The Hospital Value-Based Purchasing Program: How Are Hospitals Responding?

September 2013
By HCFO Staff

Medicare is reducing its payments to hospitals by one percent as part of the Hospital Value-based Purchasing (HVBP) Program, a provision of the Affordable Care Act. However, hospitals are given the incentive to earn back those reimbursements if they are able to demonstrate they have met benchmarks for clinical standards and patient satisfaction.  A recent article in The Memphis Daily News highlights some of the initiatives hospitals are undertaking in order to ensure they receive the high marks from patients that help earn these bonuses. 

The measures featured in the article to enhance survey marks include increasing the number of amenities provided to patients, strengthening care coordination, and bolstering communication between hospital staff and patients. Such actions are taking place not just in Memphis area hospitals, but in hospitals across the country. Because the percentage of payments withheld will increase each year until it reaches two percent in 2017, hospitals’ incentive to improve the quality of care will only grow.

HVBP is part of a larger shift from the fee-for-service model to a value-based purchasing model- where reimbursement is tied to the quality of care provided. Although Medicare has used patient satisfaction scores and clinical process measures to examine hospital quality for several years, HVBP’s method of tying these measures to payment represents one of the most significant initiatives of this sort.

The article indicates that some Memphis hospitals believe the methods by which the HVBP program determines these scores are not fair.  Safety-net hospitals such as the Regional Medical Center at Memphis (MEDI) often treat a higher proportion of vulnerable, low income, and uninsured patients. As is the case for safety-net hospitals in many parts of the country, the MEDI often receives lower patient satisfaction scores than do non-safety-net hospitals in the region. A recent Wall Street Journal article highlights several examples of safety-net hospitals that have experienced a loss in federal payments as a result of the HVBP program, despite performing above average in key areas.

Concern about whether the HVBP program unfairly penalizes safety het hospitals represents one policy-relevant question about the effectiveness of the program. As part of a current HCFO-funded study, Andrew Ryan, Ph.D. at Weill Cornell Medical College is helping hospitals and policymakers better understand the impact of HVBP by examining how the program is affecting quality of care during its first year of operation. Specifically, he is comparing how acute care hospitals and designated Critical Access Hospitals (which are exempt from HVBP) performed on various clinical and patient satisfaction measures before and after HVBP began. Using Hospital Compare data, the researchers additionally intend to assess whether hospitals’ performance on quality measures that are incentivized under HVBP differs from their performance on measures that are not incentivized. 

The goal of this project is to provide an early, nationwide evaluation of the HVBP that could assist policymakers in refining value-based design strategies in the future. Until now, policymakers have had to extrapolate from relatively small demonstrations in designing Medicare payment policy that incentivizes improvements in the quality of care.