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VBP Program Impact, Incentives Questioned

Cheryl Clark, for HealthLeaders Media, August 11, 2014

A pay-for-performance researcher says Medicare's value-based purchasing program has not shown improved hospital quality in its initial nine-month rollout period, probably because the financial incentives are too low. But Premier Inc.'s medical director challenges the findings.

In the initial nine-month rollout period for Medicare's value-based purchasing program, participating hospitals achieved quality scores that were no higher than at ineligible hospitals, says Andrew Ryan, associate professor of healthcare policy and research at Weill Cornell Medical College, and fellow researchers.

The culprit is low financial incentives, he says. Eligible hospitals appear to need much greater payment incentives than the 1% to 2% specified in the Patient Protection and Affordable Care Act.

"It's important to have stronger incentives, which is a level of payment that's enough to generate change that will improve value for the system," Ryan says. His paper was published online in a July issue of Health Services Research.

But Ryan's research was challenged by Richard Bankowitz, MD, medical director of Premier Inc., a large group purchasing and quality collaborative which years ago designed a demonstration project that was the model for the VBP program. The hospitals used to compare VBP results make it impossible to draw any conclusions from Ryan's research at all, Bankowitz says.

Negligible quality differences, trivial financial incentives

According to rules set by the Centers for Medicare & Medicaid Services, during that first nine-month performance period, which ended March 31, 2012, eligible hospitals relinquished 1% of their base operating Medicare payments to a pool that was redistributed to the best performers. In a few weeks—for fiscal year 2015, which begins October 1—the pool increases to 1.5%, and ultimately to 2% by October 1, 2017.

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