Medicare feels heat to pull plug on value-based purchasing

The latest results of Medicare’s Hospital Value-Based Purchasing program were dismal but unsurprising. The program’s use of financial sticks and carrots to motivate 3,000 U.S. hospitals to provide better care resulted in more hospitals getting dinged for poor performance in 2017, not fewer.

Now some policy experts are beginning to wonder if the program should be shelved.

Weigh all the evidence on the Hospital Value-Based Purchasing program, and “you almost wonder, is it time to retire it?” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute.

“We actually have a good amount of evidence on this. We know that the value-based purchasing program has had very little, if any, effect,” said Dr. Ashish Jha, a professor of health policy at the Harvard School of Public Health.

A study that Jha and other researchers published in BMJ in May found scant evidence that the program reduced mortality rates at participating hospitals.

In fiscal 2017, roughly 1,600 hospitals—200 fewer than in 2016—will receive performance-based bonuses, and about 1,300 hospitals will be penalized, according to data posted Nov. 1.

The program, which took effect in October 2012, is one of several established by the Affordable Care Act to tie Medicare fee-for-service payments to the quality and efficiency of care provided. Its effectiveness is diminished by a variety of factors—chief among them its limited financial consequences and the fact that hospitals have bigger fish to fry.

The CMS creates a pool of money for the bonuses by docking 2% from all hospitals’ base DRG payments. Then, the agency redistributes the money according to each hospital’s performance compared with the rest of the hospitals in the program and against its own performance over time.

For roughly half the hospitals involved, base DRG payments will ultimately change by no more than half a percentage point in 2017. The rewards or penalties in those cases amount to tens or hundreds of thousands of dollars—chump change for a hospital with revenue in the hundreds of millions.

The financial swing “isn’t that material,” said Dr. William Conway, executive vice president of Henry Ford Health System in Detroit. Rather, the five-hospital system pays attention to the components of the program “because in aggregate they represent good care.”

At the Cleveland Clinic, Chief Quality Officer Dr. Cindy Deyling likewise said adhering to the program is “more about doing the right thing for patients, rather than the 2% reimbursement that is at risk.” It has contributed to improvements in the quality of care, she said, but it’s “one of several components of our overall value strategy.”

In a healthcare landscape dominated by payment reform efforts, other valuebased payment initiatives that carry greater financial risk are competing for—and winning—hospitals’ attention and resources.

The Hospital Value-Based Purchasing program helps guide clinical efforts across Catholic Health Initiatives “by defining the metrics and desired results at each of our locations,” said Dr. Christopher Stanley, vice president for population health for the Englewood, Colo.-based system, which operates 103 hospitals spanning 19 states.

But CHI, which had $15.2 billion in operating revenue in fiscal 2015, also participates in Medicare’s voluntary Bundled Payments for Care Improvement initiative, which carries both financial rewards and penalties. CHI opted for bundled payments for nearly three dozen different types of episodes of care.

“Generally speaking, CHI’s incremental investment and focus on CMS’ episode-of-care programs has been larger than our work in the VBP program,” Stanley said.

If the program barely has an impact, then why keep it? “I think it allows us to feel like we’re doing something on trying to improve patient outcomes,” said Jha, who favors revising it by condensing its measures to those that matter to patients. “We want to be able to say we’re paying for quality.”