Quality Payments Have Little Effect on Hospital Care, GAO Finds

Most telling were the interviews with hospital leaders, who said the bonus payments did more to reinforce existing trends in quality care than alter them.

After 3 years, Medicare has produced few results from its program to offer performance-bases bonuses or penalties to hospitals based on quality of care, according to a report released yesterday from the Government Accountability Office (GAO).

The Hospital Value-Based Purchasing Program (HVBP) is among the tenets of the Affordable Care Act designed to move healthcare delivery away from one that pays for volume to one that pays for value. But the GAO found “no apparent shift” in hospital performance trends, based on quality measures from fiscal years 2013 through 2015. The report recognized that this could change as the program evolves.

The incentive program is not a huge slice of the Medicare pie: GAO found that payments to 3000 hospitals come to less than 0.5% of applicable Medicare payments each year. However, the payment distribution pointed up some trends that have received criticism elsewhere; safety-net hospitals that serve the poor, and whose patients likely walk through the door with chronic conditions and higher smoking rates, consistently had smaller bonuses and larger penalties than other hospitals. GAO found that those hospitals with a net income margin of more than 5% received average bonuses of 0.23%, while those that break even did not receive bonuses on average.

More telling was the fact that hospitals officials themselves told GAO that the incentive program “generally reinforced ongoing quality improvement efforts, but did not lead to major changes in focus.”

Hospital leaders said many factors go into improving quality, such as upgrades in information technology (IT), including electronic health records (EHR). Medicare HVBP is one among many elements that push hospitals to do better, they said.

Data from the 3 years showed that for fiscal year (FY) 2013, 3% of hospitals had penalties of 0.5% or greater; 93% had penalties or bonuses of less than 0.5%, and 4% had bonuses of 0.5% or more. These amounts crept up slightly in FY 2014, with 6% having penalties of 0.5% or more and 4% having bonuses of 0.5% or more. For FY 2015, the share of hospitals paying higher penalties rose to 8%, while the share getting higher bonuses jumped to 18%.

One exception that GAO noted is a separate program that specifically targets hospital readmissions, which has been a major focus of CMS quality care efforts. This program, which only imposes penalties, is expected to sanction more than 2500 hospitals in the next year. The poorest performers will lose 3% of their regular Medicare payment for each patient stay. However, there have been recommendations that this program be altered, as studies are showing that hospitals who treat more poor patients have higher readmission rates.

“The conjunction of the drop in hospital readmission rates and the introduction of a financial incentive program targeting those rates provide some additional indication that financial incentives … may, under certain circumstances, promote enhanced quality of care,” the report said.