Hospital performance in a statewide commercial insurer episode-based incentive program

To evaluate hospital performance and behaviors in the first 2 years of a statewide commercial insurance episode-based incentive pay-for-performance (P4P) program.

Retrospective cohort study of price- and risk-standardized episode-of-care spending from the Michigan Value Collaborative claims data registry.

Changes in hospital-level episode spending between baseline and performance years were estimated during the program years (PYs) 2018 and 2019. The distribution and hospital characteristics associated with P4P points earned were described for both PYs. A difference-in-differences (DID) analysis compared changes in patient-level episode spending associated with program implementation.

Hospital-level episode spending for all conditions declined significantly from the baseline year to the performance year in PY 2018 (-$671; 95% CI, -$1113 to -$230) but was not significantly different for PY 2019 ($177; 95% CI, -$412 to $767). Hospitals earned a mean (SD) total of 6.3 (3.1) of 10 points in PY 2018 and 4.5 (2.9) of 10 points in PY 2019, with few significant differences in P4P points across hospital characteristics. The highest-scoring hospitals were more likely to have changes in case mix index and decreases in spending across the entire episode of care compared with the lowest-scoring hospitals. DID analysis revealed no significant changes in patient-level episode spending associated with program implementation.

There was little evidence for overall reductions in spending associated with the program, but the performance of the hospitals that achieved greatest savings and incentives provides insights into the ongoing design of hospital P4P metrics.