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Corresponding author: Kevin C. Chung, MD, MS, Section of Plastic Surgery, University of Michigan Health System, 2130 Taubman Center, SPC 5340, 1500 E. Medical Center Dr., Ann Arbor, MI 48109-5340.
To examine the cost of care of surgical treatment for a distal radius fracture (DRF) and develop episodes that may be used to develop future bundled payment programs.
Methods
Using 2009 to 2015 claims data from the Truven MarketScan Databases, we examined the cost of care for surgical treatment of DRFs among adult patients in the United States. We excluded patients with concurrent fractures, patients who required complex care, and patients in assisted living facilities. We extracted data on cost and type of services provided to eligible patients, tracking patients from 3 days prior to operation to 90 days after operation. From these data, we developed 4 episode-of-care scenarios to develop an estimated bundled payment. We computed the variation in cost between surgery types, time periods, and type of service provided.
Results
Our final sample included 23,453 DRF operations, of which 15% were performed on patients 65 years of age or older. The majority (88%) underwent open fixation, the option associated with the highest cost. The average cost of care for a DRF patient ranged from $6,577 to $8,181 depending on the definition of an episode-of-care. Regardless of definition, the variation in cost was high. The cost of surgery itself composed 61% to 91% of the total cost of an episode. Of claims not directly related to the surgery, anesthesia and drugs, imaging, and therapy costs composed the next greatest proportions of the total cost of care.
Conclusions
Many DRF surgical episodes incur substantially higher costs than the average. To maximize cost reduction, bundled payments for DRFs are best designed with a clinically narrow definition that is limited to services related to the fracture and long enough to capture relevant postoperative therapy and imaging costs.
Clinical relevance
This study provides insight on spending to lay the foundation for shifting reimbursement strategies.
Episode-based bundled payments are on the foreseeable horizon as a reimbursement method in hand surgery. In contrast to historic fee-for-service models, standard bundled schemes provide a single payment that is split among relevant providers and facilities within a predefined episode-of-care.
Because providers must share a single fee, there is a greater incentive to reduce spending on services that might be considered discretionary, to achieve higher quality care, and to prevent a loss in profit.
Bundled payments have been suggested as a feasible method of controlling the escalating costs of health care in the United States, one of policy makers’ top priorities.
Historically, episode-based bundles have been developed around either a diagnosis or an operation. In other words, the episode-of-care may be based on a condition, like diabetes, or a procedure, such as total knee arthroplasty. As of 2017, the Centers for Medicare and Medicaid Services (CMS) Bundled Payments for Care Improvement Initiative has been pilot testing programs for over 45 different episodes using 4 broad models of care.
Although they have not yet gained popularity in the field of hand surgery, bundled payments may be introduced to stabilize or reduce national health care expenditure.
Based on recommendations from the Center for American Progress,
numerous hand procedures warrant consideration for episode-based reimbursement. Surgical treatment of a distal radius fracture (DRF), for instance, is a strong candidate. Because treatments have an identifiable beginning and end point, episodes are easily defined. In addition, DRFs are common. The incidence of DRF among U.S. adults has grown over the past two decades.
Although certain interventions may be favored by surgeons or patients, existing guidelines do not suggest a clearly superior option. Finally, treatment requires participation of a broad spectrum of providers. Throughout the care process, an individual may interact with emergency department personnel, surgeons, anesthesiologists, radiologists, therapists, and others.
In this historical claims analysis, we assessed costs and developed an episode-based payment scheme for the surgical treatment of DRFs in adult patients. Similar investigations have been performed for cardiac, orthopedic, spinal, and oncological procedures.
First, we aimed to examine the general cost of DRF surgery and break down payments by the type of service provided. Second, we aimed to develop a bundled payment scheme and compare the implications of various episode-of-care definitions on the development of the bundles. We hypothesized that there would be substantial differences in cost among procedure types and that the majority of cost would be associated with the operation itself, rather than pre- or postoperative services. Given the paucity of information on case rates in hand surgery, this study can identify sources of high cost and provide insight on spending to lay the foundation for a shift in reimbursement strategies.
