Healthcare Business News
Ashish Jha, associate professor of Health Policy and Management at Harvard University

Bigger value-based purchasing incentives needed, experts say

By Melanie Evans
Posted: December 21, 2012 - 4:30 pm ET

Hospitals won't see much change to their Medicare payments as a result of bonuses and penalties tied to quality and patient satisfaction that will be awarded for the first time in the new year.

Medicare will marginally raise pay for 1,588 hospitals and dock pay for 1,426 others under its new value-based purchasing program.

The program, which awards $964 million linked to performance on clinical and patient satisfaction measures, is one attempt under the healthcare reform law to more closely tie hospital payment to results instead of the sheer number of patients they treat.

The CMS on Thursday released a list of hospitals' bonuses and penalties under the value-based purchasing program.

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Health policy experts have applauded such incentives, but some have questioned whether the money at stake will be enough to motivate hospital officials and doctors to adopt changes that will reduce waste and improve quality.

“The purpose here is really straightforward and very reasonable,” said Dr. Ashish Jha, an associate professor of Health Policy and Management at Harvard University. “Forever we have paid for a quantity of healthcare. We have not really paid for quality, and CMS has decided they want to change that.”

The incentives, however, are too weak, even as they are set to increase up to 2% over the next four years, he said. “The incentives are very, very small.” Unless Congress agreed to increase incentives, he said, value-based purchasing is unlikely to see results. Meanwhile, measures such as mortality rates, which will be added but was not included in the latest performance data, would do more than some existing clinical measures to track the quality of care, he said.

Rachel Werner, an associate professor of Medicine at the University of Pennsylvania, said hospital performance did not differ much, which suggests measures may not do much to identify high-quality versus low-quality hospitals.

An analysis by Jha found two-thirds of for-profit hospitals earned bonuses. Meanwhile, more than half (52%) of private not-for-profits lost money. Government-owned hospitals fared the worst with 62% losing money.

Hospitals that lost money failed to perform well enough to fully recover money withheld by Medicare, which amounted to 1% of hospitals' DRG payments. Other hospitals broke even or recouped the amount withheld and a little more.

Almost two-thirds of safety-net hospitals were penalized under the value-based purchasing program, Jha found. The results were not a surprise, he said. Jha co-authored a study of patient experience measures published this summer online by the Archives of Internal Medicine, which found safety net hospitals often scored lower than other hospitals on the measures.

Value-based purchasing may have started with small incentives, but it was enough to get hospital executives' attention and allowed hospitals to gain experience before penalties likely increase, said Hal Luft, a healthcare economist and director of the Palo Alto Medical Foundation Research Institute.

Policies also send an important signal to providers, he said. “We've moved away from the standard denial,” that hospitals across the U.S., with a few exceptions, uniformly deliver high quality medical care, he said. “They've gotten past this denial that everybody does it well.”

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