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CMS’ Rewards Lower Quality Hospitals

By June 7, 2016Commentary

It is to be expected that any new government initiative will have some fits and starts, taking a while to be better-honed to meeting its objectives.  CMS’ various hospital quality initiatives certainly have that problem, and don’t seem to be solving it.  Research in Health Affairs finds that adding a spending measure to the hospital value-based purchasing program led to some low-quality hospitals being getting enhanced payments.   (HA Article)   The idea of value-based purchasing is that you can measure the quality of the patient outcomes a hospital is producing and then tie what the hospital gets paid to those outcomes.  Adding a spending measure to the idea of value-based purchasing seems a little odd and somewhat circular.  Apparently CMS has bought into the argument that if you are delivering better quality you should also be more efficient, you should be spending less on patient care.  Not sure that logic has always been shown to be sound by the research, especially when adjustments for various patient characteristics and preferences are made.

The authors evaluated which hospitals were rewarded or penalized following CMS’ addition of the Spending per Beneficiary Episode measure to value-based purchasing in fiscal 2015.  Originally the hospital VBP was 45% clinical processes of care, 30% patient satisfaction and 25% outcomes.  Now it is 20% clinical processes, 30% patient satisfaction, 30% outcomes and 20% efficiency (i.e. low cost).  The headline result is that whereas for fiscal 2014 no low-quality hospital got a bonus, in fiscal 2015 17% of them did.  Hospitals with more than 500 beds, teaching hospitals, urban hospitals, and for-profit facilities are more likely to be high-spending than their counterparts, so under the new formula they were less likely to get bonuses and more likely to be penalized.  Overall the researchers found only a weak positive link between spending and quality, but the positive direction of this connection allows poor quality institutions who spend less to be more likely to be rewarded.  And in fact, the low-quality hospitals that got bonuses in fiscal 2015 all performed worse on quality measures than did the higher-quality facilities that got bonuses.  So CMS is rewarding facilities that provide bad care, but at least did it cheaply.  Now it is an open question how well the CMS quality measures actually correlate with real patient health outcomes, but it is what it is for now.  As the authors suggest, if CMS is going to put a spending metric in its VBP, maybe it should at least have a quality threshold before any facility gets a bonus.

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