Materials and Methods
Data source
We used insurance claims from the 2009 to 2015 MarketScan Commercial Claims and Encounters Database and Medicare Supplements to compile payment information. The MarketScan dataset includes data from over 43 million individuals across the United States. It is the largest convenience sample available among proprietary datasets and is large enough to be nationally representative of individuals in the United States with employer-provided insurance.
These data facilitate longitudinal tracking of enrollees over time. They also permit researchers to capture complete episodes of care through the compilation of claims from office visits, hospital stays, prescription information, and laboratory tests.
We identified patients who underwent surgical intervention of a closed fracture of the distal radius using Current Procedural Terminology (CPT) Codes (Fig. 1). Three surgical options were considered: open reduction and internal fixation (ORIF), percutaneous pinning, and external fixation. We included multiple operations to best portray how a bundled payment scheme would likely be implemented into practice. Inclusion of multiple procedures also helps dilute physician-level influence on which operation the patient undergoes. Although a viable treatment option, we did not consider casting or orthosis fabrication in our bundled payment schemes. It is well known that the cost of nonsurgical treatment is considerably less than that of surgery,
and its inclusion into a bundled payment scheme would disproportionately skew the average cost of the bundle estimates to such an extent that is unreasonable for implementation into clinical practice.
Figure 1Flow diagram of sample selection. ESRD, end-stage renal disease.
To ensure our sample included only patients who underwent surgery for an associated injury, we used International Classification of Disease, Ninth Revision (ICD-9), codes to exclude patients without a primary diagnosis of DRF as well as patients treated for major trauma. Because bundled payment plans attend to the costs for a single episode-of-care, patients who sustain multiple injuries that require simultaneous care plans would likely be ineligible for this type of reimbursement plan. Thus, we excluded any patient with concomitant hip, pelvis, spinal, femoral, patella, tibial, or ankle fracture and those who received major orthopedic surgery (total hip arthroplasty, total knee arthroplasty, or hip fracture surgery) within 6 months of their DRF. Likewise, we excluded patients with a diagnosis of kidney failure, end-stage renal disease, breast cancer, or pregnancy, and patients who were nursing home residents.
We required that patients have continuous enrollment in the datasets for 12 months prior to the index surgery date to assess for comorbidities. Furthermore, we excluded patients who did not maintain continuous enrollment for 6 months after the operation date.
Defining bundled payments and costs
Using the definition developed by the CMS pilot program as a standard,
we defined our primary episode-of-care as the period of time from 3 days before to 30 days after surgery. Costs were calculated from the total payments variable in the dataset, which represents the total payment for a service from all payers prior to the application of discounts like copayments, deductibles, or coordination of benefits. Because these values are reported as payments from 1 or more payers to a provider, costs in our study are indicative of the amount of money that was reimbursed. We adjusted all costs to the 2015-US market value using the Consumer Price Index. We added the cost of all claims from eligible patients dated within the specific episode-of-care period. Total cost was then divided by the number of patients to produce a monetary value for the average cost of treatment for a DRF surgical episode. We excluded claims from patients whose total episode-of-care costs exceeded the 99th percentile to further exclude patients with extenuating circumstances.
Because surgery for a DRF is generally an outpatient procedure, the standard CMS definition of an episode-of-care, utilized mostly for inpatient or riskier procedures, may not be best suited. Thus, we created additional payment predictions using 3 supplemental definitions of an episode-of-care (Table 1). For instance, we developed a bundled scheme to cover all costs for up to 90 days after surgery. A similar time frame is used the CMS Comprehensive Care for Joint Replacement model.
Centers for Medicare & Medicaid Services. Comprehensive Care for Joint Replacement Model 2017. Available at: https://innovation.cms.gov/initiatives/cjr. Accessed July 20, 2017.
In addition, we narrowed our 30-day and 90-day predictions to include only DRF-related services. In other words, we required that claims include a DRF-related diagnosis code to prevent the inclusion of services that were given during the specified time period but were not actually related to the DRF. The cost of a consultation for an unrelated optometry appointment that occurred 3 weeks after the patient underwent surgery for a DRF, for example, would not be included in the DRF-related bundle but would be part of the comprehensive care bundle.
