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Value-Based Care News

Academic Medical Centers Receive More Value-Based Penalties

A new study shows academic medical centers performed worse than their non-academic peers in value-based penalty programs and the centers had higher costs.

Academic medical centers and value-based penalties

Source: Thinkstock

By Jacqueline LaPointe

- Academic medical centers (AMCs) are key members of the healthcare industry, engaging in medical research, uncovering clinical breakthroughs, and training future providers. However, a new analysis by Navigant shows that the organizations are struggling to deliver value.

AMCs received more overall value-based penalties between 2016 and 2018, with 40 percent of the medical centers getting seven or more of the nine possible penalties.

In contrast, just 23 percent of non-AMCs earned seven or more value-based penalties, the data from 387 hospitals with more than $500 million in annual net patient revenue and 10,000 annual discharges also revealed.

For 2018 specifically, just 1.7 percent of AMCs received no value-based penalty. Slight over nine percent (9.4 percent) of non-AMCs received no penalty that year.

While AMCs lagged behind their non-AMC peers in value-based rewards, the research-focused healthcare organizations did improve their care quality scores. AMC overall weighted performance on Medicare hospital readmission, hospital-acquired condition, and value-based purchasing program measures rose 10.4 percent between 2016 and 2016, the analysis showed.

However, AMC scores still fell behind those of non-AMCs by 1.3 points during the period.

“While AMCs have earned strong reputations for cutting-edge and specialty care, our previous experience has found most AMC admissions and procedures could also be performed at non-AMCs,” stated study author and Navigant Director Christopher Stanley, MD.

“As healthcare transparency increases, AMCs performing poorly on analyzed measures of care may face lower patient volumes, a decrease in revenue through CMS and commercial value-based payment models, and less favorable payer partnership opportunities. Results from this analysis reinforce the need for AMC quality and cost performance to be in line with non-AMCs,” he continued.

Academic medical centers may want to particularly work on aligning their cost performance with their non-AMC counterparts. The analysis found that Medicare median wage and case mix index adjusted cost per case was 5.8 percent higher at AMCs versus non-academic centers in 2017.

The cost difference between AMCs and non-AMCs translated to about $3.1 million in average added annual operating expenses for fee-for-service Medicare patients per academic medical center studied, Navigant reported.

Additionally, the study uncovered a 22 percent cost per case disparity between high and low performing AMCs.

In comparison, high and low performing non-AMCs had a 19.8 percent cost per case disparity.

“Thus, the differential for low performers would amount to approximately $12 million per AMC and $9.2 million per non-AMC in added annual operating expense attributed to Medicare FFS patients, compared to high performers,” Navigant explained.

The higher healthcare costs do not necessarily translate to higher care quality, the organization added. Both higher cost AMCs and non-AMCs did not significantly outperform lower cost facilities on quality measures, the analysis showed.

As the study showed, academic medical centers are encountering challenges with delivering high-value care, which may impact their bottom lines, researchers explained.

“Improved performance on quality outcome measures reflects AMC leadership, focus, and ongoing dedication to individual patients and their communities,” the study stated. “However, the financial health of the institutions they lead will be dependent on further improvement in their quality measures and cost structure.”

“Facilities consistently performing poorly on CMS value-based programs stand to face increasing financial pressures from future payment models emphasizing value,” the study continued.

Patients may seek care at high-value non-AMCs in light of new value-based purchasing programs that make quality performance scores public.

About 90 percent of admissions and procedures performed at AMCs can be delivered at community hospitals, according to Navigant. With AMCs reporting higher costs and poorer care quality scores, patients are likely to seek care at community hospitals, resulting in falling patient volumes at AMCs.

Lower value care will also impact an AMC’s value-based performance in alternative payment models and negatively impact the center’s relationship with their peers.

Academic medical centers can take steps to improve the value of the care they deliver. Researchers advised AMCs to implement the following strategies:


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