Adding A Spending Metric To Medicare’s Value-Based Purchasing Program Rewarded Low-Quality Hospitals

In fiscal year 2015 the Centers for Medicare and Medicaid Services 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. The Centers for Medicare and Medicaid Services should consider incorporating a minimum quality threshold into the Hospital Value-Based Purchasing program to avoid rewarding low-quality, low-spending hospitals.