Hospital Value-Based Purchasing Program

MedPAC gives some perspectives on the future of Medicare’s programs to measure quality in hospitals.  (MedPAC Presentation)  In its usual and typical governmental balkanized style, Medicare has managed to create a panoply of programs to measure and supposedly improve quality in health care, featuring the usual administrative burdens and uncertain effects on meaningful outcomes.  The Medicare Payment Advisory Commission, which I find to be an unusually worthwhile and sensible group to follow, has some thoughts on how to improve these programs.  Here is a great start–merge the Hospital Readmissions Reduction Program and the Value-Based Purchasing initiative and get rid of the Inpatient Quality Reporting Program and the Healthcare Acquired Condition Reduction Program, creating the Hospital Value Incentive Program.  The HVIP would have four primary measure domains:  spending, readmissions, mortality and overall patient experience.  Each domain would use “clear, absolute and prospective” measures.  Hospitals would be peer-grouped to account for socio-economic and demographic factors.  Public reporting of results would continue and the new program would be operated to be budget neutral.

The Commission recommends weighting each primary domain equally, but recognized that policymakers might choose to do something different, like weight clinical outcomes more heavily.  If this non-equal weighting were done, it would make only minor changes in most hospital’s scores.  Under current programs hospitals get a maximum reward of 3% of payments and a maximum penalty of 6%.   Under the new proposal, there would be a 2% payment withhold used to fund peer group pools, which would be divided according to scores.  MedPAC also looked at increasing the withhold, which has the potential to increase rewards or penalties and obviously creates a stronger incentive but may create cash-flow issues for some hospitals.  The Commission also considered how to use the patient experience measures–one single score or a composite?  And they noted that the current hospital-acquired condition program is likely leading to excessive testing and antibiotic prescribing.  So the Commission thought it best to continue to monitor rates but avoid incentives with unintended consequences.  MedPAC did some modeling of the new proposal and found that about half the hospitals would get an incentive and half be penalized.  Compared to the slew of current programs, hospitals which serve more disadvantaged patients would do better–i.e., be penalized less.  Sounds like this proposal would be a real improvement and potentially reduce burdens on hospitals.