Health Care Expenditures Associated With Skeletal Fractures Among Medicare Beneficiaries, 1999–2005

Fractures impose substantial burdens, in terms of both costs and health, on individuals and health care systems. This is particularly true for older Americans and the Medicare system. The objective of this study was to estimate the costs of care associated with selected fractures among Medicare beneficiaries. This was a retrospective, person‐level, pre/postfracture analysis using administrative data. The study used Medicare claims data from 1999 through 2005 for a 5% sample of Medicare beneficiaries. The subjects included Medicare beneficiaries, ≥65 yr of age, who had at least 13 mo of both Parts A and B coverage and not enrolled in Medicare Advantage and who experienced a closed fracture of the hip, femur, pelvis, tibia/fibula, ankle, distal forearm, nondistal radius/ulna, humerus, clavicle, spine, or wrist, or any fracture of the distal forearm or ankle during the years 2000 through 2005. The main outcome measures were incremental (greater than baseline) and attributable (directly associated) payments for Medicare‐covered services for the first 6 mo after incident fractures. Incremental payments ranged from $7788 (95% CI, $7550–$8025) for distal forearm fractures to $31,310 (95% CI, $31,073–$31,547) for open hip fractures; the attributable payments for distal forearm and hip fractures were $1856 and $18,734, respectively. Fractures are associated with substantial increases in health services utilization and costs among Medicare beneficiaries, but significant proportions of those costs are not directly attributable to fracture treatment. Further research is needed to ascertain other health conditions that are driving costs for Medicare beneficiaries after fractures.     

Cadaveric versus living donor kidney transplantation: a Medicare payment analysis

BACKGROUND: We found previously that the clinical advantages of living donor (LD) renal transplantation lead to financial cost savings compared to either cadaveric donation (CAD) or dialysis. Here, we analyze the sources of the cost savings of LD versus CAD kidney transplantation. METHODS: We used United States Renal Data System data to merge United Network for Organ Sharing registry information with Medicare claims data for 1991-1996. Information was available for 42,868 CAD and 13,754 LD transplants. More than 5 million Medicare payment records were analyzed. We calculated the difference in average payments made by Medicare for CAD and LD for services provided during the first posttransplant year. RESULTS: Average total payments were $39,534 and $24,652 for CAD and LD, respectively (P<0.0001) during the first posttransplant year. The largest source of the difference in payments was in inpatient hospitals, representing $10,653.67 (P<0.0001). For patients who had Medicare as the primary payer, average transplant charges were significantly higher for CAD donation ($79,730 vs. $69,547, P<0.0001); average transplant payments demonstrated no statistical differences ($28,483 vs. $28,447, P = 0.858). Therefore, inferred profitability was significantly higher for LD. CONCLUSIONS: Medicare payments are remarkably lower for LD compared to CAD in every category. The single largest cost saving comes from inpatient hospital services. A portion of the savings from LD could be invested in programs to expand living kidney donation.     

Non-bladder cancer mortality in patients with urothelial cancer of the bladder

ObjectivesBecause bladder cancer (BC) patients often have comorbidities that adversely affect their health, we wanted to determine whether grade and stage of BC at diagnosis are associated with the hazard of death from causes other than BC.Materials and methodsCancer records for 93,033 patients diagnosed with urothelial BC during 1988–2002 were obtained from the Surveillance Epidemiology and End Results (SEER) database. The grade-stage categories were defined as follows: (1) low grade, stage 0/I (Ta/T1, N0/Nx), (2) high grade, stage 0/I (Ta/Tis/T1, N0/Nx), (3) any grade, stage II (T2, N0/Nx), (4) any grade, stage III (T3-T4a, N0/Nx), (5) any grade, stage IV (T4b and/or N+). Patients with known distant metastases at presentation were excluded. Other covariates were age, gender, and race. The outcome measures were defined as the hazard of death from all causes, from BC, and from non-BC causes. Cox regression model was used to estimate the effect of grade-stage categories on over-all and cause-specific hazards with adjustment for covariates.ResultsThe 5-year mortality proportions by grade-stage category were as follows: low grade, stage 0/I: all-causes 25%, BC 3%, non-BC 22%; high grade stage 0/I: all-causes 38%, BC 13%, non-BC 25%; stage II: all-causes 63%, BC 36%, non-BC 27%; stage III: all-causes 69%, BC 45%, non-BC 24%; stage IV: all-causes 83%, BC 68%, non-BC 15%. Using low grade, stage 0/I as a reference category, the hazard ratios for increasing grade-stage categories (high grade 0/I, II, III, IV) were as follows: all-cause mortality 1.30, 2.37, 3.07, 6.14; BC-related hazard 3.31, 10.02, 14.65, 32.04; non-BC-related hazard: 1.05, 1.37, 1.49, 1.65 (all P < 0.001).ConclusionGrade-stage categories were associated with the hazard of death from non-BC causes. However, their influence on BC-related hazard was much greater in magnitude. Because BC (rather than co-morbidities) is the main cause of death in patients with muscle-invasive disease, aggressive BC-directed therapies in these patients, when feasible, are justified.     

