Expanding a demonstration that bundled hospital and physician payments for several cardiac and orthopedic procedures would have a significant impact on Medicare, wrote authors of a viewpoint that appeared online July 7 in JAMA Internal Medicine. They offered several options going forward.

Medicare’s three-year Acute Care Episode (ACE) demonstration tested the use of a payment structure that provided five participating sites with a global payment from Medicare for 37 high-margin inpatient cardiac and orthopedic procedures. The cardiac component included PCI, CABG, cardiac valve surgery and pacemaker implants.

Each site negotiated with Medicare to receive discounts from their usual payment, which could be split between hospitals and physicians or not. Sites that met quality reporting and monitoring requirements then could share in the savings, with some restrictions.

Medicare argued the program would give hospitals and physicians incentives to coordinate care and press manufacturers for lower prices on devices, according to authors Maura Calsyn, JD, and Ezekiel J. Emanuel, MD, PhD, of the Center for American Progress in Washington, D.C.

The demonstration showed improvements in coordination, communication and standardization. For instance, hospitals informed physicians about their performance on quality metrics and costs, which prompted changes in practice and use of resources. Administrators and physicians worked together to identify high-quality, cost-effective devices and then negotiated reduced prices with vendors.

Medicare saved $319 per episode through ACE, but the savings were not uniform. PCI offered the smallest savings, at $71, and orthopedic procedures the greatest. Hospitals also achieved savings, mostly through lower prices for devices.

Medicare’s net savings totaled $4 million, with little evidence of a drop in quality. CABG provided the only example of a “negative impact,” attributed to the use of internal mammary artery grafts instead of a more complex option that showed better outcomes.

Calsyn and Emanuel suggested three approaches for expanding the program. Medicare could allow hospitals that aren’t already involved in bundling or using accountable care organizations to participate; it could roll out orthopedic bundles, because they offered the most savings with no loss in quality; or it could expand the program regionally.

They proposed using a 4 percent discount with hospitals and physicians receiving up to 50 percent of savings if they met quality standards. They also encouraged Medicare to consider adding components to the ACE demonstration to evaluate its effectiveness with post-acute care.

“Any expansion of the ACE demonstration would be an incremental yet profound change for Medicare,” they wrote. Private payers might follow suit, further helping to control costs and increase value. “[T]he approach tested in the ACE demonstration could make a difference.”