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

Author

Listed:
  • Edward C. Norton

    (Department of Health Management and Policy, School of Public Health, University of Michigan, Ann Arbor, Michigan, USA
    Department of Economics, University of Michigan, Ann Arbor, Michigan, USA
    Institute for Healthcare Policy and Innovation, University of Michigan, Ann Arbor, MI, USA)

  • 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
    Institute for Healthcare Policy and Innovation, University of Michigan, Ann Arbor, MI, USA)

  • Lena M. Chen

    (Department of Internal Medicine, University of Michigan, Ann Arbor, MI, USA)

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.

Suggested Citation

  • Edward C. Norton & Jun Li & Anup Das & Andrew M. Ryan & Lena M. Chen, 2022. "Medicare’s Hospital Value-Based Purchasing Program Values Quality over QALYs," Medical Decision Making, , vol. 42(1), pages 51-59, January.
  • Handle: RePEc:sae:medema:v:42:y:2022:i:1:p:51-59
    DOI: 10.1177/0272989X211017105
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