Variations in Medicare payments for episodes of spine surgery

Background contextAlthough the high cost of spine surgery is generally recognized, there is little information on the extent to which payments vary across hospitals.PurposeTo examine the variation in episode payments for spine surgery in the national Medicare population. We also sought to determine the root causes for observed variations in payment at high cost hospitals.Study designAll patients in the national fee for service Medicare population undergoing surgery for three conditions (spinal stenosis, spondylolisthesis, and lumbar disc herniation) between 2005 and 2007 were included.Patient sampleIncluded 185,954 episodes of spine surgery performed between 2005 and 2007.Outcome measuresPayments per episode of spine surgery.MethodsAll patients in the national fee for service Medicare population undergoing surgery for three conditions (spinal stenosis, spondylolisthesis, and lumbar disc herniation) between 2005 and 2007 were identified (n=185,954 episodes of spine surgery). Hospitals were ranked on least to most expensive and grouped into quintiles. Results were risk- and price-adjusted using the empirical Bayes method. We then assessed the contributions of index hospitalization, physician services, readmissions, and postacute care to the overall variations in payment.ResultsEpisode payments for hospitals in the highest quintile were more than twice as high as those made to hospitals in the lowest quintile ($34,171 vs. $15,997). After risk- and price-adjustment, total episode payments to hospitals in the highest quintile remained $9,210 (47%) higher. Procedure choice, including the use of fusion, was a major determinant of the total episode payment. After adjusting for procedure choice, however, hospitals in the highest quintile continued to be 28% more expensive than those in the lowest. Differences in the use of postacute care accounted for most of this residual variation in payments across hospitals. Hospital episode payments varied to a similar degree after subgroup analyses for disc herniation, spinal stenosis, and spondylolisthesis. Hospitals expensive for one condition were also found to be expensive for services provided for other spinal diagnoses.ConclusionsMedicare payments for episodes of spine surgery vary widely across hospitals. As they respond to the new financial incentives inherent in health care reform, high cost hospitals should focus on the use of spinal fusion and postacute care.     

Risk-Adjusted Cost Performance for 90-Day Total Hip Arthroplasty Episodes: Comparing US Hospitals Nationwide Before CJR

BackgroundWe characterize variation in total hip arthroplasty (THA) episode payments in the United States. Medicare population immediately preceding implementation of the comprehensive care for joint replacement (CJR) bundled care model and propose a model for ongoing evaluation of hospital performance.MethodsWe identified THA episodes in Medicare part A 2014-2016 (n = 366,380) and compared 90-day episode payments across years and geographic regions. We fit hierarchical models that regressed episode payments on patient-level fixed and region-level and hospital-level random effects. Random effects estimates were used to characterize risk-adjusted hospital cost performance. We ranked hospitals (n = 3218) in each region by their cost performance estimate and constructed 95% confidence intervals to visualize high-performing and low-performing hospitals.ResultsMean part A episode payments declined from 2014 to 2016 throughout the United States ($19,925-$17,775; P < .001), primarily attributable to decreased postacute care payments. Ninety-day readmission rates fell by a percentage point (from 7.9% to 6.8%; P < .001). We found significant variation in risk-adjusted episode payments, postacute care utilization, and readmission rates across regions, and ever greater variation at the hospital level.ConclusionMedicare part A payments decreased for THA episodes between 2014 and 2016. The time frame for this decrease is notable for preceding full implementation of CJR, thus suggesting a more universal embrace of value-based care principles before the start date of CJR. These decreases were primarily because of decreased postacute care utilization and possibly related to falling readmission rates. Yet, significant variation in hospital cost performance remains, even after risk adjustment.     

