How Beneficiary Preferences Can Impact Hospital VBP Payment Incentives

June 28, 2023 - If the Hospital Value-Based Purchasing (HVBP) program value weights were based on Medicare beneficiary preferences, nearly $86 million in payment incentives would be reallocated and smaller rural hospitals would be penalized, according to a study published in JAMA Network Open.

The HVBP program withholds 2 percent of hospital Medicare payments and redistributes the funds as incentive payments based on hospital performance. Incentive payments can be less than, equal to, or more than the amount initially withheld.

The payments are based on hospitals’ performance in four quality domains: clinical care, person and community engagement, safety, and efficiency and cost reduction. CMS weighs each of these domains equally when determining performance scores.

Some researchers have argued that the value-based payment model should be more patient-centered and incorporate patient preferences when assigning weight to the quality domains.

The study aimed to determine how Medicare beneficiaries value the different quality domains and how using these preferences as value weights would impact incentive payments for hospitals enrolled in the HVBP program in 2019.

Researchers conducted an online survey from March 15 to March 29, 2022, using a discreet choice experiment (DCE) to gather beneficiary feedback. Beneficiaries were asked to choose between two hypothetical hospitals that were described using attributes reflecting the HVBP quality domains and two additional attributes: distance and out-of-pocket costs. Respondents also ranked the attributes by importance.

Researchers used data from CMS and the American Hospital Association (AHA) to estimate the impact of beneficiary value weights on hospital incentive payments.

Just over 1,000 Medicare beneficiaries responded to the survey. The researchers calculated coefficients for each attribute, determining the likelihood of a hospital being selected. A coefficient greater than zero indicated the hospital was more likely to be chosen if it included the given attribute level, while a coefficient less than zero meant it was less likely to be selected.

“Broadly speaking, a star rating of average or above (3 stars or above) made a profile more likely to be chosen when a rating below average (2 stars or lower) made a profile less likely to be chosen,” the study explained.

The researchers determined beneficiary value weights by calculating the difference in coefficients between one-star and five-star ratings.

Beneficiaries gave the most weight to clinical outcomes, at 49 percent. Safety and patient experience followed with 22 percent and 21 percent, respectively. Medicare spending per patient, which represented the efficiency and cost reduction domain, received the lowest weight at 8 percent.

Using these beneficiary value weights, nearly $86 million in incentive payments would have been reallocated across hospitals in 2019.

Almost twice as many hospitals would see a payment reduction (1,830 hospitals) than an increase (922 hospitals). However, the net decrease in incentives was smaller than the increase, mainly due to large increases in incentive payments for relatively few high-volume hospitals, the study noted.

Hospitals that would see a net reduction in incentive payments were more likely to have fewer hospital beds and admissions, be in less populated areas, and serve less-complex patients. This suggests using beneficiary preferences to weight HVBP domains could penalize smaller rural hospitals, exacerbating existing care disparities.

On the other hand, hospitals that would see a reduction in incentives were less likely to be safety-net hospitals, indicating the use of beneficiary preferences could reduce disparities in other respects.

Most CMS value-based payment programs did not consider health equity during the design and implementation, creating gaps that allow for disparities.

“Establishing health equity as an explicit objective of value-based payment reforms and tying equity to payments can be accomplished by incorporating equity measures into assessment and/or modifying the payment criteria to assign a greater weight to quality improvement rather than quality achievement,” researchers wrote.

Understanding which quality aspects are most important to Medicare beneficiaries can also help inform quality improvement efforts and value-based payment reforms. Since beneficiaries value clinical outcomes, experience, and safety over efficiency, one scenario could include using beneficiary value weights for the first three domains and having Medicare set the weight for efficiency.