Physician practice variation under orthopedic bundled payment.

OBJECTIVES

To describe the extent of and longitudinal changes in physician practice variation with respect to implant costs, institutional postacute care (PAC) provider utilization, and total episode payments, as well as to evaluate the association between physician volume and quality and these outcomes.

STUDY DESIGN

Observational study.

METHODS

We combined claims and internal hospital cost data for 34 physicians responsible for 3614 joint replacement episodes under bundled payment at Baptist Health System (BHS). Multilevel multivariable generalized linear models were employed and the intraclass correlation (ICC) was used to quantify between-physician variation.

RESULTS

There was significant between-physician variation in implant costs, institutional PAC provider utilization, and total episode payments not explained by observable variables (P <.001 for all). Over 5 years, the ICC decreased from 0.26 to 0.06, 0.15 to 0.13, and 0.12 to 0.10 for implant costs, institutional PAC provider utilization, and total episode payments, respectively, but differences were not statistically significant. Both higher physician case volume and quality were associated with decreased total episode payments and institutional PAC provider utilization, but not with changes in implant costs.

CONCLUSIONS

Considerable physician practice variation was observed under bundled payment at BHS and decreased to a greater degree for implant costs than institutional PAC provider utilization or total episode payments. Institutional PAC provider utilization and total episode payments were associated with physician volume and quality. Although some organizational strategies achieve gains by reducing physician practice variation, variation reduction is not an absolute requisite for success under bundled payment.