Fewer hospitals earn Medicare bonuses under value-based purchasing

More than 1,600 hospitals will see bonuses from Medicare in 2017 under the Hospital Value-Based Purchasing program, according to federal data released Tuesday. The number earning positive pay adjustments is about 200 fewer than last year.

The program affects some 3,000 hospitals, which are penalized or rewarded based on how well they perform on certain quality measures. A hospital's performance is assessed in comparison to its peers' and to its own performance over time.

The results are “somewhat concerning,” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute. One reason was the fact that fewer hospitals are being rewarded. Another was hospitals' lack of movement in rankings.

The payment increases add up to about $1.8 billion for 2017. To create the pool for the bonuses, the CMS imposed a 2% reduction to base DRG payments for hospitals paid under the Inpatient Prospective Payment System. Medicare redistributes that money to hospitals based on their performance on patient surveys and quality and efficiency measures. They earn two scores—one for achievement and another for improvement.

For about half of the hospitals in the program, the changes to base DRG payments will be minimal, in the range of 0.5 to -0.5%. The highest performing hospital will receive an increase slightly more than 4%, while the lowest performing hospital's payment will be cut 1.83%, CMS said.

The number of hospitals whose payments were docked grew from 1,236 in 2016 to 1,343 in 2017, according to a Modern Healthcare analysis of the data. Last year, 59% of hospitals received bonus payments; this year 55% did.

More than half of the 2,879 hospitals in the program both years will see lower payment adjustments in 2017 than in 2016. Payments improved for 1,388 of those hospitals.

About 1,250 hospitals earned bonuses both years and 875 were hit with penalties both years. By comparison, 437 hospitals that earned bonuses last year were docked in 2017, and 315 hospital penalized in the last round will receive bonuses next year.

The Hospital Value-Based Purchasing Program contains inherent design flaws, de Brantes said. As a "tournament-style" program in which hospitals are stacked up against each other, they don't know how they'll perform until the very end of the tournament. "It's not as if you have a specific target," he said. "You could meet that target, but if everyone meets that target, you're still in the middle of the pack."

The Hospital Value-Based Purchasing program went into effect in October 2012. It was established under the Affordable Care Act as one of many initiatives to pay for healthcare on the basis of quality, not quantity.

The Inpatient Prospective Payment System excludes specialty hospitals such as psychiatric institutions, oncology centers and pediatric facilities; hospitals that do not have a minimum number of cases; and hospitals that don't participate in the Hospital Inpatient Quality Reporting Program.

The CMS also announced several changes to the program for fiscal 2018. The four domans on which hospitals are scored—clinical care; patient- and caregiver-centered experience and care coordination; safety; and efficiency and cost reduction—will be weighted equally. The program previously allotted 30% to clinical care and 20% to safety.

For 2018, the CMS also removed two measures from clinical care and added a care transition dimension.

The results show "how progress on quality can be accelerated when pay-for-performance programs reward both achievement and improvement," said Nancy Foster, the American Hospital Association's vice president of quality and patient safety policy. "However, CMS must continue to refine the program to ensure that it effectively drives quality forward for hospitals and the patients they serve," she added, including ensuring its measures prioritize areas with the greatest impact on patient care.

With data analysis by Art Golab