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.