Researchers examined reimbursement in bundled payment programs in spine surgery and found that providers are reimbursed the same amount for lumbar fusions regardless of several factors that could affect use and costs.1

“Bundled payments are on the rise,” says Azeem Tariq Malik, MBBS, research scholar, division of spine, department of orthopaedics, at The Ohio State University. “With the shift from volume-driven to value-based healthcare, we are currently experiencing a major healthcare reform. For the most part, bundled payments are already being tested and implemented for total joint arthroplasties.”

Preliminary results from various regions of the nation show such alternative payment models reduce costs while maintaining quality of care, Malik notes. Any costly healthcare procedure might be considered for a payment model that would reduce that cost. For instance, spine surgery is a significant cost burden. Lumbar fusion spending increased from $75 million to $482 million between 2000 and 2010, data show.2 For this reason, the Centers for Medicare & Medicaid Services (CMS) is testing voluntary bundled payment models in spine surgery at multiple health systems, Malik says.

“The success of these voluntary bundled payment models will determine whether CMS may consider the launch of a mandatory bundled payment model in spine surgery,” he adds.

Bundled payments can work in spine surgery, but there are problems with grouping lumbar fusions under one payment model, regardless of their surgical approaches and other factors. This is partly because of how the diagnosis-related group (DRG) system works.

“CMS creates a single large group, which contains multiple different procedures that are thought to have similar resource utilization,” Malik explains of DRG. “Unfortunately, grouping a large variety of different procedures into one group for determining payments ends up introducing heterogeneity and major cost variation in actual payments.”

For example, research shows that under the DRG code for lumbar fusions, there is no differentiation between the anterior vs. posterior approach. Various indications of surgery (fracture vs. degenerative spinal pathology) are treated the same. There is no differentiation related to the length of the fusion, whether it is a one to three level vs. a greater than three level, Malik explains. “All of these are important as factors that play into outcomes and resource utilization,” he adds. “Fracture patients typically have poor outcomes and higher costs as compared to a normal routine elective degenerative patient population.”

The researchers’ findings are similar to what was seen in the total joint arthroplasty bundle, where hip fracture patients were reimbursed the same amount compared to hip osteoarthritis patients, Malik says. “The more extensive the surgery, with regards to levels, the greater the hospital length of stay, the greater the cost, and the greater the patient’s need for appropriate rehab to ensure appropriate recovery,” he says.

A solution to this will require multiple steps, including these:

Create better risk adjustment models for spine surgery. “Spine surgery is not a typical procedure, where you can consider bundles,” Malik says. “If bundles are successful, providers need to be paid appropriately, based on the type of patients they take care of.”

If there is a lack of risk adjustment in bundled payments, then it will lead providers to cherry-pick patients and create further barriers to healthcare access, he predicts.

Separate fracture patients. Either take fracture patients out of the bundle, or ensure that these patients receive a higher target episode price, Malik suggests. The Comprehensive Care for Joint Replacement (CJR) model offers one possible direction for alternative payment changes.

“We need to implement something similar to the CJR model, where [total hip arthroplasty] for hip fractures have higher payments now,” Malik says.

Look at other examples. The authors of other studies have found similar issues with the use of DRG-based bundling in total joint arthroplasties and hip fracture bundles, Malik says. “We, in fact, just got our second article published, which has delineated similar problems of DRG-based bundling for cervical fusion-only models, as well,” he reports.

The key from a spinal surgery industry’s perspective is to learn from the voluntary alternative payment models and correct them where possible. “If we can nip the evil in the bud ... we won’t be dealing with these issues later on in the course,” Malik says. “Furthermore, ensuring equitable reimbursement right now will encourage other hospital systems and providers to participate in these bundles.”


  1. Malik AT, Phillips FM, Yu E, Khan SN. Are current DRG-based bundled payment models for lumbar fusions risk-adjusting adequately? An analysis of Medicare beneficiaries. Spine J 2019; May 22. pii: S1529-9430(19)30196-2. doi: 10.1016/j.spinee.2019.04.024. [Epub ahead of print].
  2. Menger RP, Wolf ME, Kukreja S, et al. Medicare payment data for spine reimbursement; important but flawed data for evaluating utilization of resources. Surg Neurol Int 2015;6:S391-S397.