A quarter century of medicare expenditures for ESRD

Medicare's end-stage renal disease (ESRD) program is unique in that it is the only example of an entitlement program based solely on the basis of a clinical condition. Medicare payments on behalf of ESRD beneficiaries is a combination of ESRD-specific payment policies such as those for dialysis, physician oversight, erythropoeitin, and immunosuppression and general Medicare payment policies such as hospital payments, nondialysis physician services, home health, and skilled nursing care. Over the 25-year history of the program, much of the ESRD-related care has been subject to cost controls more stringent than elsewhere in Medicare. Total payments for ESRD beneficiaries continue to consume an ever-increasing percentage of Medicare expenditures, largely because of ever-expanding patient treatment criteria. However, increases in per capita expenditures for ESRD beneficiaries have been far below that of Medicare in general.     

Central DXA utilization shifts from office-based to hospital-based settings among medicare beneficiaries in the wake of reimbursement changes

In the United States, Medicare gradually reduced payments for central dual-energy X-ray absorptiometry (DXA) performed at physician offices (or other nonhospital settings) from an average of $139 in 2006 to about $82 in 2007 and 2008 and $72 in 2009. Reimbursement for hospital outpatient DXA service was unchanged. We investigated the utilization of hip and spine (central) DXA in the Medicare population before and after the reduction. We identified individuals from the national 5% random sample of Medicare beneficiaries who were ≥65 years of age and enrolled in Medicare Parts A and B but not in a Medicare Advantage plan from 2002 through 2009. For each calendar year, we calculated the proportion of beneficiaries who submitted claims for DXA, the proportions of DXAs performed in hospitals and in physician offices and the number of physician office-based practices that discontinued or started to provide DXA services. From 2002 to 2006, the proportion of beneficiaries who had at least one central DXA increased from 7.9% to 9.6% at an annual increase of 0.4% and from 2006 to 2009, the annual increase dropped to 0.1%. The number of DXAs performed in physician offices dropped from 1,643,720 (69% of 2,363,500 total DXAs) in 2006 to 1,534,240 (66% of 2,338,240) in 2009. This decline was offset by an increase in the number of DXAs performed in hospitals, which increased from 719,780 (31%) in 2006 to 804,000 (34%) in 2009. Among physician office-based practices, more practices initiated than discontinued DXA service each year from 2002 to 2006. However, the trend was reversed since 2007 such that in 2009, 1876 practices discontinued and only 1394 initiated DXA service. The reduction in DXA reimbursement was associated with a decrease in the number of DXAs performed in physician offices and fewer physician offices that provided DXA services.     

Demand Matching Total Joint Replacement Patients Results in Reduction of Post-Discharge Costs

BackgroundThe shift from fee-for-service to value-based care has focused payers and providers on resource utilization. One important component of value-based care is to reduce the use of post-discharge (PD) services in a clinically appropriate manner following total joint arthroplasty (TJA). Demand matching in healthcare is the process of tailoring appropriate medical care to a patient with respect to that patient’s specific medical needs and social determinants. Outcomes following the implementation of a demand-matching algorithm for coordinating PD services after TJA were analyzed in this study.MethodsPayment data from all Medicare patients undergoing primary unilateral TJA between July 2014 and December 2018 from a single orthopedic practice were included. These payments were separated into acute and PD care. The initial acute and PD costs were compared to costs at the end of the 4-year study period using multiple linear regression and chi-square.ResultsA total of 9,638 patients (4,212 total hip arthroplasties and 5,430 total knee arthroplasties) were included. Acute costs of TJA were stable averaging $13,712.00. PD costs fell steadily from a baseline average of $7,319.00 in July 2014 to $4,678.00 in December 2018 (P < .001), representing a 36.1% decline. Discharge to home increased steadily from 45.8% to 79.9% during the same interval (P < .001.)ConclusionOur results demonstrate a statistically significant reduction in PD costs over a 4-year period using a demand-matching strategy to align with the Centers for Medicare and Medicaid Services mandate for value-based care. Based on these data, we conclude that thoughtful preoperative assessment of patient factors such as social determinants and medical comorbidities could allow for cost reduction through better utilization of PD services.     

What Are the Costs of Hip Osteoarthritis in the Year Prior to a Total Hip Arthroplasty?

