A study appearing in the September 2012 edition of Health Affairs titled “Medicare's New Hospital Value-Based Purchasing Program Is Likely To Have Only A Small Impact On Hospital Payments,” questions “whether the new pay-for-performance program will substantially alter the quality of hospital care.” The researchers, Rachel M. Werner and R. Adams Dudley, applied the rules governing the inaugural year of CMS’s value-based purchasing (VBP) program to 2009 quality data and concluded that “the financial impact [of the VBP program] will be small, even at the extremes of best- and worst-performing hospitals.” In particular, applying the two “domains” approved for the 2013 VBP program (the process of care domain and patient experience of care domain) to 2009 quality data, the study found that less than six percent of hospitals nationally would experience a change (positive or negative) in payments of more than 0.5 percent. In fact, almost two-thirds of hospitals would experience a change in Medicare payment of a quarter percent or less. There was, however, substantial variation in performance based on hospital characteristics as described below. Because the study was conducted “as if it had been in place in 2009,” the authors stressed that it “cannot address how hospitals will actually perform under the program in 2012.”

The study examined performance results by region and concluded that “New England hospitals had the highest total scores and process scores, while hospitals in the Mountain and Pacific regions scored lowest.” These regional differences in hospital scores translated into an average difference in Medicare payment of over $90,000, with the average New Hampshire hospital—the state with the highest score—achieving an average Medicare payment increase of $66,948, while the average Hawaii hospital—the state with the lowest score—experiencing an average Medicare payment decrease of $25,596.

Hospital performance also varied significantly by teaching status with 20 percent of non-teaching hospitals expecting an increase in Medicare payment of at least 0.25 percent compared to just 10 percent of teaching hospitals. There was an even bigger discrepancy between for-profit hospitals and non-profit hospitals with 35 percent of for-profit hospitals expecting an increase in Medicare payment of at least 0.25 percent compared to just 15 percent of non-profit hospitals. Higher levels of nurse staffing and lower DSH percentages also correlated with higher VBP scores, according to the study.

On the whole, the study suggested that “close to half of US hospitals will face changes in Medicare payment of at least $35,000” under the new VBP program. One would expect that number to increase while the percentage of Medicare payments tied to the VBP program increases from one percent in 2013 to two percent in 2017. The authors stated, however, that “[e]ven after a scheduled doubling in size of the payments by 2017, only eight hospitals would see payment changes as large as 1.5 percent” and concluded that “[t]hese amounts may not have a major influence on hospital care.”

The abstract of the article is available here. The full article is available on the Health Affairs website but requires a subscription.