Will value-based purchasing increase disparities in care?

F incentives for improving quality and efficiency have gone mainstream in U.S. health care. After years of small-scale pilot projects, demonstrations, and experiments, the Affordable Care Act mandated that Medicare payment to hospitals and physicians must depend, in part, on metrics of quality and efficiency. The first program to do so is Hospital Value-Based Purchasing (HVBP), which began affecting Medicare payments to acute care hospitals in October 2012. In the first year of HVBP, hospitals received incentives for performance on clinical-process and patient-experience measures. In subsequent years, hospitals will also receive incentives for performance on outcome-based measures, such as 30-day mortality. All hospitals begin with a reduction in their base operating payment, known as a “withhold.” The sum of these withholds from all participating hospitals becomes the pool for the incentive payments that are distributed in a given year. On the basis of its performance on quality measures, a hospital receives a payment that is more than, less than, or the same as its withhold. Basic questions remain about whether value-based purchasing will improve quality and efficiency for Medicare. At the same time, there are concerns that such programs could exacerbate disparities in care associated with race and socioeconomic status. Perhaps most compelling of these concerns is that, through the distribution of bonus payments and penalties to providers, these programs could expand the quality gap in the care provided to more affluent and less affluent patients.1 Lower-performing providers tend to care for poorer patients and have a larger share of patients from racial or ethnic minority groups than do higherperforming providers.2 If these providers receive lower incentive payments or face payment penalties, they may be less able to fund quality-improvement initiatives — an effect that could, in turn, increase raceand incomerelated disparities in care. Numerous researchers have suggested that the solution to this problem may lie in incentive design. Because it is easier for providers with poorer initial performance to improve, value-based purchasing programs may reduce or eliminate disparities in payments by rewarding performance improvement in addition to performance achievement.1 Incentive payments in HVBP are based on an approach that rewards both. For each measure, hospitals receive points for achievement and improvement. They then receive a summary score that equals the greater of these point values. This method for translating quality achievement and improvement into incentive payments is substantively different from the methods used in previous programs. I examined incentive payments in the first year of the HVBP program to determine whether hospitals that care for more patients who are disadvantaged received lower payments. The status of hospitals was determined by the Disproportionate Share Hospital (DSH) index3; a higher DSH index value indicates that the hospital’s patient population is at a greater socioeconomic disadvantage. The two outcomes I considered were the HVBP payment adjustment and the expected financial impact of the program in fiscal year 2013. Payment adjustments can be either positive or negative, depending on hospitals’ performance relative to that of other hospitals. The expected financial impact of HVBP is the budgetary effect for each hospital, which equals each hospital’s payment adjustment multiplied by the sum of its base Medicare payments for diagnosis-related groups (DRGs) in fiscal year 2011. All data were downloaded from the Centers for Medicare and Medicaid Services (CMS) website. I used linear regression to estimate the relationship between the DSH index value and both outcomes among 2981 hospitals that were eligible to participate in the first year of HVBP and that had valid data on the DSH index. The analysis did not adjust for hospital characteristics because it focused only on whether hospitals caring for more disadvantaged patients performed worse in HVBP, not whether caring for more disadvantaged patients actually caused hospitals to perform worse in the program. Hospitals with a higher DSH index value had significantly lower Medicare payment adjustments (P<0.01) in the first year of HVBP (see Panel A of the figure), which