Table 1Types of Claims Included in Each Episode-of-Care Definition
To assess the potential implications of bundled payment for DRF surgery, we were most interested in the distribution of costs across our sample. We assessed distribution in 2 ways: (1) the overall variation of perioperative costs for each surgery type and (2) the distribution of payments between service providers. To assess overall variation, we gathered the mean, SD, and interquartile range of the cost of an episode-of-care. We calculated the proportion of each bundle that was composed from preoperative claims, surgical claims, and postoperative claims. We also examined perioperative costs stratified by procedure type. To examine the distribution of payments between providers, we categorized physician payments based on the nature of the service provided using the CPT codes from each claim. We grouped claims by service type, sorting over 5,000 CPT and Healthcare Common Procedure Coding System codes into one of the following categories: anesthesia/drugs, surgery, imaging, casting/orthotic devices, pathology/laboratory, physical/occupational therapy, evaluation, emergency department services, or other.
Finally, we performed a subgroup analysis using only claims for patients of advanced age, excluding anyone younger than 65 years, to assess the effects of this unique group of patients on the distribution of costs and subsequent development of an episode-based bundled payment.
Results
We identified 23,453 eligible DRF operations (Table 2). The majority of patients underwent ORIF; in fact, percutaneous pinning and external fixation comprised only 12% of claims. Among individuals in our study sample, 15% (n = 3,485) were 65 years of age or older and 76% (n = 17,755) were women. Most had Preferred Provider Organization health insurance plans.
Table 2Patient Demographic Characteristics
Characteristic
ORIF n (%)
External Fixation n (%)
Percutaneous Pinning n (%)
Total (n = 23,453)
20,599 (88)
643 (3)
2211 (9)
Age (y)
18–34
2,436 (12)
47 (7)
359 (16)
35–44
2,576 (13)
70 (11)
235 (11)
45–54
5,044 (24)
139 (22)
488 (22)
55–64
7,624 (37)
241 (37)
709 (32)
≥ 65
2,919 (14)
146 (23)
420 (19)
Sex
Male
5,036 (24)
148 (23)
514 (23)
Female
15,563 (76)
495 (77)
1,697 (77)
Insurance plan
PPO
12,239 (59)
380 (59)
1,266 (57)
Comprehensive
1,656 (8)
83 (13)
240 (11)
HMO
2,152 (10)
53 (8)
200 (9)
POS
1,482 (7)
34 (5)
142 (6)
Other
2,117 (10)
44 (7)
219 (10)
Missing
953 (5)
49 (8)
144 (7)
Comorbidity score
0
14,499 (70)
445 (69)
1,508 (68)
1–3
1,418 (7)
35 (5)
146 (7)
4–8
2,941 (14)
108 (17)
364 (16)
> 8
1,741 (8)
55 (9)
193 (9)
Country region
Northeast
3,493 (17)
124 (19)
301 (14)
North Central
5,244 (25)
188 (29)
652 (29)
South
7,527 (37)
230 (36)
791 (36)
West
3,889 (19)
90 (14)
431 (19)
Missing
446 (2)
11 (2)
36 (2)
HMO, Health Maintenance Organization; POS, point of service; PPO, Preferred Provider Organization.
Table 3 presents the average cost of care for the surgical treatment of a DRF using each of our episode-of-care definitions. As expected, average costs were lower for the DRF-related bundle predictions than for the comprehensive bundle predictions. In other words, patients received enough care that was unrelated to the treatment of their fracture, within the time limits of the surgical episode, to incur substantially higher costs to the health system. This relationship was most pronounced when the episode-of-care covered up to 90 days after the index surgery. For example, the amount of unrelated care that a patient received by 30 days after surgery cost payers around $385, whereas the cost of unrelated care by the 90th postoperative day increased to about $1,195. The magnitude of variation, represented by the SD, ranged from $4,548 to $5,261 depending on the methods used to define a care episode. Table 3 also provides the average cost of care for individuals in our sample who were 65 years of age or greater. Surprisingly, the mean cost for these individuals averaged approximately $1,824 less than the average cost of care for all ages.
Table 3Cost of Bundle Payment for Each Episode-of-Care Definition
Reported in U.S. dollars. All costs adjusted to the 2015-dollar value. Costs were calculated from the total payments variable in the dataset that represents the total payment for a service from all payers prior to the application of discounts like copayments, deductibles, or coordination of benefits.
