Medicare’s Hospital Value-Based Purchasing Program Values Quality over QALYs

Edward Norton, Jun Li, Anup Das, Andrew M. Ryan and Lena M. Chen
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Jun Li: Maxwell School of Citizenship & Public Affairs, Syracuse University
Anup Das: Department of Internal Medicine, University of Chicago, Chicago, IL, USA
Andrew M. Ryan: Department of Health Management and Policy, School of Public Health, University of Michigan, Ann Arbor, Michigan, USA
Lena M. Chen: Department of Internal Medicine, University of Michigan, Ann Arbor, MI, USA

Medical Decision Making, 2022, vol. 42, issue 1, 51-59

Abstract: Medicare’s Hospital Value-Based Purchasing Program (HVBP) is the first national pay-for-performance program to combine measures of quality of care with a measure of episode spending. We estimated the implicit tradeoffs between mortality reduction and spending reduction. To earn points in HVBP, a hospital can either lower mortality or reduce spending, creating a tradeoff between the 2 measures. We analyzed the quality performance and earned points of 2814 hospitals using publicly available data. We then quantified the tradeoffs between spending and mortality in terms of quality-adjusted life-years (QALYs). If incentives in the program were balanced, then the tradeoff between spending and QALYs should be comparable with those of high-value health interventions, roughly $50,000 to $200,000 per QALY. Instead, the tradeoff in HVBP was about $1.2 million per QALY. HVBP overvalues improvements in quality of care relative to spending reductions. We propose 2 possible policy adjustments that could improve incentives for hospitals to deliver high-value care.

Keywords: pay-for-performance; value-based payment programs; value of life; Medicare; QALY; episode spending (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:medema:v:42:y:2022:i:1:p:51-59

DOI: 10.1177/0272989X211017105

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