Hospital Value-Based Purchasing Program Aims to Improve Quality of Care

There are many different payment reform models that are discussed by payers and providers on a regular basis. This is a review of the progress being made in regards to the hospital value-based purchasing (VBP) model, which rewards acute-care hospitals with incentive payments for the quality of care they provide to patients with Medicare.

Given the Supreme Court’s recent ruling on the Patient Protection and Affordable Care Act, it is safe to assume that the Centers for Medicare & Medicaid Services’ (CMS) Hospital Value-Based Purchasing program will come into effect on October 1, 2012. At this time, hospitals that are taking part in this program will begin receiving incentive payments for providing high quality care or improving care. These payments will be based on the performance of hospitals between July 1, 2011, and March 31, 2012.

The hospital setting is in the process of undergoing many changes over the next several months. Although the hospital VBP program focuses on quality measure for patients with Medicare, other commercial reimbursement models are also moving toward VBP. Because of this development, hospitals may need to consider using health information exchanges (HIX) as a method to improve clinical quality and simultaneously receive payments from the entire spectrum of patients. This is the exact strategy mentioned in a recent Becker’s Hospital Review article.

Although there remains a high upside to the VBP model, not all hospitals are poised to reap the benefits. According to a recent study in the Archives of Internal Medicine, the VBP program could spell trouble for financially strapped safety net hospitals (SFN). In fact, the authors of the study point out that SFNs scored lowest on every patient experience except for quietness of hospital environment and, based on 2010 data, these hospitals had 60% lower odds of meeting the VBP program’s benchmarks for hospital payments. Further, the authors mention that, “although the new VBP rules pay for improvements as well as achievement, our findings suggest that SNHs face challenges on both fronts. If SNHs are unable to substantially improve patients' experiences over the next several years, hospital-based incentive programs are likely to disproportionately penalize these institutions.”

Katherine Neuhausen, MD, and Mitchell H. Katz, MD, elaborated on the seriousness of the study in an accompanying editorial:

Safety-net hospitals that are already drained by the DSH [disproportionate share payment] reductions are likely to lose additional funds under this program, leaving them without any capital to launch initiatives to improve quality and patient experience. Over time, VBP could worsen the disparities between prosperous non-SNHs and struggling SNHs…These hospitals will still be needed to care for the estimated 23 million individuals who will remain uninsured even if health care reform is fully implemented….The closures of SNHs would also be detrimental to the millions of insured Americans who rely on them for specialized services such as trauma care, disaster relief, burn treatment, neonatal intensive care, psychiatric care, and substance abuse treatment. These unprofitable services are more likely to be offered by SNHs than non-SNHs.

In order to better understand that complications that VBP models place on SNHs, the Healthcare Financial Management Association has called for the CMS to “conduct a patient level study to better understand the relationship between scores in the Hospital Consumer Assessment of Healthcare Providers and Systems domain and factors beyond a hospital’s control, such as patient severity and region.”

Additional Resources

Value-Based Purchasing — National Programs to Move from Volume to Value [NEJM]

Frequently Asked Questions: Hospital Value-Based Purchasing Program [CMS.gov]

Top 10 Questions About Value-Based Purchasing [Dorland Health]

Value-based Purchasing Resources [Press Ganey]

5 Tips to Improve Hospital HIEs for Value-Based Purchasing [Becker’s Hospital Review]