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Studies Give Mixed Grades to Health Law Payment Innovations

By John Reichard, CQ HealthBeat Editor

September 7, 2012 -- Studies in the latest issue of the policy journal Health Affairs are a mixed bag for two forms of payment innovation promoted in the health care law: value-based purchasing and medical homes.

Value-based purchasing won't live up to hopes that it will improve the quality and efficiency of care, says one study. But when it comes to medical homes, new research published in the journal says that they show promise in reducing costly hospital admissions.

A study by Rachel Werner and Adams Dudley used 2009 performance data on the quality of care at 3,018 hospitals to predict how much facilities will be paid under the Medicare hospital value-based purchasing program that launches in October. "Despite differences across hospitals in terms of performance, expected changes in payments were small, even for hospitals with the best and worst performance scores," the study found. "Almost two-thirds of hospitals would experience changes of just a fraction of 1 percent."

Werner is a researcher at the Philadelphia Veterans Affairs Medical Center and Dudley a health policy professor at the University of California, San Francisco.

The purchasing program assigns performance scores to each hospital based on how well it does on such measures as timely care for heart attacks and administering antibiotics before surgery to prevent infections. Patient satisfaction with care also figures into the tally, based on whether doctors and nurses were respectful and answered questions fully, among other things.

Hospitals already are assessed on these measures, but the results haven't shaped how much they are paid—until now. The Centers for Medicare and Medicaid Services (CMS) is taking one percent from the operating payments of hospitals to create an $850 million pool to fund bonus payments for those facilities that perform well.

"Based on 2009 performance, 1,581 hospitals (51 percent) would receive increased Medicare payments under this pay-for-performance program, and the remaining, 1,437 would receive decreased payments," the study authors said.

"The average absolute change in payment for the hospitals would be $125,000 for hospitals with the largest percentage loss and $55,381 for hospitals with the largest percentage gain in Medicare payment," they added. "The majority of hospitals (65 percent) would see a change in Medicare payment between 0.25 percent and 0.24 percent."

"Such small changes in payment might be only a weak stimulus to improve performance," they observed.

The researchers compared the results to findings from a test program conducted by the hospital group Premier. That program resulted in "small but statistically significant improvements in hospital performance," the study said. Participating hospitals got bonus payments averaging $35,000 per year.

But the purchasing program about to begin could have a weaker influence on quality than the smaller pilot, according to the researchers.
The small program was voluntary, "which may have led to the enrollment of hospitals that were more motivated to improve than the typical hospital," the authors said. But the new program is mandatory. Also, the improvements in the smaller pilot were "transitory," according to the study.

On the other hand, "the fact that the current program puts hospitals at risk of losing current levels of payment" could spur hospitals to improve, the authors acknowledged. "People are generally more motivated by the desire to avoid losing what they consider theirs, as will happen when the full Medicare payment is reduced [to fund the pool of bonus payments], than they are by the desire to gain something of equal value that is perceived as extra, such as in increase in payment."

The study said the program could be changed to better spur changes in hospital behavior, for example, by increasing the percentage of payment used to fund the bonus pool or paying hospitals more for each patient whose care met a certain performance standard.

Other analysts, however, have been more upbeat about the potential of the new program.

A CMS official said "the Hospital Value Based Purchasing program is already working to assure that people with Medicare get high-quality care while in the hospital and we are confident that success will continue as we work together with hospitals to learn more and more about how to better prevent hospital-acquired infections, and improve care for Medicare patients."

Other studies published in the journal were more upbeat. "They appear to show that paying a team of primary care providers in new ways—not to mention paying them more—results in more active management of chronically ill patients that leads, among other outcomes, to far less use of costly hospitalization," summarized Health Affairs Editor Susan Dentzer in a preamble to the journal. Examples including a medical home program developed by Aetna and NovaHealth, a physician association in Maine, and a program developed by the insurer Wellpoint. Earlier this week, a collaborative of medical home projects said they can reduce costs without jeopardizing care.

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