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How to Succeed in Bundled Payments for Total Joint Replacement

Case Study · October 24, 2016

This early look at one hospital’s experience with Medicare’s bundled payment for total joint replacement shows improvements in both clinical and financial performance. We credit our Complete Care program for the success at Euclid Hospital, which has prompted us to expand the initiative to nine more Cleveland Clinic hospitals.

Key Takeaways

  1. First-year data show that it is possible for a hospital to both improve care and succeed financially under CMS BPCI for total joint replacement, with enhanced financial performance for both the hospital and the insurer.

  2. Care redesign across the episode of care is essential to delivering high-quality care and favorable financial value creation underneath an organized bundled payment.

  3. A physician champion at the outset and use of a specialty care coordinator throughout the care process are both essential to success.

The Challenge

Anticipating the shift of 30% and 50% of Medicare payments to alternative payment models by the end of 2016 and 2018, respectively, Cleveland Clinic Health System wanted to gain early experience. Participating in Bundled Payments for Care Improvement (BPCI) for total joint replacement of the lower extremity, starting in 2013, challenged us to create and test a framework for redesigning care for a risk-based model.

Experience from this three-year model is of great interest as Centers for Medicare and Medicaid Services (CMS) begins implementing Comprehensive Care for Joint Replacement, a mandatory bundled payment program, in 67 metropolitan areas, affecting approximately 800 hospitals this year. Hospitals around the country are wondering, is it possible to succeed financially and improve clinical outcomes?

The Goal

This program is among the first to test financial and quality of care impacts in an episode-based innovative payment methodology for total joint replacements of the lower extremity. Our goal in participating was twofold: 1) to test the financial and quality of care impacts of the BPCI initiative for total joint replacement and 2) to create a model that delivers clinical quality and financial success under a value-based payment and that potentially could extend to risk-sharing arrangements for other conditions and across many types of payers.

The Execution

We chose Euclid Hospital as a pilot site because it was a designated center for hip and knee replacement and because surgical and administrative staff were already well aligned. We participated in BPCI Model 2, which is a retrospective 30-day episode of care with a target price based upon the historical experience of that specific hospital. If actual spend during an episode of care is below the target price, then the hospital receives a positive Net Payment Reconciliation Amount that is then available to distribute as gain share — and vice versa. If actual spend is above the target price, then the hospital is liable for the difference. All traditional Medicare patients (Parts A and B) undergoing hip and knee replacement were automatically included unless they met certain medical or administrative criteria for exclusion.

Between the initial announcement of the program by CMS in August 2011 and when the first patients went live for risk at Euclid on October 1, 2013, the Department of Orthopaedic Surgery at the Cleveland Clinic developed standard clinical care paths for total joint replacements. These physician-developed, physician-led clinical care guidelines are intended to drive high-quality outcomes based upon best practices and to reduce clinical and financial variations.

For example, collaboration among relevant departments (orthopaedics, anesthesiology, and physical therapy) led to guidelines for two key steps known to speed recovery: 1) use of short-acting blocks to ensure rapid mobilization for patients after surgery and 2) initiating physical therapy on the day of surgery if the patient was back on the floor or in the post-anesthesia care unit (PACU) by 5:00 p.m.

As we continued to build our program for BPCI, we established a standardized methodology of care redesign that could apply to other risk-sharing arrangements.

We have since articulated this as our “Complete Care” program. It can apply to any risk-based model across many specialties, including total joint replacement, regardless of payer. Complete Care’s three pillars are:

  1. Care Path Utilization: Follow evidence-based, best practice guidelines to ensure consistent, high-quality care for every episode of care.
  2. Care Coordination: Use a single point of contact — a Care Coordinator — for patients and their family members. Their relationship with the Care Coordinator begins before the patient enters the acute hospitalization, continues through the surgical intervention, and follows the patient after discharge across multiple sites of care.
  3. Connected Care: Focus on care transitions into the post-acute setting to reduce fragmentation of care delivery. A concerted effort across Cleveland Clinic aims to keep patients connected to the clinical team via phone, email, and electronic medical record to identify and address problems early, thereby avoiding emergency department visits and readmissions.
Euclid Hospital Internal Quality Reporting Data for Bundled Payment for Total Joint Replacement

Euclid Hospital Internal Quality Reporting Data for Bundled Payment for Total Joint Replacement Click To Enlarge.


During the first performance year (October 1, 2013, to September 30, 2014) of the three-year BPCI program, Euclid Hospital treated 271 patients. Internal quality reporting data for each quarter (see table) show improvement in these quality and outcome measures:

  • average length of stay in the hospital reduced from 3.4 days to between 2.67 and 3.01 days each quarter
  • rate of catheter-associated urinary tract infection (CAUTI) reduced from 5.2 (N/1000), to 0 for each of the quarters
  • 30-day readmissions decreased from 5.0% to between 1.6% and 2.7% each quarter
  • discharge to home (with and without home health care) increased from 39% to a quarterly range of 68% to 75%; discharge to skilled nursing or inpatient rehab facilities dropped accordingly
  • Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) overall rating (patients who gave their hospital a 9 or 10 rating on a scale up to 10) increased from a baseline of 74% to between 78% and 88% each quarter

Helping patients return to functional status more quickly reduced the total cost of care, which resulted in shared savings for both the hospital and Medicare. The first year showed financial value creation of $522,389 (9.8%) across the 271 episodes of care. This savings to the health care system from the historical price was distributed between CMS ($159,571) and Cleveland Clinic ($362,818).

We recently expanded the program to nine additional hospitals, and early data suggest a similar trend in quality and financial metrics.

Where to Start

We identified these factors as essential for success when redesigning care for bundled payments:

  1. Physician Engagement: At the outset, identify a physician champion who is committed to care redesign and improving the quality of care. Then, bring in other physicians who will help to develop the clinical care path.
  2. Specialty Care Coordinator: Establish a formal specialty care coordinator position, which can be someone already on staff or a new hire. A care coordinator is the patient’s single point of contact. He/she reaches out to the patient before, during, and after a hospital stay, and follows patients post discharge. We saw how a patient’s phone conversation with a care coordinator after discharge made it possible to avoid an ED visit and possible hospitalization.
  3. Education and Consistent Messaging: All stakeholders — hospital staff, affiliated physicians, patients, and families — must have a shared expectation of what will occur throughout the episode of care. This is accomplished through patient/family education classes and a patient education guide, and training for relevant hospital staff and affiliated physician practices. Patient expectations are established in the physician office. The message patients receive there must be consistent with what they hear and experience in the hospital. We found that educating both providers and patients about expectations after surgery was paramount to increasing discharge disposition to home.
  4. Post-Acute Care Partnerships: Ensure that care management and discharge teams work closely with the hospital’s top referral sites to educate them on the program and obtain buy-in.
  5. Compliance Module: Create an online module to provide hospital clinical or professional staff with information on BPCI, beneficiary protections, program waivers, and an anonymous line for reporting issues to Cleveland Clinic and/or CMS.


We are grateful for the contributions of Joseph Iannotti, MD, PhD, Mark Froimson, MD, MBA, and Michelle Schill, BSN, RN.

Please contact Monica Deadwiler for any further correspondence about the program.


Disclosure: The statements contained in this document are solely those of the authors and do not necessarily reflect the views or policies of CMS. The authors assume responsibility for the accuracy and completeness of the information contained in this document.

This case study originally appeared in NEJM Catalyst on June 2, 2016.

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