Vinay Guduguntla

Vinay is a medical student at the University of Michigan and also works with MVC.

Often, when highlighting the relevance of episode cost data to a hospital’s bottom line, it is easiest to focus on low hanging fruit – performance in bundled payment programs. Episode-cost analysis provides fantastic insight to hospitals that are participating in bundled payments, like the Comprehensive Care for Joint Replacement program and the Bundled Payments for Care Improvement program.

However, bundled payments have just begun to take hold, and are not yet very prevalent. One of Medicare’s main focuses so far has been on transitioning towards value based care through penalty programs like Hospital Value Based Purchasing and the Hospital Readmissions Reductions Program (HRRP).  MVC data can be very helpful with respect to these programs as well; specifically, analyzing performance in Medicare Spending Per Beneficiary (MSPB) and readmissions.  

How MVC can help you perform well on the MSPB program

A bit of background: MSPB is a 30-day, risk-adjusted, price-standardized, episode cost for an average beneficiary of the hospital. Hospitals are ranked nationally on their expected MSPB to determine above or below average performance. The Hospital Readmissions Reductions Program, on the other hand, focuses entirely on readmission rates for various, high-volume conditions like COPD, AMI, CHF, etc. Combined, MSPB and HRRP can affect baseline DRG reimbursement by up to 3.5%[1].  This can translate to several hundreds of thousands of dollars.

The MVC tool can be highly informative for both of these programs. First, it is important to understand the cost controlling behaviors MSPB incentivizes:

  1. Keeping patients healthy on a population level, so that there is less need to enter the hospital
  2. When patients are admitted, create the best outcomes at the lowest reasonable episode cost

The second point ties in critically to episode costs, and requires a big-picture view of a hospital’s performance. Keeping tabs on average episode cost for all of the listed conditions in the MVC tool is a great start to monitoring past performance in the program.

How MVC can help you perform well on the HRRP measure

The advantage of episode-cost data with respect to HRRP is tied to the fact that many of the relevant conditions are MVC service lines. As such, they have comprehensive post-acute care data listed in the tool. For example, hospitals can utilize readmission payment analysis to determine if it is the severity or the frequency of readmissions that needs improvement. They can even move beyond the four walls of the hospital to establish if post-acute care facilities like SNF, home-health, and rehabilitation centers are cost drivers. Together, these tools provide a deeper dive into the world of readmissions, and allow better insight into post-acute care.

Overall, episode cost data can be highly versatile and immensely useful, even beyond the bundled payment framework. Having episode cost awareness now will not only be beneficial to performance in existing programs, but also in the future as bundled payments take hold. This is especially relevant given that CMS has indicated that by 2018 alternative payment models will represent 50% of all current Medicare fee for service reimbursement[2].


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[1] 3% for HRRP, and ~.5% for MSPB