalties (reconciliation payments) to hospitals,” they wrote.

Based on these calculations, the article went on, “we found that reconciliation payments were reduced by $827 per episode for each standard-deviation increase in a hospital's patient complexity. Moreover, we found that risk adjustment could increase reconciliation payments to some hospitals by as much as $114,184 annually.”

That amount “may be a drop in the bucket in a large hospital's budget,” Ellimoottil acknowledges. “But if mandatory bundled payments using the CJR formula get rolled out in other types of care, the numbers could become very large.”

In a related development, Becker's Spine Review reported that the Academy of Orthopaedic Surgeons (AAOS) submitted a letter last week to the House Budget Committee hearing on the Center for Medicare & Medicaid Innovation that expressed concern that “this program financially penalizes physicians who perform joint replacement surgeries on disadvantaged patients, since these patients will likely require increased levels of care and longer rehabilitation.”

Risk adjustment element can be added within three year schedule
To avoid such problems, the U. of M. study recommended that an appropriate risk adjustment component be introduced into the mandatory bundled payment system.

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