Value-Based Purchasing (VBP) – the Role of Hospital Characteristics

Background: In January 2011 CMS released the proposed methodology for VBP putting 1% of baseline Medicare DRG payment at risk for fiscal year 2013. Hospitals will be scored on improvement and achievement on 17 clinical measures and 8 satisfaction measures compared against hospitals nation-wide without stratification by hospital characteristics.

Data: VBP scores calculated for 3211 acute care hospitals from most recent public data using 2Q09 to 1Q10 for assessment period and prior year for baseline period.

Methods: Analysis the distribution of overall VBP, clinical and satisfaction domain scores across hospital characteristics including region, hospital type, teaching status, location and bed size.

Results: Distribution patterns of clinical and satisfaction scores are not consistent across hospital characteristics. Ranks of subgroup averages are different as confirmed by the low rank correlation (0.13) between the clinical and satisfaction domains. Distributions of VBP score for region, teaching status, bed size are mainly determined by satisfaction score since variation of the clinical score are insignificant (<3%). Distributions for hospital type and location are determined by clinical score due to its significant variations (>10%) and higher weight (70%). High performing groups are South/Midwest, bed#<100, for profit, non-teaching and urban, low performing are West, bed#>=300, government, teaching and rural.

Conclusion: With the impending implementation of VBP significant variation of scores raises important health policy questions because the approach stipulates that hospitals are compared nation-wide without stratification by or adjustment for hospital characteristics. If scores vary, payment and public reporting of the results may have to be adjusted.