According to a new study in Health Affairs, some hospitals with poor quality that participate in CMS’ Hospital Value-Based Purchasing (HVBP) program received bonuses in fiscal year 2015.

In 2013 and 2014, hospitals were rewarded or penalized based on quality alone, but added a spending metric (Medicare Spending per Beneficiary episode) in 2015.

Researchers examined data from 2,679 hospitals participating in the program in fiscal years 2014 and 2015. They found that 231 hospitals (8.6 percent) were low quality hospitals that also received bonuses, with a bonus at an average of 0.18 percent of the hospitals’ Medicare payments. 

The authors noted that hospital quality had a weak and inconsistent association with spending.

“Compared to smaller, nonprofit, rural, or non-teaching hospitals, respectively, larger, for-profit, urban, or major teaching hospitals were more likely to have high episode spending,” the researchers wrote. “Because of this, the addition of a spending measure to the VBP program increased the likelihood that such hospitals would receive penalties.”

Our Take: This research is the first attempt to measure the effects of simultaneously incentivizing lowering spending with higher quality. We agree with the author’s conclusion that a minimum threshold for quality should be established before rewarding frugal spending—just like CMS does for Medicare ACOs. After all, the primary goal is to reward better patient care; it doesn’t make sense to penalize urban and teaching hospitals for treating more complicated patients that cost more to serve.

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