More than a decade after their creation, an assessment of Medicare’s hospital value-based programs is not only timely but also crucial for incorporating the key priority of health equity. Our new peer-reviewed study, titled “CMS Hospital Value-Based Programs: Refinements are Needed to Reduce Health Disparities and Improve Health Outcomes,” co-authored by FAH staff and Dobson | DaVanzo and published on July 5^th in Health Affairs, provides an initial roadmap for a revamp of the programs.

An update must be undertaken now to ensure that the metrics in Medicare quality programs meet three vital themes: improving clinical care and performance, providing accountability to payers, and offering transparency that aids patient care choices.

Examining the Programs

The study scrutinized three hospital value-based programs: Hospital Readmissions Reduction Program (HRRP), the Value-Based Purchasing Program (VBP), and the Hospital-Acquired Condition Reduction Program (HAC). The 2023 study, part of a series published in Health Affairs, expanded to include equity, with the aim to identify variables that may influence penalties in hospital value-based programs.

CMS has already adjusted the HRRP and VBP program formulas for hospitals serving more dual-eligible Medicare beneficiaries. The study paves the way for further research, reform factors, and additional measures impacting the care of vulnerable individuals.

Findings

• Despite improvements in hospital performance, the percentage of hospitals that received penalties continued to increase. Approximately 65% of hospitals penalized in HRRP in 2015 were also penalized in 2021, and 27% were hurt in both years in the VBP program.
• Large hospitals, major teaching hospitals, and those with higher proportions of Medicare disproportionate share hospital (DSH) patients were more likely to receive downward adjustments.
• Associations were found with more complex patients and hospitals providing more uncompensated care, supporting the assumption that social determinants of health may affect performance.
• On the equity front, a composite index of community “resilience” was associated with inconsistent hospital performance. The evaluation of individual metrics demonstrated that some variables were associated with negative performance, while others were not.
• The correlation between people living alone and hospital performance was significant and could provide valuable insights into caring for this vulnerable group.

A Path Forward?

The fact that improvement does not curb heavy penalties under HRRP and HAC may reveal structural issues with the programs. Similarly, findings on patient complexity and disparities might explain why larger and teaching hospitals incur more penalties.

The research findings necessitate further investigation to guide revisions to Medicare’s quality/value programs. There is a disconnect between actual performance and how programs assess penalties and incentivize improvement.

Addressing health disparities and social determinants of health requires a nuanced approach in program design, including balancing adjustments for hospitals treating at-risk populations.

HRRP has been in place since 2012, and HAC began in 2014. It is far too long to allow these flawed programs to continue negatively impacting patients, communities, and providers. Regular reexamination of program dynamics is essential.

In the Affordable Care Act (ACA), policymakers established these Medicare programs to transform health care delivery and improve patient outcomes. By addressing the limitations cited in our paper and refining the programs based on thorough research, policymakers through CMS can achieve its primary goals and further achieve greater health equity and reduce disparities.