Refining risk adjustment for the proposed CMS surgical hip and femur fracture treatment bundled payment program

BACKGROUND: The U.S. Centers for Medicare & Medicaid Services (CMS) has been considering the implementation of a mandatory bundled payment program, the Surgical Hip and Femur Fracture Treatment (SHFFT) model. However, bundled payments without appropriate risk adjustment may be inequitable to providers and may restrict access to care for certain patients. The SHFFT proposal includes adjustment using the Diagnosis-Related Group (DRG) and geographic location. The goal of the current study was to identify and quantify patient factors that could improve risk adjustment for SHFFT bundled payments. METHODS: We retrospectively reviewed a 5% random sample of Medicare data from 2008 to 2012. A total of 27,898 patients were identified who met SHFFT inclusion criteria (DRG 480, 481, and 482). Reimbursement was determined for each patient over the bundle period (the surgical hospitalization and 90 days of post-discharge care). Multivariable regression was performed to test demographic factors, comorbidities, geographic location, and specific surgical procedures for associations with reimbursement. RESULTS: The average reimbursement was $23,632 ± $17,587. On average, reimbursements for male patients were $1,213 higher than for female patients (p $20,000 in average reimbursement (p < 0.01). DRGs also showed significant differences in reimbursement (p < 0.01); e.g., DRG 480 was reimbursed by an average of $10,421 ± $543 more than DRG 482. Payments varied significantly by state (p ≤ 0.01). Risk adjustment incorporating specific comorbidities demonstrated better performance than with use of DRG alone (r = 0.22 versus 0.15). CONCLUSIONS: Our results suggest that the proposed SHFFT bundled payment model should use more robust risk-adjustment methods to ensure that providers are reimbursed fairly and that patients retain access to care. At a minimum, payments should be adjusted for age, comorbidities, demographic factors, geographic location, and surgical procedure.