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

Edward C. Norton, Jun Li, Anup Das, Andrew M. Ryan, Lena M. Chen

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
JournalMedical Decision Making
DOIs
StateAccepted/In press - 2021

Keywords

  • episode spending
  • Medicare
  • pay-for-performance
  • QALY
  • value of life
  • value-based payment programs

ASJC Scopus subject areas

  • Health Policy

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