Edward C. Norton, PhD, is an Economist and Professor in the School of Public Health at the University of Michigan.
Pay-for-performance programs aim to reward hospitals that achieve high quality at low cost. Yet designing the incentives to meet those goals is challenging.
Consider the dilemma that the Centers for Medicare and Medicaid Services (CMS) faced when they added a performance metric for episode payment to a program that previously had included only quality metrics. Instead of rewarding only hospitals with both high quality and low cost, they gave bonus payments to some hospitals whose low quality was outweighed by low costs.
In short, CMS paid a bonus to some low-quality hospitals after the addition of a spending metric to Medicare’s Hospital Value-Based Purchasing (HVBP) program. Several MVC Team Members just published a new study showing this unintended consequence.
Here are the main results of that national study. In fiscal year 2015, CMS expanded its Hospital Value-Based Purchasing program by rewarding or penalizing hospitals for their performance on both spending and quality. This represented a sharp departure from the program’s original efforts to incentivize hospitals for quality alone. How this change redistributed hospital bonuses and penalties was unknown. Using data from 2,679 US hospitals that participated in the program in fiscal years 2014 and 2015, we found that the new emphasis on spending rewarded not only low-spending hospitals but some low-quality hospitals as well. Thirty-eight percent of low-spending hospitals received bonuses in fiscal year 2014, compared to 100 percent in fiscal year 2015. However, low-quality hospitals also began to receive bonuses (0 percent in fiscal year 2014 compared to 17 percent in 2015). All high-quality hospitals received bonuses in both years.
What does this mean for MVC and the BCBSM pay-for-performance program? The simple answer is that BCBSM only measures episode payments, not other quality measures. Obviously BCBSM also cares deeply about quality of care, but this P4P program is focused on only one measure, thus avoiding the problem that CMS found. CMS is now considering a minimum quality threshold to avoid rewarding low-quality, low-spending hospitals.
The MVC team hopes to use its experience studying the national P4P programs to design and improve similar P4P programs in Michigan.
Questions or comments? We’d love to hear from you. You can comment on this article, or fill out the contact form at the bottom of the page.
Andrea McVeigh is the Project Manager of MVC.
As the Project Manager of the Michigan Value Collaborative (MVC), one of my favorite things is on-boarding a new hospital, site coordinator or champion, and getting to know each of them. One of the most common questions I hear during this process is, “How does MVC compare to the other Blue Cross Blue Shield Michigan (BCBSM)-funded Collaborative Quality Initiatives (CQIs)?” If this isn’t asked early on, I make sure to point out the similarities and differences, because it’s important to understand how MVC fits into the Value Partnerships program at Blue Cross. In this article, I’ll first describe the differences and then the similarities between MVC and the other Blue Cross-funded CQIs.
How is MVC different from the other BCBSM-funded CQIs?
- MVC focuses on improving and optimizing cost-efficiency and care transitions around episodes of hospitalizations. To date, we are the only CQI that includes cost data.
- MVC examines a wide array of clinical conditions: We examine 25+ clinical service lines, ranging from medical conditions (like congestive heart failure and pneumonia) to surgical procedures (like heart valve replacement surgery or total hip replacement surgery). The other Blue Cross-funded CQIs are centered on a specific clinical condition.
- MVC uses pre-existing claims data to inform and initiate change: We use claims data to define our episodes of care. Other CQIs collect their own data from patient records. In MVC, the data are already collected and we require no chart abstraction.
- MVC engages hospital executives and leaders, in addition to clinicians: Other Blue Cross-funded CQIs engage mostly with clinicians. Their meetings are attended mostly by doctors, physician assistants and nurses. Because of the nature of our data and the fact that they include cost and utilization information, our meetings are attended mostly by Chief Medical Officers, Chief Executive Officers, Chief Financial officers and Directors of Quality.
How is MVC similar to the other BCBSM-funded CQIs?
The CQIs have an obvious similarity, which is that we are all funded by BCBSM and are part of their Value Partnerships program. But other than our funding source, what else makes us similar to each other? Well, there’s an intangible quality that we all possess, a certain “je ne sais quoi”. For the last ten years, I have been working solely on Blue Cross-funded CQIs. So I guess you could say I’ve been around for a little while. What I’ve learned in the last decade is that the Blue Cross CQIs are alike because we all possess the essential ingredients necessary for running successful statewide collaborative quality initiatives.
- Our sponsor and partner, Blue Cross Blue Shield of Michigan: The support the Blues provide is exceptional. Their financial support is what makes all of this possible and without it, none of the CQIs would exist. Their support is so much more than financial, though. Their partnership, constant engagement and innovative vision keep us all humming along and pointed in the right direction. Our leader at Blue Cross, Dr. David Share (who serves as Sr. VP of Value Partnerships) was named by Crain’s Detroit Business as a Health Care Hero for the work he has done to transform Michigan’s health care system. Blue Cross’s Value Partnerships Program has won numerous national awards for their cost-savings and improvements to patient care (http://www.valuepartnerships.com/vp-award/). Since we live in Michigan, it’s easy to forget that for the rest of the country, this is not the norm. Other states don’t have payers who are as devoted to developing and continuously supporting statewide collaborative work as Blue Cross of Michigan is.
- Engaged hospitals across the state. When you stop and think about what the CQIs ask of hospitals, it’s quite astounding. We more or less ask Michigan hospitals to look at data we provide them, ask themselves why they’re performing above or below the state average and, if they’re willing, open up their doors and share their best practices with their competitors. It’s this collaboration that drives improvement. Without the buy-in, participation and continued engagement from hospitals, any CQI surely would fail.
- Unbelievably talented Directors of the CQIs: Each of the Blue Cross-funded CQIs has a Director who, along with the rest of the Coordinating Center, leads the charge and manages the project. The type of talent to which I’m referring is more than just the necessary brainpower and discipline to get the job done; it’s the ability to earn the trust and respect of all of the hospitals across the state.
And there you have it: a quick run-down of how MVC compares to the other Blue-Cross funded CQIs. Even though MVC uses claims data and cuts across multiple specialties, we still need the same 3 essential ingredients to thrive.
Questions or comments? We’d love to hear from you. You can comment on this article, or use the form at the bottom of this page.