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Bundled payments have been proposed as a mechanism for restraining health care spending for total knee arthroplasty (TKA), but empirical data are limited. We used Medicare data to examine variation in payments for TKA during a window extending 30 days before to 90 days after TKA for 167 186 patients who underwent elective primary TKA in 2009. Mean Medicare payment was US$23 656. We found that 2.5% of patients incurred payments of >US$50 000 (0.2% >US$100 000). Payments were lower for men and for non-Hispanic whites but higher for patients with greater comorbidity. Episode-of-care payment for primary TKA varies substantially depending upon patient demographics and comorbidity. To the extent that similar patients tend to be clustered within hospitals, bundled payments could inadvertently cause financial harm to certain health systems while rewarding others.

Background: Little is known about readmission rates for total hip and total knee arthroplasty (THA and TKA). Our objective was to examine readmission rates and whether hospitals with high and low readmission rates at baseline remain outliers in subsequent years. Methods: We identified Medicare beneficiaries who underwent THA (N = 245 995) and TKA (N = 517 867) between 2003 and 2005. We created four different hospital cohorts: low and high volume for THA and TKA. We calculated 30-day risk-standardized readmission rates (RSRRs) for each hospital for each year. Hospitals were defined as having low (lowest 25% of all hospitals), high (highest 25% of hospitals), and intermediate readmission rates (all others) for each year. Hospitals were labeled outliers if they had consistently low or high readmission rates for all years. We examined the number and characteristics of outlier and nonoutlier hospitals. Results: Unadjusted readmission rates in 2003 for THA ranged from 0% to 94.7% (inter-quartile range: 0%-7.0%) and for TKA from 0% to 94.4% (inter-quartile range: 0.7%-5.9%). Of 255 low-volume THA hospitals with low readmission rates in 2003 (RSRRs ≤3.5%), 34 were outliers for all 3 years—significantly more than predicted ( P < .0001). Likewise, of 256 low-volume THA hospitals with high readmission rates (RSRRs ≥5.8%) in 2003, 33 were outliers for all 3 years ( P < .0001). Outlier and nonoutlier hospitals did not differ in meaningful ways (teaching status and staffing ratios). Results were similar for other hospital cohorts. Conclusions: Using a 3-year window allows for identification of hospitals with consistently higher and lower readmission rates than predicted.