Bundled Payments in Spine Surgery: Lessons Learned

International Society for the Advancement of Spine Surgery (ISASS17) Meeting Highlight

In his Association for Collaborative Spine Research (ACSR) presentation made during ISASS17, Bundled Payments in Spine Surgery: Lessons Learned, Alexander Vaccaro, MD, PhD, MBA, reported that the United States spends $287 billion annually for fusion-based spinal procedures. The current approach for cost-savings is through bundled payments. The Centers for Medicare and Medicaid Services (CMS) introduced their spine bundle program in 2013 under Bundled Payment Care Improvement (BPCI), which is based on Diagnosis Related Group (DRG)-driven definitions and not Current Procedural Technology (CPT) codes.
Bundled money being held in a man's handsWhile a majority of stakeholder groups are embracing the concept of bundles, physicians are not equally sold on the idea.While a majority of stakeholder groups are embracing the concept of bundles (including hospitals, consumers, payors, and employers), physicians are not equally sold on the idea. Dr. Vaccaro notes the scope is poorly designed for spine surgeries. Spine surgeries are more heterogeneous—they involve numerous diagnoses, wide variations within a specific DRG (levels, instrumentation, grafts), cost differences based on setting (in- or out-patient facilities), and pain management. Dr. Vaccaro also noted that the “outliers” can be rather costly.

Dr. Vaccaro discussed a 2014 study that examined variations in healthcare costs using DRG coding for cervical or lumbar spine surgeries. Just over 196,900 patients met the study inclusion criteria. “Significant variation existed between DRGs, ranging from $11,180 (30-day bundle, DRG 491) to $107,642 (30-day bundle, DRG 456).” In addition, there were significant variations in cost within each individual DRG. The total bundle costs for hospital stays remained relatively stable despite increased bundle length (increasing from $33,522 for 30-day to $35,165 for 90-day bundle). The largest portion of bundle costs—76%—were payments to hospitals. While an estimated 40% of the cost of joint replacement surgeries is postoperative rehabilitation, only 4% to 8% of costs (in 90-day bundle) for spinal surgery are attributable to post-hospital discharge costs.

In another study on 30-day episodes for spinal stenosis, spondylolisthesis, and lumbar/sacral disc herniation involving nearly 186,000 patients seen between 2005-2007, Dr. Vaccaro noted a range in costs from approximately $16,000 (lowest quintile) to just over $34,000 (highest quintile)—a variance of 113%. Following refinement of the dataset to adjust for patient risk factors and Medicare pricing differentials between markets, variation in cost between the highest and lowest quintiles was still 47%. Further refinement addressing variation in procedure choice of the surgeon (eg, use of fusion) only reduced cost variation to 28%, still a substantial difference.

In another study examining commercial market data on lumbar spine fusions in surgical facilities within Philadelphia hospitals alone, the costs ranged from $25,683 (25th percentile) to $53,516 (90th percentile). He noted that “practice variation and procedure choice exist in all markets—large/small, rural/urban—and noted that while rural geographies may not experience the substantive variation due to lack of competing facilities, all will, nevertheless, be impacted by reimbursement cost lessons being learned in the larger markets.” The data underscored the substantial cost differential between various levels of surgical facilities, and the cost implications attached to their selection by the surgeon. Yet another study of about 255,400 spinal fusions found a DRG cost variation of 44.2% to 52.6%, compared to cost variation associated with total joint arthroplasty (TJA) DRG of 38.2%.

Dr. Vaccaro discussed how his facility examined all the costs involved in spine surgeries—identifying every person who in some way had contact with the patient or the case—from preoperative through postoperative care. The study analyzed all the costs, examined discharge practices, readmissions, and complications, in order to begin determining how to best bundle costs. He recommended physicians (or facilities) identify all the controllable expenses. The primary (unnecessary) cost contributors to spinal surgery were overutilization of imaging studies, overutilization of specialist care, and overutilization of procedures. In light of his findings, he offered recommendations for other facilities interested in adapting his process of determining appropriate bundles.

He began by stressing the importance of delineating all your costs and knowing your patient: perform a risk assessment and appropriately stratify the patient into the right place of care (inpatient or outpatient) facility. He noted that cost variations increase along with the complexity of the procedure. He recommended negotiating appropriate episode of care reimbursements for particular DRG using CPT codes modified by specific patient characteristics, and reminded surgeons to factor in risk and bonus payments. He also emphasized discharging the patient by condition—not by insurance coverage benefits. “Patients who do not require extensive postoperative rehabilitation should not be prescribed extensive rehabilitative care.”

Dr. Vaccaro concluded that there is “significant variation in total health care costs for patients who undergo spinal surgery, even within a given DRG.” Further, he noted, “the success of a value-based population health model is still substantially impacted by old reimbursement practices. Variation in facility reimbursement for the same procedure and outcome persists, and to succeed the system must be exploited to create savings by using a proper patient health risk assessment to select a facility accordingly. A patient-facing compensation model would reimburse the same amount for the same service and not backload support payments for general (often unneeded) facility resources into procedure reimbursement. Be aware the differentials are becoming glaringly obvious to payers and the landscape is changing. Expect a narrowing of these margins as payers get better control of their data.”

Updated on: 02/08/18
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