Predicting Fiscal Year (FY) 2015 Hospital Value-based Purchasing (VBP) redistribution slope

Background: Under CMS' the Value-Based Purchasing Program (VBP), CMS withhold from participating hospitals a fixed percentage of base DRG payments. Based on their overall VBP scores hospitals can earn back part, all, or more than their withhold. Law requires that the total amount of withheld payments be redistributed and each hospital’s VBP payment will depend on its overall VBP score and the slope of redistribution function. Predicting the redistribution slope is crucial for hospitals to estimate financial impact early. We developed predictive models for the FY 2015 VBP slope.

Data: For the process and HCAHPS domains, we used hospital compare data for over 3,000 hospitals and Press Ganey’s proprietary data for over 1,500 hospitals. For the outcome and efficiency domains, we used hospital compare data. We also used financial data from the most recent MedPAR data and hospital characteristics information from AHA survey.

Methods: First, we forecast measure-level performance scores at the corresponding performance assessment periods for each hospital with exponential weighted moving average (EWMA) models. While double-EWMA was applied to proportional measures (process, HCAHPS and mortality) with a clear trend, single-EWMA was more appropriate for the other ratio measures. Then overall VBP scores were calculated by plugging the predicted measure-level scores into a series of calculation formulas. Finally, the redistribution slope was obtained with nonlinear combination of individual VBP scores and withheld dollars. Additionally we looked into the distribution of the predicted VBP scores and the variation by hospital characteristics was analyzed with descriptive analysis and multiple ANOVA model.

Results: The predicted overall VBP score centers around 40 for FY 2015 with a near-normal distribution and a slightly right skewness driven by the HCAHPS, outcome, and efficiency domains. The estimated slope is 2.65, indicating that the break-even point will be at 37.7. Higher VBP performance was predicted for hospitals in the West and Midwest region, hospitals of smaller bed size, in private ownership, and in rural setting.

Conclusion: With the introduction of the efficiency domain and two new outcome measures, the average VBP score is low by at least 25% in FY 2015 compared with FY 2014.  Consequently the payment adjustment factor is increased. Prediction on the new measures poses specific challenges. Hospitals are encouraged to pay more attention and allocate additional resources to improve performance on the spending efficiency and patient safety outcomes measures.