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GAO: Hospital Value-Based Purchasing Model Rewards Low Quality

About 20 percent of hospitals earning a financial bonus in the Hospital Value-Based Purchasing Program had care quality scores below the median, the GAO found.

GAO found that lower-than-average quality hospitals earned financial bonuses in Hospital Value-Based Purchasing Program between 2015 and 2017

Source: Thinkstock

By Jacqueline LaPointe

- A new Government Accountability Office (GAO) report found that CMS gave financial bonuses to hospitals participating in the Hospital Value-Based Purchasing Program despite the facilities earning composite quality scores below the median.

Using CMS data from 2013 to 2017 on nearly 3,000 hospitals, researchers found that about 20 percent of hospitals receiving value-based bonuses under the Medicare program had weighted total quality performance scores below the median for all hospitals in fiscal years 2015 to 2017.

Image shows about 20 percent of hospitals earning a financial bonus in the Hospital Value-Based Purchasing Program from 2015 to 2017 had lower-than-average care quality scores.

Source: Government Accountability Office (GAO)

Although, the average value-based bonus awarded was less than the upward Medicare reimbursement adjustment earned by high-quality hospitals. For example, the median bonus for all hospitals in 2015 was 0.32 percent and the median bonus for hospitals receiving a bonus with composite quality scores below the median was 0.17 percent.

The hospitals still earned a bonus because of high cost efficiency scores, the federal watchdog stated.

READ MORE: Best Practices for Value-Based Purchasing Implementation

The median cost efficiency score for hospitals achieving a bonus despite low-quality performance was between 1.5 and 6 times higher than the average efficiency scores for hospitals overall.

In 2015, CMS added an efficiency domain to the Hospital Value-Based Purchasing Program’s four quality domains. The only measure in the domain was Medicare spending per beneficiary and hospital performance on the measure only accounted for 20 percent of total performance in 2015.

The efficiency domain weight increased to 25 percent for fiscal years 2016 and 2017.

The federal agency explained in a 2012 Hospital Value-Based Purchasing Program rule that the weighting formula ensured that hospital cost performance would only represent a portion of the total performance. Value-based bonuses and penalties would still be based primarily on quality.

“The same documentation stated that the distinct measure of cost, independent of quality, would enable the agency to identify—and subsequently reward through payment adjustments—hospitals involved in the provision of high-quality care at a lower cost to Medicare,” the GAO added.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

“However, CMS’s formula for weighting the domain scores to determine a total performance score has created a system that, in some cases, rewards lower quality hospitals that provide care at a lower cost,” researchers continued.

While CMS asserted that weighting quality domains at 75 percent and cost efficiency at 25 percent struck an appropriate balance between cost and quality performance, the Hospital Value-Based Purchasing Program’s policy for redistributing missing quality domain scores upset the reported balance.

CMS did not require a complete set of domain scores from hospitals participating in the Medicare program after 2015. Hospitals may be missing domain scores if the facility does not have a sufficient number of patients to calculate the domain measures.

If a hospital did not have a score in one of the four quality domains, the weight of the missing score was redistributed to other categories, including cost efficiency.

Consequently, the cost efficiency domain had the potential to represent significantly more than one-quarter of a hospital’s total performance in the Hospital Value-Based Purchasing Program. A hospital’s efficiency score could have been weighted between 25 and 50 percent, instead of the intended 20 percent in the fiscal year 2015.

READ MORE: Preparing the Healthcare Revenue Cycle for Value-Based Care

The redistribution policy could have also increased the efficiency score weight from the original 25 percent in fiscal years 2016 and 2017 to up to 71 percent.

As a result, hospitals with missing quality domain scores were more likely to earn a value-based bonus than hospitals with a complete set of domain scores. Sixty-eight percent of hospitals with missing domain scores in the fiscal year 2017 received a value-based bonus versus one-half of hospitals with all domain scores.

Out of the 20 percent of hospitals that received a value-based bonus despite lower-than-average quality performance, most were missing a domain score. In 2017, 53 percent of the hospitals in this group were missing at least one quality domain score.

The positive Medicare reimbursement adjustment for hospitals with missing domain scores also exceeded the average value-based bonus for all hospitals. Lower-quality hospitals with missing domain scores that earned a value-based bonus had a positive adjustment of 0.74 percent by 2017. The positive Medicare reimbursement adjustment was significantly greater than the median bonus adjustment of 0.54 percent for hospitals overall.

The GAO concluded that the Medicare Hospital Value-Based Purchasing Program fell short of providing incentives to high-quality, cost-efficient hospitals. The weighting system for quality and cost efficiency results in CMS awarding bonuses to lower quality hospitals.

Since the program is budget neutral, the weighting system may also lead to smaller value-based bonuses for hospitals that perform well on all five quality and cost domains.

“If CMS continues to use the current formula, it will continue to reward hospitals that do not score well on quality and efficiency metrics,” the federal watchdog wrote.

To improve the Medicare Hospital Value-Based Purchasing Program, the GAO recommended that CMS update the formula used to determine a hospital’s total performance score or ensure that the efficiency score does not disproportionately impact total performance scores.

The federal investigators also suggested that CMS modify the proportional redistribution policy used to correct missing domain scores.

In response, HHS stated that it will look into the GAO recommendations and explore alternatives to better balance quality and cost performance in the value-based purchasing program. Although any potential changes to domain weights would be evaluated for possible negative consequences and would need to go through a notice-and-comment rulemaking process.


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