IMPORTANCE: Bundled payments, in which services provided around a care episode are linked together, are being tested under Medicare's Bundled Payments for Care Improvement (BPCI) program. Reducing post‐acute care (PAC) is critical under bundled payment, but little is known about whether this is done through provider selection or consolidation, and whether particular patterns of changes in PAC are associated with success under the program. OBJECTIVE: To characterize patterns of change in PAC under lower‐extremity joint replacement episodes in BPCI. DESIGN: Retrospective difference‐in‐differences study. SETTING: US Medicare, 2013 to 2015. PARTICIPANTS: A total of 264 US hospitals participating in BPCI for lower‐extremity joint replacement and matched controls. EXPOSURES: Participation in BPCI. MEASUREMENTS: Use and duration of institutional PAC (proportion discharged to a skilled nursing facility, an inpatient rehabilitation facility, and a long‐term care hospital), dispersion of PAC (proportion of discharges to commonly used providers), and quality of PAC (Star Ratings, readmission rates, length of stay, and nurse staffing); part A Medicare payments. RESULTS: BPCI participants decreased the use and duration of institutional PAC compared to controls: overall institutional PAC declined 4.4% in BPCI hospitals vs 2.1% in non‐BPCI hospitals (difference = −2.2%; P = .033), and duration decreased by 1.6 days in BPCI hospitals compared to 0.0 days in non‐BPCI hospitals (difference in differences = −1.5 days; P < .001). However, BPCI participants did not change their PAC referral patterns to reduce dispersion or refer patients to higher‐quality PAC providers. Hospitals that were more successful in reducing Medicare payments started with higher payments and higher use of institutional PAC settings and demonstrated greater drops in use and duration of institutional PAC, but no differences in dispersion or referral to high‐quality providers. CONCLUSIONS AND RELEVANCE: Reductions in spending under BPCI were driven by a shift from higher‐ to lower‐cost discharge settings, and by shortening the duration of institutional PAC. Hospitals that reduced payments the most had the highest spending at baseline. J Am Geriatr Soc 67:1027–1035, 2019. See related editorial by Huckfeldt et al. in this issue. [ABSTRACT FROM AUTHOR]
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