CMS' value-based performance programs ding hospitals for health equity factors outside of their control, study finds

Medicare’s value-based programs are penalizing inpatient hospitals for community-level health equity factors that impact outcomes but are largely out of hospitals’ control, according to a recent analysis published in Health Affairs.  

Specifically, the study, based on Centers for Medicare & Medicaid Services (CMS) data, pointed to patient populations with greater medical complexity, greater need for uncompensated care and who more frequently live alone as a drag on hospitals’ performance in three CMS quality programs. The research was conducted by the Federation of American Hospitals (FAH) and a contracted health consultant.

“CMS’ hospital value-based programs serve an important role in incentivizing value and improvement in care delivery,” researchers from FAH and Dobson DaVanzo & Associates wrote in the journal. “However, refinements are needed to ensure that these programs work as intended and that they support the reduction of health disparities and improve outcomes.”

The groups’ analysis reviewed CMS inpatient prospective payment system hospital impact files incorporating three quality programs: the Hospital Readmissions Reduction Program (HRRP), the Hospital Value-Based Purchasing Program (Hospital VBP Program) and the Hospital-Acquired Condition Reduction Program (HAC Reduction Program). Analyses for each individual program included data from, respectively, 3,073 hospitals, 2,674 hospitals and 3,113 hospitals and reflected observation periods between 2016 and 2019.

For fiscal year 2021, program penalties were more frequent among certain hospital types and characteristics, the researchers found. The penalties were more frequent among hospitals with a greater number of beds, major teaching hospitals and hospital groups with a higher percentage of Medicare disproportionate share hospital patients.

What came as a surprise to the researchers, however, was that a composite score for estimating community health equity risk factors, the Census Bureau Community Resilience Estimate, was only tied to higher penalties in the HAC Reduction Program.

Individual component metrics of that estimate such as community levels of poverty and unemployment also weren’t tied to penalties across the board, together suggesting that “composite metrics can perform differently depending on the context, and it may be more informative to examine the associations between individual factors and value-based program performance,” they wrote.

The factors that stood out to researchers were a hospital’s average beneficiary Hierarchical Condition Categories (HCC; a medical complexity measure), the portion of people living alone in a hospital’s catchment area and a hospital’s portion of uncompensated care costs, researchers wrote.

The first of those saw hospitals with the highest average beneficiary HCC receive significantly more penalties under the Hospital VBP Program, HRRP and, to a less statistically relevant effect (p < 0.1), the HAC Reduction Program.

Fewer people living alone was significantly associated with fewer penalties under the HAC Reduction Program and to a lesser extent for middle-of-the-pack hospitals under the Hospital VPB Program.

Hospitals with the greatest uncompensated care costs were somewhat more likely to be penalized under HRRP, while those in the second-highest quartile were also somewhat more likely to be dinged under the HAC Reduction Program.

Researchers said their findings outline the need for CMS’ value-based programs to account for patient and community health equity risk factors alongside risk-adjusted performance. They pointed to CMS’ work toward adopting dual-eligible peer groups in the HRRP as a step in the right direction—though other investigations have warned policymakers to still be considering health equity alongside any “blanket” methodology adjustments.

Additionally, quality programs like the HRRP have been somewhat upended in recent years due to the COVID-19 pandemic. This led the Biden administration to limit its penalties for the 2022 fiscal year and the upcoming 2023 fiscal year.