Episode-of-Care
All Patients Mean (SD)
Patients 65+ Mean (SD)
30-D comprehensive
6,962 (4,656)
5,184 (4,775)
90-D comprehensive
8,181 (5,109)
6,251 (5,261)
30-D DRF-related
6,577 (4,548)
4,830 (4,640)
90-D DRF-related
6,986 (4,669)
5,145 (4,750)
∗ Reported in U.S. dollars. All costs adjusted to the 2015-dollar value. Costs were calculated from the total payments variable in the dataset that represents the total payment for a service from all payers prior to the application of discounts like copayments, deductibles, or coordination of benefits.
Health care costs varied among procedure types. Tables 4 and 5 describe the preoperative, surgical, and postoperative costs associated with each surgery type for the comprehensive care bundles and DRF-related bundles, respectively. Difference in the cost of the surgery itself was greatest for ORIF and percutaneous pinning. With an average surgical cost of $6,289 (SD, $4,457), ORIF was about 1.8 times more expensive than pinning ($3,440; SD, $2,721). This may be explained by the high cost of the ORIF fixation device, but we are unable to confirm this prediction because the cost of the equipment was not billed separately in the claims. Preoperative costs were comparable between procedures. Similarly, the cost of postoperative care was comparable at the 30-day after surgery mark regardless of procedure type. However, we found that, by the 90th postoperative day, patients who received an external fixator experienced particularly high follow-up care costs (average, $2,493; SD, $2,277). These costs may result from the additional expense of device removal or postoperative complications.
Table 430- and 90-Day Comprehensive Care Bundle Cost by Procedure
Figure 2 illustrates the variation in the cost of both the 30- and the 90-day comprehensive bundle payment predictions, broken down by preoperative, surgical, and postoperative costs. Figure 3 illustrates the same concepts for the 30- and 90-day DRF-related bundled predictions. Preoperative costs had the least variation between episodes. Because we restricted the preoperative claims to occurring within the 3 days prior to operation to align with the CMS pilot models, the true cost of preoperative management for DRF patients is likely underestimated. In our own practice, for instance, patients typically receive an operation anywhere from 1 to 14 days after initial presentation. The majority (61%–91%) of each episode-of-care was composed of the cost of surgery itself. In addition, the largest amounts of variation were observed from surgical costs. For each of our predictions, we observed numerous cases (black dots) on the costlier end that were extreme outliers, or over 3 SDs from the mean, illustrating a substantial variation in cost at the population level.
Figure 2Distribution of costs for 30- and 90-day comprehensive bundle predictions. This graph illustrates the shape and variability of the distribution of costs by time of service. The median value (thick gray line), inner quartiles (top and bottom edges of box), outer quartiles (thin horizontal lines), and outliers (black dots) are depicted.
Figure 3Distribution of costs for 30- and 90-day DRF-related bundle predictions. This graph illustrates the shape and variability of the distribution of costs by time of service. The median value (thick gray line), inner quartiles (top and bottom edges of box), outer quartiles (thin horizontal lines), and outliers (black dots) are depicted.
Table 6 describes the breakdown of the total bundle payment by type of service provider. The majority of cost is associated with surgical costs. Regardless of definition, the second largest contributor to total episode cost was the cost of anesthesia or drugs. The smallest proportion of each bundled prediction was composed of payments for pathology or laboratory tests. Therapy costs were more than 3 times higher by 90 days after surgery, compared with the amount spent by the 30th day after surgery.
Table 6Breakdown of Bundled Payment Schemes by Service Type
The introduction of bundled payment schemes into surgical subspecialties is looming. It is necessary to understand the implications that these payments can have on physician reimbursement and clinical outcomes. In the present study, we show that the cost of caring for a patient with DRF was variable, with many cases costing over 3 SDs more than the national average. In numerical terms, average variation ranged from $4,548 to $5,261 depending on the methods used to define an episode-of-care. Collectively, these findings highlight the need for standardization as a measure to reduce discrepancies in the cost of care. Although slight variation in treatment type and associated cost is inevitable to account for case mix and patient preferences, elimination of even the costliest outliers through initiatives like payment bundling could substantially decrease variation and lessen the burden of DRF treatment costs on the health system. We postulate that a bundled payment initiative will have considerable effects on the current reimbursement patterns in play for DRF operations, ultimately reducing costs to payers.
