GAO Report Finds Lower Quality Hospitals Still Received Value-Based Bonuses

The Government Accountability Office (GAO) recommended that CMS should take steps to prevent lower quality hospitals from qualifying for value-based bonuses, after a report by the office found that some bonuses in recent years had rewarded poorly-rated hospitals.

According to the report, which was issued to Congressional Committees and released publicly, the findings contradict the aims of the Hospital Value-Based Purchasing (HVBP) program established by the Affordable Care Act. In theory, CMS would determine Medicare payments using a formula that rewards hospitals that score highly on a set of quality and cost efficiency measures, and penalizes hospitals that perform poorly. The program was part of a “range of efforts…to induce providers to improve their quality of care and become more cost efficient.”

However, the GAO’s analysis for the fiscal years 2013 through 2017 found that some hospitals with relatively low quality scores still received bonuses through the program because they had high cost efficiency scores. Additionally, the formula used to calculate the payment adjustments weighted the efficiency score to count more towards the total score when any quality scores were missing. In 2016, for instance, 372 hospitals with composite quality scores below the median received bonuses, as did 1429 hospitals with scores above the median. In fiscal year 2017, both of these figures had declined slowly, due to an increase in the number of hospitals incurring a penalty, but 345 hospitals with quality scores below the median still received bonuses.

As recently as November 2016, CMS reported to Congress that its scoring methodology “provided balanced consideration for quality and efficiency” by weighting the quality domains at 75% and efficiency at 25%. However, the GAO report determines that such a balance has not been achieved, as lower quality hospitals continue to receive bonuses and hospitals performing well in all domains are awarded smaller bonuses. It recommends revising the formula to lessen the weight of efficiency score in calculating total performance and fixing the redistribution calculation used when domain scores are missing.

When presented with a draft of the report, HHS indicated it would reexamine the formula and “explore alternatives to the practice of proportional redistribution,” but noted that any potential changes would be subject to notice and comment rules.

Another section of the report analyzed performance scores and payment adjustments for safety net, small rural, and small urban hospitals in particular. Safety net hospitals tended to have lower quality domain scores, while small rural facilities scored higher on quality and efficiency domains, as well as each of the 4 subdomains that make up the quality score. In 4 out of 5 years examined, small hospitals were more likely to receive a bonus and safety net hospitals were more likely to incur a penalty compared with all hospitals participating in the HVBP program.

According to the report, safety net hospitals bear a disproportionate share of the program’s burden, as they received about 5% of all bonus dollars awarded but paid about 10% of all penalty dollars collected yearly. Meanwhile, small rural and small urban hospitals received twice the percentage of dollars as they paid in penalties. The report did not recommend any changes to the HVBP program in order to reduce this disparity.