BackgroundThe majority of the cost analysis literature on total hip arthroplasties (THAs) has been focused around the perioperative and postoperative period, with preoperative costs being overlooked.MethodsThe Humana Administrative Claims database was used to identify Medicare Advantage (MA) and Commercial beneficiaries undergoing elective primary THAs. Preoperative healthcare resource utilization in the year prior to a THA was grouped into the following categories: office visits, X-rays, magnetic resonance imagings, computed tomography scans, intra-articular steroid and hyaluronic acid injections, physical therapy, and pain medications. Total 1-year costs and per-patient average reimbursements for each category have been reported.ResultsTotal 1-year preoperative costs amounted to $21,022,883 (average = $512/patient) and $4,481,401 (average = $764/patient) for MA and Commercial beneficiaries, respectively. The largest proportion of total 1-year costs was accounted for by office visits (35% in Commercial; 41% in MA) followed by pain medications (28% in Commercial; 35% in MA). Conservative treatments (steroid injections, hyaluronic acid injections, physical therapy, and pain medications) alone accounted for 40%-44% of the total 1-year costs prior to a THA. A high healthcare utilization within the last 3 months prior to surgery was noted for opioids and steroid injections.ConclusionOn average, $500-$800/patient is spent on hip osteoarthritis-related care in the year prior to a THA. Despite their potential risks, opioids and steroid injections are often utilized in the last 3 months prior to surgery.     

Real-world burden of illness and unmet need in locally advanced or metastatic urothelial carcinoma following discontinuation of PD-1/L1 inhibitor therapy: A Medicare claims database analysis

BackgroundSeveral programmed death-1 or death-ligand 1 (PD-1/L1) inhibitors are approved first- or second-line therapies for locally advanced or metastatic urothelial carcinoma (la/mUC); however, clinical trials show that only ∼20% of patients respond and all ultimately progress. This study elucidated real-world treatment patterns, healthcare resource utilization (HRU), and economic burden among Medicare beneficiaries with la/mUC who discontinue PD-1/L1 inhibitor therapies.MethodsWe conducted a retrospective claims analysis of patients aged ≥65 years diagnosed with la/mUC (2015−2017) who initiated and subsequently discontinued PD-1/L1 inhibitor therapy (index=date of last administration) using Medicare Fee-for-Service Research Identifiable Files. Included patients had ≥12 months pre- and ≥3 months post-index continuous Medicare enrollment, and were followed until disenrollment, death, or data cutoff.ResultsAmong 28,063 patients, 17% (n=4652) received ≥1 PD-1/L1 inhibitor following la/mUC diagnosis. Of these, 791 discontinued PD-1/L1 inhibitor therapy and met inclusion criteria (study cohort); 73% male, median age 76 years. Post-discontinuation, 3% received a different PD-1/L1 inhibitor, 46% chemotherapy, and 51% no further systemic treatment. HRU was high during follow-up: 97% had ≥1 outpatient visit and 52% ≥1 hospitalization. Healthcare costs per-patient-per-month were $7153 pre- and $7745 (adjusted) post-index; systemic therapy costs were higher pre- vs. post-index ($2978 vs. $1195) but other costs were higher post-index: hospitalization ($1120 vs. $2200), outpatient ($1437 vs. $2064), hospice ($3 vs. $536), skilled nursing facility ($106 vs. $384).ConclusionsOver half of Medicare beneficiaries with la/mUC received no disease-directed therapy post-PD-1/L1 inhibitor treatment. Patients who discontinued PD-1/L1 inhibitor therapy had intensive HRU unrelated to therapy costs, highlighting the significant burden of la/mUC and need for treatments that extend survival.     

Utilization and costs of lumbar and full spine radiography by Ontario chiropractors from 1994 to 2001

Background contextIn Ontario, chiropractors see one-third of patients who seek care for low back pain. Previous studies suggest that chiropractors have high utilization rates of lumbar and full spine radiography. There has been a proliferation of evidence-based guidelines recommending that plain film radiography be used only to assess high-risk patients with low back pain. Evidence for the use of full spine radiography, except for the evaluation of scoliosis is lacking. It is uncertain what impact the growing evidence against their use has had on radiography utilization by Ontario chiropractors.PurposeTo describe the annual costs and use of lumbar and full spine plain film radiography among Ontario chiropractors between 1994 and 2001.Study design/settingTime-trend analysis of radiography utilization by Ontario chiropractors.Patient sampleChiropractic claims data submitted to the Ontario Health Insurance Plan or the Workplace Safety & Insurance Board from 1994/1995 to 2000/2001.Outcome measuresChange in the annual cost and proportion of claimants receiving lumbar and full spine radiography.MethodsTime-trend analysis of chiropractic claims submitted to the Ontario Health Insurance Plan (OHIP) or Workplace Safety & Insurance Board (WSIB) from 1994/1995 to 2000/2001 fiscal years.ResultsDuring the 7-year period, the proportion of OHIP claimants receiving lumbar spine radiography decreased from 4.54% to 3.25% and for full spine radiography from 3.87% to 3.04%. For WSIB claimants, lumbar spine radiography deceased from 6.49% to 3.30% of claimants and full spine radiography from 1.51% to 0.94%. OHIP payments for lumbar spine radiography decreased 12.7% to $562,944, whereas full spine radiography payments decreased 5.3% to $1,071,408. WSIB lumbar and full spine radiography payments decreased 44.2% and 34.3% to $31,202 and $11,713 respectively.ConclusionsClaims data from the two largest third-party payers of chiropractic services in Ontario, suggest that lumbar and full spine radiography, and their associated costs decreased steadily between 1994 and 2001.     

