• Faiz Gani, Martin A Makary, Elizabeth C Wick, Jonathan E Efron, Sandy H Fang, Bashar Safar, John Hundt, and Timothy M Pawlik.
• Department of Surgery, Johns Hopkins University School of Medicine, Baltimore, Maryland.
• JAMA Surg. 2016 May 18; 151 (5): e160202.

ImportanceThe Bundled Payments for Care Improvement Initiative was proposed by the Centers for Medicare and Medicaid Services to obtain and reward a greater value of care. Still in its infancy, little is known regarding the potential effects of the Bundled Payments for Care Improvement Initiative on hospital payments and net margins.ObjectiveTo investigate the potential effects of the Bundled Payments for Care Improvement Initiative on net margins among Medicare patients undergoing colectomy at a tertiary care hospital.Design, Setting, And ParticipantsCross-sectional retrospective analysis conducted in October 2015. Medicare enrollees undergoing an elective colectomy at a large tertiary care hospital between January 1, 2009, and December 31, 2013, were identified using diagnosis-related group and International Classification of Diseases, Ninth Revision, Clinical Modification diagnosis codes.Main Outcomes And MeasuresMultivariable linear regression analysis was performed to calculate risk-adjusted, diagnosis-related group-specific hospital costs and payments for each patient. Net margins were calculated as the difference between total hospital costs and total payments received.ResultsA total of 821 Medicare enrollees underwent an elective colectomy and met inclusion criteria. The median age of patients was 69 years (interquartile range [IQR], 65-74 years), with 51.3% being female. Postoperative complications were observed among 27.5% of patients (n = 226) and the median length of stay was 8 days (IQR, 5-14 days). The median risk-adjusted cost among all patients was $24 951 (IQR, $16 197-$38 922). Risk-adjusted costs were higher among patients who developed a postoperative complication ($42 537 [IQR, $28 918-$72 316] vs $22 829 [IQR, $14 820-$26 150]; P < .001) and among patients with an observed to expected length of stay greater than 1 ($36 826 [IQR, $24 951-$65 016] vs $16 197 [IQR, $14 182-$23 998]; P < .001). The median payment under the fee-for-service structure was $29 603 (IQR, $17 742-$44 819), resulting in an overall net margin of $3177 (IQR, -$1692 to $10 773), with 33.7% of patients (n = 277) contributing to an overall negative margin. In contrast, under the bundled payment paradigm, the net margin per patient was $3442 (IQR, -$9311 to $8203), with 41.7% of patients (n = 342) contributing to a net negative margin.Conclusions And RelevancePostoperative complications, length of stay, and total hospital costs were strongly associated with hospital costs. Payments under the bundled payments system were lower and the proportion of patients contributing to a net negative margin increased. Further study is warranted to define the effect of bundled payments on quality of care and hospital finances.

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