August 29, 2016

CSSRR Health–August 29, 2016

Filed under: H. Working Papers,Health — admin @ 3:50 pm

Center for Policy Research [Maxwell School, Syracuse University] Working Paper: “So Many Hospitals, So Little Information: How Hospital Value Based Purchasing is a Game of Chance,” by Andrew I. Friedson, William C. Horrace, and Allison F. Marier (Working Paper No. 192, August 2016, .pdf format, 28p.).


As part of the 2010 Patient Protection and Affordable Care Act, participating Medicare hospitals have part of their Medicare reimbursements withheld and then redistributed based on quality performance. The Hospital Value Based Purchasing payment reimbursement plan relies partly on ordinal rankings of hospitals to determine how money is distributed. We analyze the quality metric distributions used for payment and show that there is not enough information to reliably differentiate hospitals from one another near the payment cutoffs; and conclude that a large part of the payment formula is driven by sampling variability rather than true quality information. This results in point allocation under the payment formula that is random for a large proportion of the hospitals. An alternative payment plan is discussed.


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