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Early Evaluation of CMS’ Hospital Value-Based Purchasing

By October 6, 2015Commentary

It is a heavy burden we bear, shining the light of truth into the darkened corners of health care, overturning myth and fallacy.  And what disappointment and despair we must endure in our Sisyphean work.  No, not really, I take delight in seeing the pompous predictions of disruptive change shown to be little more than airy fantasy.  What brings this to mind?  A report from the Government Accounting Office evaluating the early years of the Medicare value-based purchasing program as applied to hospitals.  (GAO Report)   Value-based purchasing was one of the cornerstones of the intellectual, academic-driven theory of how to reduce costs and improve quality.  Reform law proponents and bureaucrats at CMS took up the theory and applied it first to hospitals and now to almost all classes of providers.  As applied to Medicare, the initiative requires that providers be judged on patient satisfaction, a number of process of care measures and other “quality” variables, with the result used to adjust reimbursements.  2013 was the first year of actual payment adjustments and the amount at risk increases over the next few years.  GAO looked at average penalties and bonuses and performance on quality measures from 2013 to 2015.  About 3000 hospitals were covered by the program in this time period.  GAO found that for most hospitals the penalty or bonus was small, less than one-half percent of Medicare reimbursement.  The absolute dollars are also small, $100,000 a year or less for most hospitals.  Small hospitals tended to have somewhat larger bonuses or penalties than did large ones.  Safety net hospitals had lower payment adjustments.

Since the program is designed to be cost-neutral, it isn’t really directly going to lower spending.  The theory is that better quality may mean patients need fewer services. Maybe??  In terms of quality measures, GAO found that at least in the first two years the quality measures included in the value-based purchasing program did not show any change in trend of improvement.  This finding applied to clinical process of care and patient satisfaction and outcomes measures.  Most hospitals were already showing improvement before VBP began.  GAO also looked at performance of hospitals on quality measures not yet included in the program and found little change in improvement or improvement trend, with the exception of readmissions, which is subject to a separate program and which has shown some improvement by some hospitals.  It is early in the value-based purchasing program, results may get better.  Many of the quality measures are near to being “topped out”; more improvement just isn’t likely.  New measures allegedly will do a better job of identifying meaningful quality changes; but these largely come from the same think-tankers and academics that designed the original measures.  We can always hope for the best.

In addition to its data analysis, GAO interviewed executives at 8 hospitals which participated in the program.  These executives were not particularly sanguine, identifying challenges including balky information systems, limited financial resources, staff and other resources that stretched by other regulatory demands and difficulty in getting timely and accurate data, including from CMS itself.  In other contexts, hospitals have complained about the administrative burden that value-based purchasing and other programs impose, and the danger of causing providers to focus on certain areas, but ignore other equally or more important quality improvement challenges.  Better patient outcomes and health status should be the ultimate definition and objective of quality; it is not clear that most of CMS’ quality initiatives meet this definition.

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