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Safety Net Hospitals Weather VBP and Readmissions Penalties

Analysis  |  By Christopher Cheney  
   April 24, 2017

Research examines the financial effect of readmissions penalties and value-based purchasing incentives on safety-net hospitals compared to other hospitals.

Safety-net hospitals have risen to a potentially existential challenge from a pair of Medicare's value-based payment reforms, a study published in the Journal of the American Medical Association indicates.

"Comparative Trends in Payment Adjustments Between Safety-Net and Other Hospitals Since the Introduction of the Hospital Readmission Reduction Program and Value-Based Purchasing," sheds light on how Medicare's Hospital Readmissions Reduction Program (HRRP)and its Hospital Value-Based Purchasing program (HVBP) have affected safety-net hospitals, says the study's lead author.

"The study confirms that safety-net hospitals have faced disproportionate penalties in both the HRRP and VBP, but also suggests that they have improved on the metrics used in these programs," says Nathan Favini, MD.

He says the research provides fodder for both supporters and opponents of HRRP and VBP, two major initiatives launched by the Centers for Medicare & Medicaid Services to prod and incentivize hospitals to deliver higher value for patients.

"This should ease concerns that safety-net hospitals can't effectively respond to penalties and incentives from CMS."

"For proponents of the programs," Favini says, "the improvements at safety-net hospitals, particularly in pneumonia and congestive heart failure readmissions, are a big success. Critics might note that the reductions in revenue at safety-net hospitals were big enough to impact margins and worry about the opportunity cost of focusing on these metrics in resource-limited settings."

HRRP imposes a Medicare payment penalty on hospitals that report relatively high 30-readmission rates for a bevy of medical conditions and procedures:

  • Acute myocardial infarction,
  • Chronic obstructive pulmonary disease,
  • Coronary artery bypass graft surgery,
  • Elective total hip and total knee arthroplasty,
  • Heart failure
  • Pneumonia

VBP tweaks the Medicare payment rate for hospitals based on a weighted set of quality metrics: clinical process of care, patient experience, clinical outcomes, and efficiency.

The JAMA study compares HRRP penalties and VBP payment adjustments based on safety-net hospital status from federal fiscal years 2013 to 2016. The research reflects CMS data collected from 3,016 hospitals, with 776 of the facilities designated as safety-net hospitals.

Under HRRP and VBP, a hospital's payment adjustments are reflected as a percentage of total payments from Medicare.

In FY 2013, Favini and his study co-authors found safety-net hospitals were assessed higher mean HRRP penalties than other hospitals, at -0.37% of total Medicare payments compared -0.28% at other hospitals. However, safety-net hospitals were able to close this gap to zero by FY 2016, the researchers show.

Safety-net hospitals also improved their VBP performance from FY 2013 to FY 2016, but they did not keep pace with improved VBP performance at other hospitals, the JAMA study found.

In FY 2013, safety-net hospitals were assessed a -0.05% mean penalty under VBP compared to a 0.02% VPB mean bonus paid to other hospitals. In FY 2016, safety-net hospitals earned a 0.05% mean bonus compared to a 0.19% mean bonus received at other hospitals.

In the JAMA study, Favini and his co-authors say the improved performance of safety-net hospitals in the HRRP program appears to be linked to better readmissions rates for heart failure and pneumonia. They ascribe the improved VBP numbers at safety-net hospitals to improved performance and adjustments to the way CMS weights the VBP measures.

CMS established a different weighted set of VBP measures for every year examined in the JAMA study:

  • 2013: Clinical process of care 70%, patient experience 30%
  • 2014: Process of care 45%, experience 30%, clinical outcome 25%
  • 2015: Process of care 20%, experience 30%, outcome 30%, efficiency 20%
  • 2016: Process of care 10%, experience 25%, outcome 40%, efficiency 25%

The yearly VBP measure adjustments make it difficult to determine exactly how safety-net hospitals improved their VBP performance, but Favini provides an explanation:

"We know that safety-net hospitals tend to perform worse on clinical process of care and patient experience measures, so the fact that these had less weight in 2015 and 2016 and that outcome and efficiency measures have taken on more importance could explain why safety-net hospitals are faring better in the program."

Christopher Cheney is the CMO editor at HealthLeaders.

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