Wide Variation in Surgical Spending Within Hospital Systems: A Missed Opportunity for Bundled Payment Success

Abstract

Objective: We sought to measure the extent of variation in episode spending around total hip replacement within and across hospital systems.

Summary of background data: Bundled payment programs are pressuring hospitals to reduce spending on surgery. Meanwhile, many hospitals are joining larger health systems with the stated goal of improved care at lower cost.

Methods: Cross-sectional study of fee-for-service Medicare patients undergoing total hip replacement in 2016 at hospital systems identified in the American Hospital Association Annual Survey. We calculated risk- and reliability-adjusted average 30-day episode payments at the hospital and system level.

Results: Average episode payments varied nearly as much within hospital systems ($2515 between the lowest- and highest-cost hospitals, 95% confidence interval $2272-$2,758) as they did between the lowest- and highest-cost quintiles of systems ($2712, 95% confidence interval $2545-$2879). Variation was driven by post-acute care utilization. Many systems have concentrated hip replacement volume at relatively high-cost hospitals.

Conclusions: Given the wide variation in surgical spending within health systems, we propose tailored strategies for systems to maximize savings in bundled payment programs.