Experts are skeptical value-based purchasing program is helping boost quality

Four years into Medicare's value-based purchasing program, more hospitals than ever are earning bonuses, and the top-performing ones are getting bigger rewards.

But policy experts and hospitals themselves remain dubious that the program has much influence over healthcare quality.

Last week, the CMS published the 2016 bonuses and penalties for the more than 3,000 hospitals that are subject to value-based purchasing, which adjusts the amount hospitals receive from Medicare based on how they perform on 25 measures of quality, patient experience and spending.

The good news is that the number of hospitals seeing a positive adjustment in 2016 for their performance increased by about 160 hospitals to more than 1,800. And the bonuses topped out a full percentage point higher than last year's.

Value-based purchasing is one of several Affordable Care Act initiatives that incrementally change how Medicare pays hospitals and doctors. Under these efforts, a growing percentage of what providers earn from Medicare depends on their performance on measures of quality, safety and the cost of patient care.

The money at stake in each individual program is modest—1% to 3%. But performance across all programs, combined with incentives to adopt electronic health records, will account for 7% of Medicare reimbursement this year, and will increase to 8% in 2016.

Few hospitals are coming out ahead. An Advisory Board Co. analysis found that 85% of hospitals took a cut from Medicare after calculating the combined effects of value-based purchasing and the reform law's initiatives targeting readmissions and hospital-acquired conditions.

Still, the incentive to change depends on how much the penalties cost individual hospitals, said Eric Fontana, a practice manager for the Advisory Board. And the amount value-based purchasing contributes to that sum isn't much for most of them. The average bonus in 2016 was 0.59%, compared to an average penalty of 0.33%, an analysis by Avalere Health found.

The newest round of results follows a Government Accountability Office report in early October that found “no apparent shift in existing trends” in quality during the value-based purchasing program's first three years.

Even some of the top-performing hospitals say value-based purchasing isn't much of a factor in their quality improvement efforts.

“I don't see it as a motivator,” said Rodney Welch, director of quality and accreditation at Rothman Orthopaedic Specialty Hospital, Bensalem, Pa. Incentives factored less into performance than an overall strategy to improve quality, he said. The hospital ranked among the top five performers this year, earning a positive payment adjustment of 2.87%.

Welch said he didn't know how much additional revenue the bonus will generate for the hospital. “It is hard to quantify the dollar amount,” he said. “It is not something we add up.”

That sentiment isn't universal. The extra cash will be a welcome addition to a thin margin for Hawkins County Memorial Hospital in Rogersville, Tenn., said Eric Deaton, chief operating officer for the hospital's parent company, Wellmont Health System. He called the program “a positive incentive.”

The trivial sums to be gained or lost for most hospitals aren't the only flaw in the program's design, according to its critics. The bigger problems, they say, are that it's a poor measure of quality and puts safety net hospitals at a disadvantage.

“It's hard to tell anything in any useful detail” because Medicare does not publicly identify which measures drive a hospital's performance, said Harold Miller, CEO of the Center for Healthcare Quality and Payment Reform.

Many hospitals, meanwhile, persistently find themselves at the back of the pack for reasons beyond their control.

For example, patients with limited social support or financial resources may need to stay in nursing homes after hospitalization.

That increases spending per beneficiary, one of the measures in the value-based purchasing program, but Medicare doesn't try to adjust for such factors.

The GAO analysis confirmed that safety net hospitals generally do worse in the program. Those hospitals, “which provide a significant amount of care to the poor, consistently had lower median payment adjustments—that is, smaller bonuses or larger penalties—than hospitals overall in the program's first three years.”

And because value-based purchasing is a revenue-neutral program, low-performing hospitals are funding the bonuses for their better-performing peers.

The program will award hospitals $1.5 billion in 2016. That's funded by an across-the-board 1.75% cut to the base payment for Medicare inpatient care. Hospitals that performed the best earned back the 1.75% and more. The lowest-performing hospitals will recover little or nothing.

In the latest round, the hospital at the very bottom of the heap was Regional General Hospital in Williston, Fla., which lost the full 1.75%. A spokeswoman blamed the result on the hospital's temporary inability to report performance data after emerging from bankruptcy.

Bayfront Health Brooksville (Fla.), another hospital with one of the largest penalties (-1.15%), said it has launched multiple quality improvement efforts in the past year, including initiatives to address communication, and the use of catheters and central lines.

“Physicians on our medical staff, our nurses and other clinicians continually review ways to strengthen our care by implementing evidence-based practices,” said Jennifer Siem, a spokeswoman for Bayfront Health Brooksville.

“While hospitals across the country are dedicated to these quality and experience metrics, just one incident can have a significant impact on these rates in the form of penalties,” she said. —with Virgil Dickson