Influence of shunt surgery on healthcare expenditures of elderly fee-for-service Medicare beneficiaries with hydrocephalus

OBJECT: The goal in this study was to determine the percentage of patients with hydrocephalus who were treated with shunt surgery and to assess Medicare expenditures for those with and without shunt surgery. METHODS: Retrospective cost analyses were performed using the Standard Analytic Files of paid claims for beneficiaries enrolled in both Parts A (Inpatient) and B (Outpatient) of the Medicare program for 1997 through 2001. The main outcome measures were 5-year total payments and 5-year payments for separate types of service; for example, acute hospital (inpatient and outpatient), skilled nursing facility, home health, and physician/supplier services. RESULTS: Of 1441 patients with hydrocephalus, 25.1% underwent shunt surgery during the study period. The effect of a shunt procedure on 5-year Medicare expenditures is a cost difference of $25,477 (p < 0.0001) less per patient, which is equal to a potential -$184.3 million difference in 5-year Medicare expenditures. The following three factors had a negative association with whether shunt surgery was performed: (1) age 80 to 84 years (odds ratio [OR] 0.619, confidence interval [CI] 0.390-0.984); (2) age 85 years or older (OR 0.201, CI 0.110-0.366); and (3) African-American race (OR 0.506, CI 0.295-0.869). The effect of age on the likelihood of shunt surgery persisted after adjusting for the propensity to die score. CONCLUSIONS: Medicare expenditures for patients with hydrocephalus treated with shunt surgery are significantly lower than expenditures for untreated patients. Research to improve the diagnosis and treatment of hydrocephalus has the potential to improve outcomes and reduce health care expenditures further.     

Refining risk adjustment for bundled payment models in cervical fusions—an analysis of Medicare beneficiaries

