Addressing Social Risk in Medicare Value-Based Reimbursement

January 12, 2017 - Hospitals that disproportionately treat patients with social risk factors, such as low income and race, may be unfairly penalized under some Medicare value-based reimbursement programs. But the National Academies of Science, Engineering, and Medicine (NASEM) recently suggested a method that would incorporate social risk factors into value-based reimbursement to make penalty determinations fairer for all healthcare providers.

Researchers recommended that value-based reimbursement should be directly adjusted for social risk factors. But direct payment adjustments should be coupled with public quality performance reporting also based on social risk factors.

In the research group’s final report on how social risk factors influence Medicare value-based reimbursement, NASEM concluded:

“The committee supports four goals of accounting for social risk factors in Medicare payment programs: reducing disparities in access, quality, and outcomes; improving quality and efficient care delivery for all patients; fair and accurate reporting; and compensating health plans and providers fairly. These goals would best be achieved through payment based on performance measure scores adjusted for social risk factors (or adjusting payment directly for these risk factors) when combined with public reporting stratified by patient characteristics within reporting units.”

NASEM advised CMS and the Department of Health and Human Services (HHS) to incorporate social risk factor payment adjustments and public reporting into its value-based reimbursement programs after the research group found negative care consequences resulting from value-based penalties.

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“Providers disproportionately serving socially at-risk populations are more likely to score poorly on performance/quality rankings, more likely to be penalized, and less likely to receive bonus payments under VBP [value-based payments],” the report stated. “VBP may be taking resources from the organizations that need the most.”

Consequently, providers may also avoid patients with social risk factors to minimize their chances of being penalized under Medicare value-based reimbursement programs. Healthcare disparities would, therefore, widen without appropriate social risk factor adjustments.

To start addressing the social risk factor effect on value-based reimbursement, NASEM reiterated the five measure domains of social risk that create bias in the programs. The domains included:

• Socioeconomic position, such as income, education, dual eligibility, wealth, and occupations

• Race, ethnicity, and cultural context

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• Gender, including both normative and non-normative gender identities

• Social relationships

• Residential and community context, such as neighborhood deprivation, urbanicity, and housing

Similarly, the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) recently identified social risk factors that create bias in Medicare value-based reimbursement programs. However, the office pinpointed dual eligibility for Medicare and Medicaid as the greatest predictor of poor patient outcomes.

Other researchers, though, have suggested that hospital size may also lead to unfair value-based penalties in Medicare quality programs. A December 2016 American Journal of Medical Quality study indicated that hospitals on either end of the size spectrum are unfairly penalized under the Hospital-Acquired Condition Reduction Program.

READ MORE: How Value-Based Reimbursement Affects Physician Productivity

Based on NASEM’s social risk domains, the research group developed four methods for incorporating social risk factors into Medicare value-based reimbursement programs. The methods included:

• Stratified public reporting

• Performance measure score adjustments

• Direct payment adjustments

• Redesigning payment incentive methodologies

While each method would help to level the playing field for program providers, NASEM recommended a combination of direct payment adjustments and stratified public reporting. The combination would be the best fit for achieving all Medicare payment program goals, including decreasing care disparities, improving care quality, fair and accurate reporting, and compensating participants fairly.

CMS and HHS should directly align payments with social risk factors to ensure providers that treat more patients in the socially at-risk population are not underpaid, the report stated.

“By accounting for the increased resources (i.e., estimated costs) needed to care for socially at-risk populations, directly adjusting payments avoids intentionally redistributing resources away from (i.e., underpaying) providers who serve patients with social risk factors and reduces incentives to avoid these patients,” wrote NASEM.

However, only adjusting value-based reimbursement would not reduce healthcare disparities or make them more visible. Therefore, CMS and HHS should also develop a public reporting mechanism that separates quality performance by social risk factors.

Public reporting of quality performance incentivizes providers to improve care delivery so more consumers select their organization for services. But stratified public reporting would make information on subgroups available, incentivizing providers to lower care disparities.

“Just as overall performance can lead to quality improvement for all beneficiaries, publicly reported performance scores stratified by social risk factors could influence beneficiaries’ choices by allowing patients to see which providers or plans provide the best care for patients like them,” stated the report.

In its December 2016 report, ASPE also suggested strategies to make Medicare value-based reimbursement programs fairer to safety-net hospitals as well as to reduce care disparities. The office recommended three key strategies: measuring and reporting quality for beneficiaries with social risk factors; setting fair quality standards; and financially rewarding providers that improve outcomes specifically for beneficiaries with social risk factors.

"Public reporting by patient characteristics within reporting units must be part of any approach to improve on the status quo."

While ASPE noted that policymakers can pick and choose which of their suggestions to implement, NASEM advised CMS and HHS to implement their twofold approach. The NASEM strategy addresses unfair value-based penalties as well as care disparity reductions, especially through stratified public reporting.

“The committee states that if CMS’s goals for VBP include monitoring for and reducing disparities, stratified public reporting by patient characteristics within reporting units (for example, publicly reporting data for patients by race and ethnicity within a hospital) must be part of any approach to improve on the status quo,” NASEM stated its website.

Looking forward, the research group also noted that the strategy for incorporating social risk factors into Medicare value-based reimbursement programs could be expanded to the private payer sector.

The report stated, “The approaches the committee identified to account for social risk factors in quality measures and payment could be applied to other payers, which could further increase resources to these providers via the same mechanism as under Medicare.”