Valuing Improvement in Value Based Purchasing

Background

Medicare will soon implement hospital value-based purchasing (VBP), using a scoring system that rewards both achievement (absolute performance) and improvement (performance increase over time).  However, improvement is defined so as to give less credit to initial low performers than initial high performers.  Since initial low performers are disproportionately hospitals in socioeconomically disadvantaged areas, these institutions stand to lose under Medicare’s VBP proposal. 

Methods

We developed an alternative improvement scale, and applied it to hospital performance throughout the US.   Using 2005-2008 Medicare process measures for acute myocardial infarction (AMI) and heart failure (HF), we calculated hospital scores using Medicare’s proposal and our alternative.  Hospital performance scores were compared across 5 locational dimensions of socioeconomic disadvantage: poverty, unemployment, physician shortage, high school and college graduation rates.

Results

Medicare’s proposed scoring system yielded higher overall scores for the most locationally advantaged hospitals for 4 out of 5 dimensions in AMI and 2 out of 5 for HF.  Using our alternative, differences in overall scores between hospitals in the most and least advantaged areas were attenuated, with locationally advantaged hospitals having higher overall scores for 3 out of 5 dimensions in AMI and 1 out of 5 dimensions for HF. 

Conclusions

Using an alternative VBP formula that reflects the principle of “equal credit for equal improvement,” resulted in a more equitable distribution of overall payment scores, which could allow hospitals in both socioeconomically advantaged and disadvantaged areas to succeed under VBP.