Although bundled plans have been present in the U.S. health care system for over 30 years, they resurfaced as a topic of interest in the health policy agenda following the 2010 implementation of the Affordable Care Act.
Despite a scarcity of literature on the effect of bundled payment schemes on long-term outcomes, there is consensus that bundled payments can reduce cost without sacrificing quality.
In fact, they should promote higher-quality care through the use of incentives and increased accountability. Considering our shifting political climate, the fate of publicly funded pilot programs for bundled reimbursement remains unknown.
Nonetheless, the successes of prior bundled payment initiatives, particularly in the private sector, underscore the need for broader participation in alternative payment models and the extension of bundled payments into specialized surgical fields.
To implement a bundled payment into practice, considerations of numerous factors, including who should be eligible, what types of procedures or services should be included, and how to best define an episode-of-care, must be made. We examined the extent of the difference between a 30-day and a 90-day postoperative episode. In addition, we examined differences between a broad, comprehensive definition of an episode-of-care and a narrower DRF-related definition. Ellimoottil et al
performed a similar comparison of varied definitions of an episode-of-care in the Comprehensive Care for Joint Replacement model. Whereas they conclude that a broader definition had little effect on payment implications for most hospitals, we found that our broadly defined comprehensive care bundles were substantially costlier than the DRF-related service bundles, particularly by 90 days after surgery. This finding may indicate that DRF patients seek additional medical care that is unrelated to their fracture sooner than those who undergo lower extremity joint replacement. Because total joint replacement is more invasive and requires a more exhaustive follow-up regimen, it makes sense that the care that is being provided to these patients within 90 days is likely to be related to the index operation; subsequent charges would thus be covered in both a broad and a narrow episode-of-care definition. Our contrasting findings may also be artifact of different strategies used to define broad or narrow bundled schemes.
Compared with the overall cost of an episode of care, variation in the cost of postoperative services was relatively small. Only about 6% of the payments reflected in the 90-day bundle were not covered in our 30-day bundle predictions. To limit the potential risk of destructive competition for patients with the lowest risk but who maximize the opportunity for cost savings, an episode-of-care for DRF surgery may be best defined using a narrower definition and longer follow-up period.
In this study, we also found that treating adult patients between 18 and 64 years of age was costlier, on average, than treating patients 65 years or older. In general, medical spending in the United States is largest for older patients.
The type of surgery undergone by individuals in our sample may explain our observed differences. Older patients may be more inclined to undergo a less invasive surgical option to reduce the potential of complications. The rate of percutaneous pinning among individuals in our sample was 12% for patients 65 years or older compared with 9% for those 18 to 64 years. Therefore, despite their increased risk for multiple comorbidities and surgical complications,
the average cost of surgical treatment in older patients was actually lower. Furthermore, different types of implants and the time required to place them may also play an important role in dictating costs. It is well established that implant costs can vary substantially by type.
Decisions on which kind to use are often based on convenience and familiarity. A recent randomized controlled survey found that physicians may be more inclined to choose a less costly implant type when prices are made transparent.
Increasing physician awareness of cost differences simply between implant types may also encourage cost reduction and align well with a bundled payment initiative.
Episode-based payments shift existing cost and quality paradigms by reducing unnecessary services and holding providers accountable for the cost of complications. Like most surgical subspecialties, hand surgery is plagued by an overuse of discretionary services. Costly physician overuse or misuse has been suggested for many services within the scope of hand surgery, including medical imaging,
In the present study, we found that the second largest determinant of cost was for anesthesia and drugs, exceeded only by services from the surgery itself. Considering the lack of a best treatment option, regulation of surgical costs may be difficult. Surgeons should consider the specific indications for ORIF, the costliest option, carefully. Although internal fixation methods may be recognized as the more elegant option, there is a lack of evidence to support its superiority in regard to functional outcomes. Still, the added benefits of returning to work or activity sooner and easier postoperative care requirements (eg, no pin cleaning) may increase the appeal of internal fixation for patients. Although the most appropriate treatment will vary with circumstance, the value of alternative treatment options, like pinning, must be recognized in light of evolving reimbursement policies. Furthermore, based on our findings, bundled payments for DRF have potential to promote reductions for other types of debated services, such as anesthesia, imaging, or postoperative therapy.
