Importance: Under bundled payment programs, hospitals receive a single payment for all services provided surrounding an episode of care. Because health care providers, such as hospitals and physicians, accept more financial risk under these programs, they will need a better understanding of episode costs to identify areas to target improvements in quality and cost-efficiency.
Objective: To examine hospital variation in episode costs for a common high-risk procedure that is a prime candidate for bundled payment programs (ie, bariatric surgery).
Design, setting, and participants: In this retrospective cohort study, we used national Medicare claims data and identified patients undergoing bariatric procedures in 2011-2012 (N = 24 647 patients; 463 hospitals). We calculated risk-adjusted Medicare payments from the date of admission for the index procedure to 30 days following discharge. We then divided hospitals into equally sized quartiles and examined variation in payments for services around episodes of care. Medicare payments were examined by service payment type (ie, payments to hospitals, payments to physicians, and payments for postacute care services) across hospital quartiles.
Main outcomes and measures: Hospital variation in episode costs for services around an episode of bariatric surgery.
Results: Mean total payments for bariatric procedures varied from $11 086 to $13 073 per episode of care, resulting in a mean difference of $1987 (16.5% difference) per episode of care between the lowest and highest hospital quartiles. The index hospitalization was responsible for the largest portion of total payments (75%), followed by physician services (21%) and postacute care services (2.8%). Payments for index hospitalization accounted for the greatest variation in payments.
Conclusions and relevance: There are variations in hospital episode payments among Medicare patients undergoing bariatric surgery procedures. As hospitals enter bundled payment programs, they will need to target areas with the largest variation in costs for quality- and efficiency-improvement activities.