So Many Hospitals, So Little Information: How Hospital Value Based Purchasing is a Game of Chance

William Horrace, Andrew Friedson and Allison F. Marier ()

No 192, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: 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.

Keywords: Pay-for-Performance; Hospital Value Based Purchasing; Hospital Quality Scores; Ordinal Ranking; Indistinguishability (search for similar items in EconPapers)
JEL-codes: H51 I18 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-08
New Economics Papers: this item is included in nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: So Many Hospitals, So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:192

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