Medicare's Acute Care Episode Demonstration: Effects of Bundled Payments on Costs and Quality of Surgical Care

Objective: To evaluate whether participation in Medicare's Acute Care Episode (ACE) Demonstration Program—an early, small, voluntary episode-based payment program—was associated with a change in expenditures or quality of care. Data Sources/Study Setting: Medicare claims for patients who underwent cardiac or orthopedic surgery from 2007 to 2012 at ACE or control hospitals. Study Design: We used a difference-in-differences approach, matching on baseline and pre-enrollment volume, risk-adjusted Medicare payments, and clinical outcomes to identify controls. Principal Findings: Participation in the ACE Demonstration was not significantly associated with 30-day Medicare payments (for orthopedic surgery: −$358 with 95 percent CI: −$894, +$178; for cardiac surgery: +$514 with 95 percent CI: −$1,517, +$2,545), or 30-day mortality (for orthopedic surgery: −0.10 with 95 percent CI: −0.50, 0.31; for cardiac surgery: −0.27 with 95 percent CI: −1.25, 0.72). Program participation was associated with a decrease in total 30-day post-acute care payments (for cardiac surgery: −$718; 95 percent CI: −$1,431, −$6; and for orthopedic surgery: −$591; 95 percent CI: $-$1,161, −$22). Conclusions: Participation in Medicare's ACE Demonstration Program was not associated with a change in 30-day episode-based Medicare payments or 30-day mortality for cardiac or orthopedic surgery, but it was associated with lower total 30-day post-acute care payments.