The implementation of bundled payments across commercial providers and in the outpatient setting will undoubtedly involve challenges. Proponents of bundled plans have underscored their potential to reduce discretionary spending and improve quality of care by providing incentives and shifting accountability directly to service providers.
Strategies and tactics for successful implementation of bundled payments: bundled payment for care improvement at a large, urban, academic medical center.
Nevertheless, there is risk that the system may actually hinder collaboration between providers. In an effort to maintain profit, necessary care for patients who truly require additional services will be limited. Furthermore, continued investigation is needed to delineate which services and fees should be grouped in the bundle and which should be excluded. Based on the findings of this study, we recommend that the cost of surgery, anesthesia, therapy, imaging, and the emergency department all be considered. Concerted efforts to develop and guide patients through a standard episode-of-care pathway may be difficult to organize considering that these patients are treated in the outpatient setting and not all will seek recommended follow-up visits. This phenomenon likely explains some of the variation we observed in our average postoperative costs. Patients may also switch between multiple hospital systems, making coordination and the disbursement of fees challenging.
This analysis does have limitations. First, our payment models are based entirely on ICD-9 coding methodology. Many established models target the Medicare population and use Medicare Severity-Diagnosis Related Group-based classifications. Because our sample included claims predominantly from commercial insurers and patients of all ages, we were required to use the ICD-9 system. Nonetheless, as bundled payment programs gain popularity, their associations with ICD-9 coding will grow, marking the necessity for preliminary study. Second, similar to all large claims data studies, we were limited in the amount of clinical detail available for consideration in our analysis. Although the dataset is large and includes claims from across the United States, it is a convenience sample and is restricted to the health plans that provide their claims. Because we were interested in examining the implications of a bundled payment scheme among private insurers, a commercial claims dataset was appropriate. Despite being the predominant treatment method used to treat DRFs,
we did not include the cost of casting/orthosis fabrication in our estimates because we were most interested in the potential to reduce surgery-related costs. Considering the large differences in cost between nonsurgical and surgical management,
future consideration of a bundled payment scheme for casting alone may be justified. Finally, we were unable to assess many clinical characteristics or measure quality outcomes. Although we created detailed inclusion and exclusion criteria to limit the influence of outlier cases, these patients will likely play an important role in clinical practice.
As an integral facet of modern health reform, initiatives emphasizing value-based care have gained considerable attention. Despite policy shifts, the potential of bundled payments to reduce cost and coordinate care should not be ignored. This study shows that, in many cases, the cost of a surgical episode to treat a DRF is substantially higher than the national average, which emphasizes how prospective bundled payment schemes could be a valuable tool to stabilize or reduce expenditure on the national level. Furthermore, our results depict the distribution of the cost of care for the surgical treatment of DRFs, both between procedure type, time period, and service type. These findings can be used to guide the development of appropriate bundled episodes in hand surgery.
Acknowledgments
The authors acknowledge Dr. Sirichai Kamnerdnakta, MD for his assistance in the conception of this manuscript.
References
Hussey P.S.
Sorbero M.E.
Mehrotra A.
Liu H.
Damberg C.L.
Episode-based performance measurement and payment: making it a reality.
Centers for Medicare & Medicaid Services. Comprehensive Care for Joint Replacement Model 2017. Available at: https://innovation.cms.gov/initiatives/cjr. Accessed July 20, 2017.
Strategies and tactics for successful implementation of bundled payments: bundled payment for care improvement at a large, urban, academic medical center.
Funding for this work was supported by a Midcareer Investigator Award (2 K24-AR053120-06) and a Research Project Grant (R01-AR062066) to K.C.C. from the National Institute of Arthritis and Musculoskeletal and Skin Diseases. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health. The rest of the authors declare that they have no conflicts of interest.
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