Under the Affordable Care Act the federal government uses Medicare payment incentives to try to raise the quality of hospital care received by Medicare beneficiaries. Medicare payments to hospitals now vary based on the quality of care they provide, not just the quantity of procedures they perform. Hospitals are rewarded based on how closely they follow best clinical practices and how well hospitals enhance patients’ experiences of care. The thinking is that when hospitals follow proven best practices, patients receive higher quality care and see better outcomes.
The Hospital Value-Based Purchasing (HVBP) program, which the Centers for Medicare & Medicaid Services (CMS) administers, annually evaluates individual hospital performance on a designated set of quality measures related to inpatient hospital services and, based on those results, adjusts Medicare payments to hospitals in the form of bonuses and penalties. The HVBP program was enacted in 2010 as part of the Patient Protection and Affordable Care Ac (ACA).
The payment incentive approach makes a lot of common sense. But does it work in practice?
On Thursday, the Government Accountability Office (GAO) issued a report evaluating the results of HVBP. The first HVBP payment adjustments occurred in fiscal year 2013. ACA included a provision for GAO to assess the HVBP program’s impact on Medicare quality and expenditures, including the HVBP program’s effects on small rural, small urban, and safety net hospitals. The GAO report evaluates the initial effects of the HVBP program on: (1) Medicare payments to hospitals, (2) quality of care provided by hospitals, and (3) selected hospitals’ quality improvement efforts.
Here is a Kaiser Health News summary of the GAO report. It is reprinted with permission. Kaiser Health News is a nonprofit national health policy news service.
By Jordan Rau October 2, 2015
Medicare’s quality incentive program for hospitals, which provides bonuses and penalties based on performance, has not led to demonstrated improvements in its first three years, according to a federal report released Thursday.
The Government Accountability Office examined the Hospital Value-Based Purchasing Program, one of the federal health law’s initiatives to tie payment to quality of care. Earlier this year Medicare gave bonuses to 1,700 hospitals and reduced payments to 1,360 hospitals based on their mortality rates, patient reviews, degree of improvement and other measurements.
While the payments to a majority of the nation’s hospitals have been affected each year, the audit found the financial effect has been minimal. Most hospitals saw their Medicare payments increase or drop by less than half a percentage point. In the fiscal year that ended Sept. 30, 74 percent of hospitals fell within that range, with a median bonus of $39,000 and a median penalty of $56,000, according to the analysis.
Safety-net hospitals, which serve more poor patients, tended to do worse than hospitals overall, but that difference has decreased over the life of the program, the report said. Hospitals with the strongest balance sheets tended to do better than other hospitals, the report found: Those with a net income margin more than 5 percent received average bonuses of 0.23 percent, while hospitals basically breaking even financially on average did not earn any extra payments.
The Centers for Medicare & Medicaid Services did not respond to the report. Officials have previously stressed that financial incentives like these will have a long-term effect by focusing hospitals more on quality.
The report said that even before the program began in October 2012, hospitals had been improving in how consistently they followed basic clinical guidelines, such as performing blood cultures before giving patients antibiotics. That improvement continued but did not increase with the advent of the financial incentives. The same was true for patient ratings, on such items as the quality of communication from doctors and nurses, and for mortality rates for heart attack patients. Heart failure and pneumonia death rates stayed roughly the same.
“Our analysis found no apparent shift in … quality measure trends during the initial years of the program, but such shifts could emerge over time as the program implements planned changes,” the GAO wrote.
The report noted patient readmission rates began to decline in 2010, when the health law was passed. It said that might be due to a separate Medicare penalty program, also created by the health law, which focuses only on readmission rates. Those penalties will hit 2,592 hospitals over the next 12 months, with the worst performers losing 3 percent of their regular Medicare payments for each patient stay.
“The conjunction of the drop in hospital readmission rates and the introduction of a financial incentive program targeting those rates provide some additional indication that financial incentives … may, under certain circumstances, promote enhanced quality of care,” the report said.
KHN’s coverage of aging and long-term care issues is supported in part by a grant from The SCAN Foundation.