Are current DRG-based bundled payment models for lumbar fusions risk-adjusting adequately? An analysis of Medicare beneficiaries.

BACKGROUND CONTEXT Current bundled payment programs in spine surgery, such as the Bundled Payment for Care Improvement (BPCI), rely on the use of Diagnosis Related Groups (DRGs) to define payments. However, these DRGs may not be adequate enough to appropriately capture the large amount of variation seen in spine procedures. For example, DRG 459 (spinal fusion except cervical with major co-morbidity or complication) and DRG 460 (spinal fusion except cervical without major co-morbidity or complication) do not differentiate between the type of fusion (anterior or posterior), the levels/extent of fusion, the use of interbody/graft/BMP, indication of surgery (primary vs revision) or even if the surgery was performed for a vertebral fracture. PURPOSE We carried out a comprehensive analysis to report the factors responsible for cost variation in a bundled payment model for spinal fusions. STUDY DESIGN Retrospective review of a 5% national sample of Medicare claims from 2008-2014 (SAF5). OUTCOME MEASURES To understand the independent marginal cost impact of various patient-level, geographic-level and procedure-level characteristics on 90-day costs for patients undergoing spinal fusions under DRG 459 and 460. METHODS The 2008-2014 Medicare 5% Standard Analytical Files (SAF) were used to retrieve patients undergoing spinal fusions under DRG 459 and DRG 460 only. Patients with missing gender, age and/or state-level data were excluded. Only those patients who had complete data, with regard to payments/costs/reimbursements, starting from Day 0 of surgery up to 90 days postoperatively were included to prevent erroneous collection. Multivariate linear regression models were built to assess the independent marginal cost impact (decrease/increase) of each patient-level, state-level and procedure-level characteristic on the average 90-day cost while controlling for other covariates. RESULTS A total of 21,367 patients (DRG-460=20,154; DRG-459=1,213) were included in the study. The average 90-day cost for all lumbar fusions was $31,716 ± $18,124, with the individual 90-day payments being $54,607 ± $30,643 (DRG-459) and $30,338 ± $16,074 (DRG-460). Increasing age was associated with significant marginal increases in 90-day payments (70-74y: + $2,387, 75-79y: + $3,389, 80-84y: + $2,872, ≥85: + $1,627). With regard to procedure-level factors – undergoing an anterior fusion (+ $3,118), >3 level fusion (+ $5,648) vs 1-3 level fusion, use of interbody device (+ $581), intra-operative neuro-monitoring (+ $1,413), concurrent decompression (+ $768) and undergoing surgery for thoracolumbar fracture (+ $6,169) were associated with higher 90-day costs. Most individual comorbidities were associated with higher 90-day costs, with malnutrition (+ $12,264), CVA/stroke (+ $5,886), Alzheimer's (+ $4,968), Parkinson's disease (+ $4,415) and coagulopathy (+ $3,810) having the highest marginal 90-day cost-increases. The top 5 states with the highest marginal cost-increase, in comparison to Michigan, were Maryland (+ $12,657), Alaska (+ $11,292), California (+ $10,040), Massachusetts (+ $8,800) and the District of Columbia (+ $8,315). CONCLUSIONS Under the proposed DRG-based bundled payment model, providers would be reimbursed the same amount for lumbar fusions regardless of the surgical approach (posterior vs anterior), the extent of fusion (1-3 level vs >3 level), use of adjunct procedures (decompressions) and cause/indication of surgery (fracture vs degenerative pathology), despite each of these factors having different resource utilization and associated costs. When defining and developing future bundled payments for spinal fusions, health policy makers should strive to account for the individual patient-level, state-level and procedure-level variation seen within DRGs to prevent the creation of a financial disincentive in taking care of sicker patients and/or performing more extensive complex spinal fusions. FDA DEVICE/DRUG STATUS This abstract does not discuss or include any applicable devices or drugs.