Payment based on episodes of care is becoming more common in bundled payment and accountable care organization situations. A new study published in The Spine Journal examines Medicare payments for episodes of spine surgery.
The patient sample includes 185,954 episodes of spine surgery performed from 2005 to 2007 among the Medicare patient population. The study examined patients with spinal stenosis, spondylolisthesis and lumbar disc herniation. Hospitals where the procedures were preformed ranked from least to most expensive and were ranked into quartiles.
The study was funded with a grant from the National Institutes of Aging. Here are five findings from the study:
1. Hospitals in the highest quartile reported episode payments more than twice the amount made to hospitals in the lowest quartile. The highest quartile received $34,171 on average for an episode of care, compared with $15,997 for the lowest quartile.
"Medicare payments for episodes of spine surgery vary widely across hospitals," concluded the study authors. "As they respond to new financial incentives inherent in healthcare reform, high cost hospitals should focus on the use of spinal fusion as well as post-acute care."
2. Total episode payments to hospitals in the highest quartile remained 47 percent higher than the lowest quartile even after risk- and price-adjustment. The average amount paid to these hospitals was $9,210 higher than the lowest quartile. After the Centers for Medicaid Services released their chargemaster data in May 2013, sources reported procedures varied from $19,000 to more than $470,000 depending on the hospital.
The top 10 hospitals at that time were:
1. Lourdes Medical Center of Burlington County (Willingboro, N.J.): $471,121
2. Pottstown (Pa.) Memorial Medical Center: $323,318
3. North Hills Hospital (North Richland Hills, Texas): $306,773
4. Northridge (Calif.) Hospital Medical Center: $304,564
5. Washington Hospital (Fremont, Calif.): $296,766
6. Vista Medical Center East (Waukegan, Ill.): $284,148
7. Presbyterian Intercommunity Hospital (Whittier, Ga.): $282,889
8. Santa Rosa (Calif.) Memorial Hospital: $280,517
9. CJW Medical Center (Richmond, Va.): $279,767
10. University of California Davis Medical Center (Sacramento): $269,846
However, the data came from the hospital charges and reflects only hospitals paid under Medicare's IPPS. The data specifically reflects spinal fusions except cervical, without major complications and comorbidities.
3. Even after adjusting for the type of procedure chosen — fusions are associated with higher costs — the hospitals in the highest quartile were still 28 percent more expensive than in the lowest quartile. According to the report, procedure choice is a major determinant of total episode payment.
An issue brief from the Berkley Center for Health Technology and Integrated Healthcare Association on lumbar fusion surgery in California also examined the costs, volumes and reimbursements. The report also found a huge variation in implant cost, ranging from $3,397 to $54,826; the average was $12,773. The report even found within-hospital variation after adjusting for patient characteristics. Total surgical costs were driven by the implant costs, complications and length of stay, according to the report, and reached $28,103 for California hospitals, ranging from $11,693 to $64,687.
4. Post-acute care use was also different across hospitals. The post-acute care use accounted for the bulk of residual variation in payments across the hospitals.
5. The hospital payments varied similarly after subgroup analyses for the three different procedures. The hospitals in the highest quartile for one procedure were also expensive for the other spinal diagnoses. A 2012 study from the Dartmouth Atlas Project examined regional differences in lumbar spinal fusion. The regions with the highest lumbar fusions among Medicare enrollees were:
1. Idaho Falls, Idaho
2. Missoula, Montana
3. Mason City, Iowa
4. Bradenton, Fla.
5. Casper, Wyo.
The lowest rate of spinal fusions among Medicare enrollees was in:
1. Bangor, Maine
2. Covington, Ky.
3. Terre Haute, Ind.
4. Grand Forks, N.D.
5. Newark, N.J.
"The strong correlation of local surgical rates over time — both for lumbar fusion and for lumbar discectomy/laminectomy, is consistent with a model of decision-making in which local physician opinion is an important determinant of local practice," concluded the study authors.
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