BACKGROUND CONTEXTThe current Bundled Payment for Care Improvement model relies on the use of “Diagnosis Related Groups” (DRGs) to risk-adjust reimbursements associated with a 90-day episode of care. Three distinct DRG groups exist for defining payments associated with cervical fusions: (1) DRG-471 (cervical fusions with major comorbidity/complications), (2) DRG-472 (with comorbidity/complications), and (3) DRG-473 (without major comorbidity/complications). However, this DRG system may not be entirely suitable in controlling the large amounts of cost variation seen among cervical fusions. For instance, these DRGs do not account for area/location of surgery (upper cervical vs. lower cervical), type of surgery (primary vs. revision), surgical approach (anterior vs. posterior), extent of fusion (1–3 level vs. >3 level), and cause/indication of surgery (fracture vs. degenerative pathology).PURPOSETo understand factors responsible for cost variation in a 90-day episode of care following cervical fusions.STUDY DESIGNRetrospective study of a 5% national sample of Medicare claims from 2008 to 2014 5% Standard Analytical Files (SAF5).OUTCOME MEASURESTo calculate the independent marginal cost impact of various patient-level, geographic-level, and procedure-level characteristics on 90-day reimbursements for patients undergoing cervical fusions under DRG-471, DRG-472, and DRG-473.METHODSThe 2008 to 2014 Medicare SAF5 was queried using DRG codes 471, 472, and 473 to identify patients receiving a cervical fusion. Patients undergoing noncervical fusions (thoracolumbar), surgery for deformity/malignancy, and/or combined anterior-posterior fusions were excluded. Patients with missing data and/or those who died within 90 days of the postoperative follow-up period were excluded. Multivariate linear regression modeling was performed to assess the independent marginal cost impact of DRG, gender, age, state, procedure-level factors (including cause/indication of surgery), and comorbidities on total 90-day reimbursement.RESULTSFollowing application of inclusion/exclusion criteria, a total of 12,419 cervical fusions were included. The average 90-day reimbursement for each DRG group was as follows: (1) DRG-471=$54,314±$32,643, (2) DRG-472=$28,535±$17,271, and (3) DRG-473=$18,492±$10,706. The risk-adjusted 90-day reimbursement of a nongeriatric (age <65) female, with no major comorbidities, undergoing a primary 1- to 3-level anterior cervical fusion for degenerative cervical spine disease was $14,924±$753. Male gender (+$922) and age 70 to 84 (+$1,007 to +$2,431) was associated with significant marginal increases in 90-day reimbursements. Undergoing upper cervical surgery (−$1,678) had a negative marginal cost impact. Among other procedure-level factors, posterior approach (+$3,164), >3 level fusion (+$2,561), interbody (+$667), use of intra-operative neuromonitoring (+$1,018), concurrent decompression/laminectomy (+$1,657), and undergoing fusion for cervical fracture (+$3,530) were associated higher 90-day reimbursements. Severe individual comorbidities were associated with higher 90-day reimbursements, with malnutrition (+$15,536), CVA/stroke (+$6,982), drug abuse/dependence (+$5,059), hypercoagulopathy (+$5,436), and chronic kidney disease (+$4,925) having the highest marginal cost impacts. Significant state-level variation was noted, with Maryland (+$8,790), Alaska (+$6,410), Massachusetts (+$6,389), California (+$5,603), and New Mexico (+$5,530) having the highest reimbursements and Puerto Rico (−$7,492) and Iowa (−$3,393) having the lowest reimbursements, as compared with Michigan.CONCLUSIONSThe current cervical fusion bundled payment model fails to employ a robust risk adjustment of prices resulting in the large amount of cost variation seen within 90-day reimbursements. Under the proposed DRG-based risk adjustment model, providers would be reimbursed the same amount for cervical fusions regardless of the surgical approach (posterior vs. anterior), the extent of fusion, 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 reimbursements. Our findings suggest that defining payments based on DRG codes only is an imperfect way of employing bundled payments for spinal fusions and will only end up creating major financial disincentives and barriers to access of care in the healthcare system.     

Challenges and directions for Medicare ESRD payment policy

Since the inception of the ESRD program in 1973, Medicare has been challenged to provide access to high-quality care to beneficiaries with ESRD while trying to contain program payments. Despite implementing policies to control the growth in spending for outpatient dialysis and shifting the risk of certain ESRD beneficiaries to private payers, annual ESRD program payments have grown faster than overall Medicare spending. Some stakeholders contend that these policies have adversely affected beneficiaries' access to high-quality care. Refining the payment systems for caring for beneficiaries with ESRD in traditional Medicare and managed care plans may provide some respite to the growth in ESRD program spending in the short-term. In the long run, ESRD program spending may not be effectively controlled until changes are made in the delivery of health care services to this population.     

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

BACKGROUND CONTEXTCurrent bundled payment programs in spine surgery, such as the bundled payment for care improvement rely on the use of diagnosis-related groups (DRG) 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 comorbidity or complication) and DRG 460 (spinal fusion except cervical without major comorbidity 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 being performed for a vertebral fracture.PURPOSEWe carried out a comprehensive analysis to report the factors responsible for cost-variation in a bundled payment model for spinal fusions.STUDY DESIGNRetrospective review of a 5% national sample of Medicare claims from 2008 to 2014 (SAF5).OUTCOME MEASURESTo 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.METHODSThe 2008 to 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 characteristics on the average 90-day cost while controlling for other covariates.RESULTSA 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 (70–74 years: +$2,387, 75–79 years: +$3,389, 80–84 years: +$2,872, ≥85: +$1,627). With regards to procedure-level factors—undergoing an anterior fusion (+$3,118), >3 level fusion (+$5,648) vs. 1 to 3 level fusion, use of interbody device (+$581), intraoperative neuromonitoring (+$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 five states with the highest marginal cost-increase, in comparison to Michigan (reference), were Maryland (+$12,657), Alaska (+$11,292), California (+$10,040), Massachusetts (+$8,800), and the District of Columbia (+$8,315).CONCLUSIONSUnder 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 dis-incentive in taking care of sicker patients and/or performing more extensive complex spinal fusions.