An Assessment of Value-Based Purchasing

Medicare’s value-based purchasing programs are supposed to evaluate the quality of care delivered by providers and adjust reimbursement according to results.  A recent paper by Leavitt Partners looks at the status of the hospital VBP program as it heads into the 2016 fiscal year, which began October 1.   (Leavitt Paper)   Hospitals are judged on clinical processes of care (10%); clinical outcomes (40%), patient experience of care (25%) and efficiency (25%).  There has been a fair amount of controversy about the utility of the measures and the adequacy of the program to adjust for differing populations served by hospitals.  For fiscal 2016, 1806 hospitals will receive a bonus of up to 3% of reimbursement and 1235 will be penalized up to 1.75% of their Medicaid payments.  Some hospitals could lose as much as $8 million in revenue or gain $6 million.  In total, the program currently has a pretty small effect on the average hospital’s revenue.

About 45% of hospitals got a bonus in both 2015 and 2016, while 30% were penalized in both.  25% switched from one status to the other.  Looking at quintiles of scores on the measures, 308 hospitals were in the bottom 20% for 2015 and 2016 and 370 were in the top quintile both years.  Most hospitals, therefore, moved one or more quintiles between the years.  Larger and less profitable hospitals are more likely to be penalized, as are those who serve more Medicaid patients.  Rural hospitals were much more likely to get a bonus, while academic medical centers, which often serve a more complex, poorer patient base, were much less likely to get one.  Hospitals in the upper Midwest and the Pacific Northwest were somewhat more likely to be high-performing.   Areas the paper recommends for improving the VBP program include increasing the bonuses or penalties to make a meaningful change in hospitals’ revenue; only using measures that have a large spread in scores, so that differences in scores are meaningful, and to ensure minimum volumes are used for each measure to reduce volatility.  One thing that is still very unclear is whether VBP is actually improving the health or health outcomes of patients.