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Bundling knee replacement payments could save employers up to 10%: Study

Bundling knee replacement payments could save employers up to 10%: Study

Bundled payments for total knee replacements would save employers between 5% and 10%, according to research conducted by the Health Care Incentives Improvement Institute Inc.

The findings are based on a 2011 analysis of more than 52,000 total knee replacement procedures performed during 2008 and 2009 conducted by HCI3, a Newton, Conn.-based nonprofit organization focused on improving health care quality and value through evidence-based incentive payments.

The analysis found that commercial payers spend an average of $3,200 more per procedure than Medicare, mostly due to higher inpatient stay costs resulting from complications.

“We found that much of the variation in total knee replacement case costs are attributable to potentially avoidable complications,” said Francois de Brantes, HCI3's executive director, in a statement. “In addition, we found that commercial payers are spending significantly more for hospital services related to total knee replacements than Medicare.”

“If you look at the report, what's striking is that when case costs are higher than average, that excess is almost exclusively caused by (potentially avoidable complications)…doesn't matter whether it's a Medicare case or a commercial case. Remember that Medicare controls case costs only for the stay, not for associated professional services, so if there's a problem in the hospital, the hospital can't bill more days, but the docs can bill more professional services,” Mr. de Brantes said.

The average cost for a total knee replacement, including the initial hospital stay, all related professional services, readmissions and post-acute care was $22,611 for Medicare patients vs. $25,872 for commercial patients, according to HCI3's research.

The average initial stay costs, including the costs of any complications that may have occurred during the hospital stay, were $10,870 and $17,292, respectively, and the average professional services were $10,058 and $6,568, respectively. The balance of costs was attributed to readmissions, rehabilitation services and other post-acute facility care.

Reducing complications during and after the procedure would save an estimated 20% of total care costs for Medicare and 10% for commercial payers, HCI3's research concluded.