Adding A Spending Metric To Medicare's Value-Based Purchasing Program Rewarded Low-Quality Hospitals.

Area of Science:

• Health Economics
• Healthcare Policy
• Quality Improvement

Background:

• The Hospital Value-Based Purchasing (VBP) program initially incentivized hospitals based on quality alone.
• In fiscal year 2015, the program was expanded to include financial spending as a performance metric.
• The impact of this shift on bonus and penalty distribution was previously unexamined.

Purpose of the Study:

• To analyze how the inclusion of spending metrics in the Hospital VBP program affected hospital bonus and penalty allocation.
• To determine if the program's updated structure inadvertently rewarded hospitals with lower quality.

Main Methods:

• Analysis of data from 2,679 U.S. hospitals participating in the Hospital VBP program.
• Comparison of hospital performance and financial outcomes between fiscal years 2014 and 2015.
• Evaluation of bonus and penalty distributions based on both spending and quality metrics.

Main Results:

• The expanded program rewarded low-spending hospitals, with 100% receiving bonuses in FY2015 compared to 38% in FY2014.
• A notable increase in bonuses was observed for low-quality hospitals (17% in FY2015 vs. 0% in FY2014).
• All high-quality hospitals consistently received bonuses in both fiscal years.

Conclusions:

• The integration of spending into the Hospital VBP program has led to the unintended consequence of rewarding some low-quality hospitals.
• It is recommended that the Centers for Medicare and Medicaid Services implement a minimum quality threshold within the Hospital VBP program.
• This policy adjustment would prevent financial incentives from being directed towards hospitals with suboptimal quality of care.