Truven Health Analytics Study: Significant Geographic Variation in Commercial Bundled Spend for Joint Replacements

Truven Health Analytics Study: Significant Geographic Variation in Commercial Bundled Spend for Joint Replacements

Press Release Feb 13, 2016

Ann Arbor, Mich. — A new study by Truven Health Analytics found that average bundled spend for major lower joint replacement in the middle-Atlantic region of the U.S. are more than 35 percent higher than spend for the same procedure in the East South Central region.
Truven Health conducted research into the spend for knee and hip replacements ahead of the April 1, 2016, implementation of the Centers of Medicare & Medicaid Services’ (CMS) Comprehensive Care for Joint Replacement (CJR) Model. The new CJR model is a directive aimed to encourage hospitals, physicians, and post-acute care providers to improve care coordination and lower the episode spend for a major lower joint replacement — from the initial hospitalization through 90 days post-surgery. Truven Health conducted the study to help clients make better decisions as they begin to adopt this model.
The study found a significant difference between the bundled payment spend for these procedures in commercially insured populations, with six states in the middle Atlantic ranking highest in the United States for total bundled spend. Key findings include:
• $10,500 price variation per patient based on geography: A 35 percent variation by geographic area in commercially insured bundled pricing, ranging from $29,825 in the least costly region – the East South Central U.S. that includes Alabama, Kentucky, Mississippi and Tennessee – to $40,431 in the Middle Atlantic, the region that includes Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, Washington, D.C., and West Virginia.
• Low percentage of spend due to readmissions and post-acute care: Readmissions and post-acute care make up relatively small percentages of average total bundled spend for these procedures, at 2.1 percent and 12.7 percent, respectively. That is in contrast to patterns seen among Medicare’s older population, which spends far more on post-acute care.
“As providers gear up to adopt the new Medicare CJR model, they need to understand both the magnitude of spend variation by region and the drivers of those spends. And they need to know where they stand in relation to projected target pricing, so they can take action to close payment gaps,” said Bob Kelley, vice president, healthcare analytics at Truven Health Analytics and lead researcher on the study. “Further, we are already seeing interest among commercial payers in applying bundled payments, and they need to know the best way to define pricing for their business and predict what those definitions can do for patient care and the bottom line.”
For this analysis, Truven Health researchers used claims data for 2012 and 2013 from the Truven Health MarketScan® Commercial Database. They selected only patients treated for total knee and total hip replacement who were age 45 to 64 at the time of the procedure. The study based episode length on the CMS final rule of 90 days post-hospital discharge. The study sample included a total of 84,648 individual cases.
For more information, visit http://truvenhealth.com/issues/bundled-payments or visit Truven Health at Booth #3021 at HIMSS ‘16 in Las Vegas, Nevada, from February 28-March 4, 2016.

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