Large Variations In Medicare Payments For Surgery Highlight Savings Potential From Bundled Payment Programs

Payers are considering bundled payments for inpatient surgery, combining provider reimbursements into a single payment for the entire episode. We found that current Medicare episode payments for certain inpatient procedures varied by 49–130 percent across hospitals sorted into five payment groups. Intentional differences in payments attributable to such factors as geography or illness severity explained much of this variation. But after adjustment for these differences, per episode payments to the highest-cost hospitals were higher than those to the lowest-cost facilities by up to $2,549 for colectomy and $7,759 for back surgery.
Payers are considering bundled payments for inpatient surgery, combining provider reimbursements into a single payment for the entire episode. We found that current Medicare episode payments for certain inpatient procedures varied by 49–130 percent across hospitals sorted into five payment groups. Intentional differences in payments attributable to such factors as geography or illness severity explained much of this variation. But after adjustment for these differences, per episode payments to the highest-cost hospitals were higher than those to the lowest-cost facilities by up to $2,549 for colectomy and $7,759 for back surgery.

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