The Impact of Medicare Bundled Payments: Evidence from a Nationwide Randomized Evaluation for Lower Extremity Joint Replacement
Bundled payments are a key part of Medicare’s shift away from the traditional fee-for-service (FFS) payment model. We propose to study a nationwide randomized-controlled trial (RCT) of bundled payments for knee and hip replacements that was designed by CMS and launched in April 2016. Randomization was conducted at the Metropolitan Statistical Area (MSA) level with 67 MSAs and more than 800 hospitals assigned to the treatment group. We will examine the impact of bundled payments on Medicare spending, utilization, and quality. Our findings should be directly relevant for the design of payments for knee and hip replacements, two common and expensive medical procedures. Average impacts, as well as variation in impact across types of providers and markets may also shed light on economic mechanisms, which should be relevant for bundled payment initiatives under consideration for other medical services. System-wide policies such as payment reform are typically held up as a prime example of an environment where RCTs are impractical. Our study and its results will highlight the feasibility and value of such RCTs.