Working Paper: NBER ID: w22371
Authors: Edward C. Norton; Jun Li; Anup Das; Lena M. Chen
Abstract: US policymakers place a high priority on tying Medicare payments to the value of care delivered. A critical part of this effort is the Hospital Value-based Purchasing Program (HVBP), which rewards or penalizes hospitals based on their quality and episode-based costs of care. Within HVBP, each patient affects hospital performance on a variety of quality and spending measures, and performance translates directly to changes in program points and ultimately dollars. In short, hospital revenue from a patient consists not only of the DRG payment, but also consists of that patient’s marginal future reimbursement. We estimate the magnitude of the marginal future reimbursement for individual patients across each type of quality and performance measure. We describe how those incentives differ across hospitals, including integrated and safety-net hospitals. We find some evidence that hospitals improved their performance over time in the areas where they have the highest marginal incentives to improve care.
Keywords: Medicare; Value-Based Purchasing; Hospital Performance; Financial Incentives
JEL Codes: I11; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Marginal future reimbursement (J17) | Hospital performance improvements (I19) |
| Hospital Value-Based Purchasing (HVBP) program (I18) | Hospital performance improvements (I19) |
| Higher marginal incentives for improvement (J33) | Performance on quality measures (L15) |
| Financial incentives (M52) | Improvements in quality measures (L15) |
| Integrated hospitals (I29) | Greater improvements in performance (D29) |
| Size of financial incentives (M52) | Degree of performance improvement (D29) |
| Context and existing conditions of hospitals (I11) | Mediating effects of financial incentives (M52) |