The lack of quality improvements from the HVBP initiative was blamed by another researcher on its complicated design and small financial incentives.


July 21—Hundreds of U.S. hospitals that posted low quality of care scores under Medicare’s Hospital Value-Based Purchasing (HVBP) initiative still received bonuses, according to a new report from the Government Accountability Office (GAO).

The HVBP, a budget neutral program launched in FY13 and authorized by the Affordable Care Act (ACA), ranks 3,000 hospitals by their performance on quality and efficiency measures, awarding bonuses or penalizing hospital based on hospital performance. Up to two percent of a hospital’s Medicare payments are adjusted in HVBP payments.

The June 30th GAO report looked at HVBP payments from FY13 to FY17 and found that safety-net hospitals generally scored lower on quality compared to all other participating hospitals and that small urban and rural hospitals scored higher on efficiency.

“In four out of the five years of GAO’s analysis, small rural and small urban hospitals were more likely to receive a bonus compared to all participating hospitals, while safety net hospitals were more likely to receive a penalty,” the GAO reported.

GAO noted that “most hospitals had a bonus or penalty of less than $100,000 in” FY17.

The report found that “some hospitals with high efficiency scores received bonuses, despite having relatively low quality scores, which contradicts the CMS-stated intention to reward hospitals providing high quality care at a lower cost.”

In the 41-page report the GAO recommended that the CMS administrator “revise the formula for the calculation of hospitals’ total performance score or take other actions so that the efficiency score does not have a disproportionate effect on the total performance score.”

The agency also suggested revising “the practice of proportional redistribution used to correct for missing domain scores so that it no longer facilitates the awarding of bonuses to hospitals with lower quality scores.”

CMS included an efficiency domain in FY15, reporting a hospital’s spending per Medicare beneficiary and signaling “the importance of hospitals’ providing care at a lower cost to Medicare. And, in its weighting formula, the agency tried to find balanced consideration for quality and cost,” the report concluded.

“Rather than achieving this balance—which would have allowed the agency to identify and reward higher quality and lower cost hospitals—CMS’s weighting formula has resulted in bonuses for some lower quality hospitals, solely due to their cost efficiency.”

CMS responded to the report and agreed to examine the formula for calculating hospital performance scores and explore alternatives to the practice of proportional redistribution.

Akin Demehin, director of policy for the American Hospital Association, said in a statement that hospitals generally favor pay-for-performance programs, such HVBP, that assess multiple aspects of care and reward providers for achievement and improvement.

“Such programs also must assess providers in a reliable, accurate and fair manner,” Demehin wrote. “The GAO report’s finding that safety net providers have fared worse in the hospital HVBP program reinforces the need to assess the measures used in the program for the impact of sociodemographic factors and to incorporate sociodemographic adjustment where warranted.”

Mandatory Reporting

Fred Bentley, vice president of Avalere Health’s Center for Payment and Delivery Innovation, said he was not surprised by the GAO report’s findings.

“I don’t think you’ll ever get a flawless payment model,” Bentley said in an interview. “We have to look at the bigger picture. While the HVBP program clearly has flaws that need to be fixed, it’s the right approach and creates the right incentives.”

Bentley said requiring hospitals to report on quality measures should be mandatory.

 “CMS can’t allow hospitals to skate by and receive bonuses without reporting performance measures. There should be greater focus on true quality measures, instead of process measures,” Bentley said.

Bentley said he agreed with recent studies showing that, unlike the hospital readmissions initiative, the HVBP is only incrementally improving quality in those hospitals.

“We’re trying to dock the Queen Mary and change the direction of our payment system and it is incredibly hard to do,” he conceded.

The hospital readmissions initiative has shown that change is possible, according to Bentley.

“Readmissions has a big spotlight on it and the industry has embraced it,” he said. “The industry has made huge gains in an area once thought intractable. But the bigger strategic issues go beyond policy discussions. Expectations will be ratcheted up and competing hospitals will ramp up their performance as well.”

George Whetsell, managing partner with Chicago-based consulting firm Prism Healthcare, said if CMS intended to use HVBP to improve quality and efficiency, “It hasn’t hit a bullseye.”

Whetsell said the total amount of the bonus or penalty is modest.

“Nobody is penalized or rewarded in a really significant way,” Whetsell said in an interview. “This should be a relatively simple fix: Change the weighting or criteria and only award bonuses when hospitals have much higher than medium quality and efficiency or significantly improve quality.”

CMS should increase the size of penalty and bonus payments, Whetsell said.

“If the program ever gets expanded beyond the 2 percent rollback and CMS puts more money out there, say 5 percent of Medicare reimbursements, that should be enough money to get everyone’s attention,” he said.

Concerns Identified

Maryellen Guinan, senior policy analyst with America’s Essential Hospitals (AEH), said the GAO findings concern her members.

“We strive for quality at essential hospitals, but our hospitals are doing so with limited resources,” Guinan said in an interview. She said member hospitals often treat sicker patients requiring higher utilization than other hospitals.

“Those penalties feed into a vicious circle of inadequate resources and further penalties,” Guinan said. “We would urge CMS to examine the measures that go into the efficiency domain formula to focus on patient outcomes. Our hospitals are dealing with social risk factors outside the control of the hospitals.”

AEH supports the shift from volume to value-based reimbursement, but wants “to level the playing field so factors outside hospital control are accounted for so our members are not disproportionately impacted by the program,” Guinan said.

The GAO report followed recent studies that found the initiative has done little to improve quality of care.

One study concluded that improvements in clinical-process and patient-experience measures were not significantly greater among hospitals exposed to HVBP than among control hospitals.

“HVBP was not associated with improvements in measures of clinical process or patient experience and was not associated with significant reductions in two of three mortality measures,” the June study in the New England Journal of Medicineconcluded.

Andrew Ryan, assistant professor of health management and policy at the University of Michigan School of Public Health, and co-author of the NEJM study said is broadly supportive of the GAO recommendations to improve HVBP.

“However, I think that the larger issue is that HVBP has resulted in little or no improvement in patient quality,” Ryan said. “This may be because the program has a complicated design coupled with small financial incentives. CMS should consider changes to HVBP to address these issues.”


Mark Taylor is a freelance writer based in Chicago. 

Publication Date: Friday, July 21, 2017